Northwest Airlines Submits Bankruptcy Reorganization Plan
NWA has filed its Chapter 11 bankruptcy reorganization plan. The airline company says that it plans to emerge from bankruptcy protection during the second quarter of 2007 as an independent company. NWA also says that it plans to eliminate unsecured debt by paying its unsecured creditors using common stock in the reorganized company. Preferred and common shareholders, however, will not receive anything.
A US Bankruptcy Court gave NWA an extension until February 15 to file its disclosure statement which will detail its reorganization plan for the public.
On Friday, NWA said that the plan included new, cost-saving lease agreements with airports and other facilities, as well as purchase agreements with engine and aircraft manufacturers.
Since filing for bankruptcy protection in 2005, NWA says that they succeeded in restructuring its fleet, removing $2.4 billion in yearly costs, significantly strengthening its balance sheet, and entering into new aircraft purchase agreements. New labor accords are also expected to save the airline carrier $1.4 billion each year.
According to the plan, NWA will use equity rights offerings and the help of private equity investors to raise its exit financing funds.
NWA Timeline (CBSnews.com):
1926: Col. Lewis Brittin founds Northwest Airways to carry air mail from the Twin Cities to Chicago with two rented aiplanes. A month later, the Detroit-based airline introduces the nation's first closed-cabin commercial airplane.
1927: Northwest flies its first ticketed passengers.
1929: A group led by St. Paul businessman Richard Lilly buys the airline from its Michigan investors. Five years later, it is incorporated in Minnesota under the name Northwest Airlines.
1947: Northwest becomes the first commercial airline to fly from the U.S. to Japan, with the flights continuing to Seoul, Shanghai and Manila. It re-brands itself as "Northwest Orient Airlines," though the company's legal name remains Northwest Airlines.
1948:The airline begins painting the tails of its planes red, which has remained the company's trademark ever since.
1960: Northwest moves into its new, centralized base of operations at the Minneapolis-St. Paul Wold Chamberlain Field, now the Minneapolis-St. Paul International Airport.
1986: Northwest acquires Twin Cities-based Republic Airlines for $884 million, nearly doubling its work force from 17,000 to 33,000 employees. The company drops the word Orient from its name, and adopts its Twin Cities-Detroit-Memphis hub system.
1989: Northwest is acquired in a leveraged buyout by an investor group headed by Al Checchi and Gary Wilson and including KLM Royal Dutch Airlines. Checchi becomes chairman.
1991: The Minnesota Legislature approves a nearly $800 million aid package for Northwest, including a $270 million direct loan that the company is still repaying.
1993: Remaining costs of the buyout and an industry downturn lead Northwest to threaten bankruptcy unless employee groups make concessions. After concessionary agreements are signed, the company turns its first profit since 1989.
1998: Northwest pilots hold a 15-day strike that shuts down Northwest operations for 18 days. Later in the year, Northwest mechanics, cleaners and custodians choose the Aircraft Mechanics Fraternal Association as their new union representative, splitting off from the International Association of Machinists and Ground Workers.
2001: Northwest and its mechanics avert a strike with a deal that includes an average wage increase for mechanics of 24.4 percent, giving Northwest mechanics the highest pay in the industry.
2003: Northwest executives announce the company needs $950 million in concessions from its workers in order to avert bankruptcy. Pilots later agree to a 15 percent pay cut.
2005: Northwest raises its concessions demand to $1.1 billion.
Aug. 20, 2005: Mechanics go on strike rather than accept wage cuts and layoffs.
Sept. 14, 2005: Airline files for Chapter 11 bankruptcy, citing high fuel and labor costs.
March 3, 2006: Northwest Airlines Corp. pilots agreed to give up $358 million in pay cuts and changes to work rules. Pilots had threatened a strike if a judge allowed the airline to impose its terms. That could have killed the airline. Next, pilots as well as flight attendants and ground workers each must vote on their tentative agreements.
July 17, 2006:The union that represents Northwest Airlines Corp. flight attendants said it tentatively agreed to deep wage cuts and work rule changes the same day the nation's fifth-largest airline had bankruptcy court clearance to impose a new contract that had drawn strike threats. Details of the agreement weren't released, but the airline said it got the $195 million in annual savings it sought. Northwest said it expected the union to finish voting on July 31.
