‘Normal operations continue’

Northwest Airlines assured its clients yesterday, including the CNMI, that its operations will remain normal amid its filing of Chapter 11 bankruptcy in New York yesterday.

“Normal operations continue,” said the airline in a statement, noting that it has $1.5 billion in cash and investments currently available for use.

The company said it will continue to operate normally “to serve customers, honor tickets, fly its competitive schedule and continue the WorldPerks frequent flyer and WorldPerks Visa programs.”

Guam-based NWA manager Richard Parsons sent the statement in an e-mail yesterday.

This came as NWA prepares for its direct Osaka-Saipan daily flights, which will begin on Oct. 1 this year, a move that is welcomed by the CNMI government in view of the pullout of Japan Airlines from the Marianas next month.

Right now, NWA flies daily to Saipan from Tokyo and Nagoya.

Press secretary Peter A. Callaghan said yesterday that the administration is not worried over the news about Northwest’s filing for bankruptcy.

“We’re not concerned. Based on the information, the move is to allow them to restructure their debt and get out of some expensive bonds they have floated,” he said.

He said international flights would probably not be affected “since they are more profitable” than domestic flights.

NWA, the world’s fourth largest airline, said it filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York.

The airline said that it also developed a plan to restructure Northwest outside of Chapter 11 and has been implementing that plan.

But due to skyrocketing fuel prices, “our efforts have been overtaken” in addition to an uncompetitive cost structure.

“We can no longer continue to incur sizable losses and reductions in liquidity as we attempt to complete implementation of the plan. By filing for Chapter 11 now, we ensure that we have the means to complete the transformation of Northwest quickly and effectively,” said NWA Northwest president and chief executive officer Doug Steenland in a statement sent to the media yesterday.

Northwest expects that its fuel bill for 2005 will be approximately $3.3 billion, a huge jump from last year’s $2.2 billion and 2003’s $1.6 billion.

A Chapter 11 petition will allow the company to restructure its debts, so it can continue to operate.

NWA said Chapter 11 process will allow the airline to achieve three major goals: set a competitive cost structure, including both labor and non-labor costs, a more efficient business model, which will allow it to continue to deliver superior choice and service to customers, and a strengthened balance sheet with debt and equity levels consistent with long-term profitability. Steenland denied that their decision to file for Chapter 11 protection was related to the ongoing strike by members of the airline’s mechanics union in the U.S. mainland.

NWA said that, although the filing will change the process of restructuring, it will not change the airline’s safe and reliable air transportation and its ongoing collective bargaining agreements with its employees represented by labor unions.

NWA carries more than 55 million passengers annually around the world.

Delta Air Lines, the nation’s third largest carrier, also filed for the same court protection yesterday.

Both cited the recent spike in jet fuel costs, which have soared nearly 20 percent since June 1, as prime reasons for seeking protection from creditors under Chapter 11 of federal bankruptcy laws.

Delta, founded in 1928, flies some 340,000 passengers on about 1,870 flights a day while NWA, which started flying mail in 1926 and passengers a year later, carries about 160,000 people on its 1,450 flights a day.

Two other major airlines, United Airlines and US Airways, had filed for bankruptcy since 2001.

Overall estimates showed that the industry posted net losses of $32.3 billion from 2001 to 2004. Losses of another $9 billion to $10 billion are expected in 2005.