Northwest Airlines files Chapter 11

By Caroline Salls

Pittsburgh, Sept. 14 - Northwest Airlines Corp. filed for Chapter 11 bankruptcy Wednesday in the U.S. Bankruptcy Court for the Southern District of New York amid what the company said were "skyrocketing fuel costs."

The company will continue normal operations during the bankruptcy process, according to a company news release.

According to documents filed Wednesday with the court, Northwest has $14.35 billion in assets, $17.92 billion in total debt and 87.75 million shares of common stock outstanding.

"We had developed a plan to restructure Northwest outside of Chapter 11 and have been implementing that plan," president and chief executive officer Doug Steenland said in the release. "Unfortunately, in addition to an uncompetitive cost structure, our efforts have been overtaken by skyrocketing fuel costs.

"We can no longer continue to incur sizable losses and reductions in liquidity as we attempt to complete implementation of the plan."

Northwest said it expects that its fuel bill for 2005 will be $3.3 billion, compared to $2.2 billion for 2004 and $1.6 billion for 2003.

"The Chapter 11 process will allow us to realize three major goals essential to the transformation of Northwest Airlines: first, a competitive cost structure including both labor and non-labor costs; second, a more efficient business model; and third, a strengthened balance sheet with debt and equity levels consistent with long-term profitability," Steenland said in the release.

In addition to its other labor cost restructuring, Northwest said that it must continue its transition from defined benefit pension plans to defined contribution plans. The company is required to contribute $3.3 billion to its defined benefit plans from 2006 through 2008.

As of Sept. 14, the company's unrestricted cash and short-term investments balance was $1.5 billion.

Northwest's 10 largest unsecured creditors include:

* US Bank, NA with $1.69 billion indenture trustee claims on the company's 10% senior notes due 2009, 9 7/8% senior notes due 2007, 8 7/8% notes due 2006, 7 1/8% convertible senior notes due 2023, 7 7/8% notes due 2008, 6.625% senior convertible notes due 2023, 9.5% senior quarterly interest bonds due 2039 and 8.7% senior notes due 2007;

* State Street Bank & Trust Co.-IAM, with a $211.68 million trustee claim on the company's series C non-qualified trust preferreds;

* State Street Bank & Trust Co.-IBT with $64.77 million trustee claim for series C non-qualified trust preferreds;

* Koninklijke Luchtvaart Maatschappij NV with a $64.12 million claim;

* Pinnacle Airlines, Inc. with a $28.05 million regional carrier claim;

* Mesaba Aviation, Inc. with a $23.13 million regional carrier claim;

* American Express Travel Related Services Co. with a $19.18 million trade claim;

* Blue Cross Blue Shield with an $18.37 million insurance claim;

* Woldspan with a $14.87 million global distribution system claim; and

* SNECMA with a $13.28 million trade claim.

Also, CIT Group Inc. said Northwest has operating leases on three CIT-owned aircraft, as well as debt exposure against four aircraft operated by Champion Air, a former affiliate of Northwest.

CIT's total exposure is about $57 million; however, CIT management said it believes that the Northwest filing will not have a material adverse impact on its financial results.

Northwest is an Eagan, Minn.-based airline. Its Chapter 11 case number is 05-17930.

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