July 31, 2006: Northwest Airlines Corp. flight attendants reject a cost-cutting contract for a second time and threatened job actions if Northwest imposes a new contract on them - which could happen as early as Aug. 1. The vote was 55 percent against the new contract and 45 percent in favor.
Aug. 1, 2006: Northwest Airlines flight attendants start a 15-day countdown toward a possible Aug. 15th strike. The move puts the bankrupt airline at risk for even worse financial problems. The Association of Flight Attendants made the threat after Northwest imposed a new contract that 80 percent of flight attendants had rejected in June. A second agreement was rejected July 31. Job actions could range from limited, brief work stoppages to a full-fledged strike.
Aug. 10, 2006: A federal bankruptcy judge could rule by Monday, Aug. 14 on whether to bar Northwest Airlines flight attendants from a planned strike that could disrupt flights. The flight attendants have said they would begin random, unannounced work stoppages starting Tuesday.
Aug. 11, 2006: Flight attendants say they'll delay a threatened strike by 10 days because of security concerns stemming from a foiled terrorist plot in London. A bankruptcy judge has not yet ruled on Northwest's request to block a strike.
Aug. 15, 2006: Almost a year to the day that they went on strike, mechanics at Northwest Airlines are set to meet with the airline today. But labor experts say most of the mechanics' leverage is gone -- along with their jobs. Northwest began hiring permanent replacements weeks after the strike began last August.
Aug. 18, 2006: Northwest Airlines Corp. files an appeal as expected on aimed at blocking a strike by flight attendants that could begin as early as Aug. 25. Northwest has said a strike would be illegal, but on Aug. 17, U.S. Bankruptcy Judge Allan Gropper, who is overseeing Northwest's Chapter 11 reorganization, said labor law gives him no power to block a strike.
Aug. 30, 2006: Northwest and its flight attendants are due to update a New York judge on the status of their talks. On Aug. 25, Judge Victor Marrero blocked a flight attendant strike. He seemed to hope that the two sides would negotiate. That hasn't happened, and no talks are planned.
Sept. 7, 2006:Northwest Airlines recalls all of its more than 1,100 furloughed flight attendants. The move to boost the ranks of available staff comes as the bankrupt carrier awaits a judge's ruling whether the workers can strike.
Sept. 16, 2006: Northwest Airlines flight attendants are appealing a federal judge's decision to block their threatened strike. Northwest was happy with the judge's decision and called for talks with the flight attendants. But the union says it won't negotiate unless it has the right to strike.
Nov. 6, 2006: Northwest Airlines Mechanics vote overwhelmingly to end their 15-month strike and accept a deal negotiated with the airline in October. Mechanics can choose a layoff with recall rights and up to five weeks of severance pay or those who resign will get up to 10 weeks of separation pay.
Nov. 28, 2006: Northwest Airlines flight attendants ask a federal appeals court to overrule a lower court decision that prevents them from striking while they are in contract talks. Northwest says the decision should stand because it allows the two sides to negotiate a contract in a calmer atmosphere.
Jan. 10, 2007: Northwest Airlines and Delta are involved in ongoing talks about a possible joint operating plan once the two carriers emerge from bankruptcy. While neither airline would comment, aviation analysts say Delta would probably prefer to emerge from bankruptcy as a stand alone carrier, but a deal with Northwest would be preferable to a hostile takover by US Airways --which raised its bid to takeover the airline.
Jan. 12, 2007: Northwest Airlines announces reorganization plan. Carrier says it plans to emerge from bankruptcy as an independent company in the second quarter of 2007.
Sagaria Law, P.C. represents companies and individuals seeking bankruptcy protection under the U.S. Bankruptcy code. Many of our clients come from Santa Clara County, Monterey County, Alameda County, and the surrounding areas. To speak with a bankruptcy attorney for a free consultation, contact Sagaria Law, P.C. today.
NWA files reorganization plan, hopes to emerge from Chapter 11 in second quarter, ATW Daily News, January 15, 2007
Northwest Timeline, CBS News.com
Related Web Resources:
Northwest Airlines Files Its Plan Of Reorganization, NWA.com
Chapter 11 Bankruptcy Basics, US Courts.gov
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