Northwest is Back After 20 Tough Months

Northwest Airlines' exit from Chapter 11 on Thursday marked the close of a misery-filled five-year run during which at least one of the USA's major carriers were operating under bankruptcy court protection.

Four of the six major airlines -- Northwest, Delta, United and US Airways -- have used Chapter 11 reorganizations since the 9/11 terror attacks to shrink costs and capacity, revise work rules and eliminate debt. US Airways started the industry run in bankruptcy court by filing for the first of its two Chapter 11 stays in August 2002.

A judge in New York last month cleared the way for the exit by Northwest, which is based in Eagan, Minn. The airline filed for bankruptcy protection on Sept. 14, 2005, the same day as Delta Air Lines. Delta emerged on April 30.

On the first day of trading on the New York Stock Exchange, shares in the reorganized airline closed at $25.15. That closing price was up 65 cents from Wednesday's close, when they were traded on a "when issued" basis. Northwest now trades under the ticker symbol NWA.

At an afternoon news conference, CEO Douglas Steenland touted the new, smaller Northwest as better equipped to tackle stiffer competition, rising oil prices and, at the moment, sluggish travel demand. The airline's reduced costs, the $1 billion worth of new aircraft and large trans-Pacific route network are all big advantages, he said.

"We were able to take a company that was on the road to a very, very bleak ... future into what I think of as being the best-positioned airline in the U.S. today," he said.

During its 20-month reorganization, Northwest eliminated $4.2 billion in debt, shed $2.4 billion in annual costs -- mostly labor costs -- and raised its cash balance to more than $3 billion.

Like the other carriers that restructured in bankruptcy, it also reduced the number of seats it flies. Next month, Northwest will fly 13% fewer seats than it did in June 2005, according to a USA TODAY analysis of data from schedule tracker OAG.

Northwest faces a challenge with its restive employees. Clay Parraghi, president of the International Association of Machinists and Aerospace Workers local in Detroit, said the sting of pay and benefits cuts during Chapter 11 was made worse recently when the bankruptcy court approved an executive compensation plan potentially worth $297 million over four years. The plan covers 400 executives. Steenland alone stands to gain $26 million.

Steenland noted that it was approved by the company's creditors, and ruled to be "proper and reasonable" by the bankruptcy court.

And he noted that Northwest was able to preserve $2.1 billion in retirement benefits for former and current employees during bankruptcy when a change in the law allowed it to freeze, but not terminate, their defined benefit pension plans.

Contributing: Barbara Hansen

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