Northwest Reaches Deal With Amex Over Suit

Attorneys for Northwest Airlines Corp. told a New York bankruptcy judge on Friday they have reached an agreement with American Express Co. that may end a suit launched by the bankrupt airline against the financial services company.

"We have reached an agreement with American Express ... the agreement is being documented," an attorney for Northwest told New York bankruptcy Judge Allan L. Gropper.

The agreement's details likely will be made public in an upcoming hearing. The committee that represents different creditors has not yet been given the specifics of the agreement between Northwest Airlines and American Express.

Eagan, Minn.-based Northwest Airlines, the nation's fourth largest carrier, filed for bankruptcy protection on September 14. Company executives have said the airline was pushed into bankruptcy by skyrocketing fuel costs and competition from low-cost carriers.

Last Friday, Northwest said it was close to settling a lawsuit with American Express' travel services unit, which the airline claims has withheld payments worth about $63.4 million for tickets on its flights. Northwest lawyers said last Friday the dispute should be resolved by early this week.

Airline and credit card industries have become increasingly dependent on each other since the first frequent flyer card was introduced by Continental Airlines and Midland Marine bank in 1985.

Credit card issuers have come to rely on frequent flyer reward plans because they encourage spending and have become a big source of profit. According to David Robertson of the Nilson Report, which tracks the credit card industry, consumers with frequent flyer rewards cards spend 2.5 times more than other credit card holders.

"Because co-brand customers are so profitable and because the U.S. market is saturated, issuers don't want to lose the customers because they cannot be replaced," said Robertson.

Separately, Gropper said he would make public letters he has received from Northwest employees that address "broad" issues, among them severance and union contracts. "Nothing that comes to me should be considered private," he said.

"I am completely confident any employee (having sent a letter) will not be penalized," Gropper said.


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