Northwest Airlines said yesterday it chose not to make $42 million in debt payments in recent days, suggesting the carrier is conserving...
MINNEAPOLIS — Northwest Airlines said yesterday it chose not to make $42 million in debt payments in recent days, suggesting the carrier is conserving its cash ahead of a potential bankruptcy filing.
Bankruptcy worries sliced more than half the value off Northwest shares.
Northwest’s board planned to meet this morning to decide whether to file for bankruptcy protection, said Will Holman, a spokesman for the Air Line Pilots Association, which has a member on the board.
Earlier, The New York Times and The Wall Street Journal reported in their online editions that the carrier may file for bankruptcy protection as soon as today, citing anonymous sources.
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The carrier, whose mechanics and cleaners have been on strike since Aug. 20, said it also must make a $65 million pension contribution tomorrow or risk having a claim made against its assets, according to a filing with the Securities and Exchange Commission yesterday.
Typically, such defaults could trigger other debt covenants, forcing bankruptcy.
Northwest spokesman Kurt Ebenhoch would say only that the airline “has made no decision” on a bankruptcy filing.
Shares of Northwest tumbled 53 percent to close at $1.57 after the reports.
Northwest has said previously that bankruptcy was a possibility. It has raised its $1.1 billion target for annual labor-cost savings to a new, undisclosed figure, as rising fuel prices batter the carrier.
The potential bankruptcy news comes as Northwest is weathering a strike that began Aug. 20. Northwest said it began hiring permanent replacements yesterday.
With the walkout in its fourth week, about 200 mechanics rallied at the union’s strike headquarters in a hotel parking lot near Minneapolis-St. Paul International Airport.
The two sides haven’t met since early Sunday, when Aircraft Maintenance Fraternal Association (AMFA) leaders walked away from an offer that sought even more concessions than they rejected before striking.
In a letter to the union late Monday, Northwest urged the union leaders to allow a vote on the airline’s latest offer.
But mechanics at yesterday’s rally didn’t appear unhappy that their leadership wasn’t sending them an offer. When the union’s chief negotiator, Jim Young, asked the crowd whether anyone wanted to vote on the last proposal, they roared, “No!”
Northwest’s last offer before talks broke off would retain the jobs of 1,080 mechanics, down from a pre-strike union work force of about 4,400 workers.
The larger figure includes some 800 cleaners whose jobs, Northwest says, have already been permanently shifted to contractors.
Northwest mechanics averaged about $70,000 a year in pay before the strike. The airline had been seeking pay cuts of about 25 percent before the walkout, but since then they have raised an overall concessions target to $203 million from $176 million.
Union members got a financial boost yesterday from the United Auto Workers (UAW), which donated $880,000 — or about $200 for each striking member.
“Northwest Airlines’ behavior toward AMFA is blatant union busting and an insult to every American worker,” UAW President Ron Gettelfinger said in a statement
Bob Rose, president of the AMFA local in Detroit, said the money would go to striking union members nationwide.
John Remington, a labor-relations professor at the University of Minnesota, said it was hard to gauge how a Chapter 11 filing would affect the standoff with mechanics.
“Filing for bankruptcy doesn’t make this one go away,” Remington said. “It may make it less urgent to deal with, but the fact of the matter is these guys are still on strike, and they’re still hurting Northwest’s business to some extent.”