May Declare Chapter 11 Wednesday

Right at the heels of similarly troubled Delta Airlines, there are reports that Northwest may be ready to file for Chapter 11 as early as Wednesday.

Northwest's board of directors was scheduled to meet Wednesday to decide on a Chapter 11 filing, said Will Holman, a spokesman for the Air Line Pilots Association union, to the Associated Press. Anonymous sources claim such a filing could come as soon as Wednesday afternoon, in US Bankruptcy Court in New York

Already in the national spotlight over its continuing conflict with striking members of the Aircraft Mechanics Fraternal Association, Northwest has also been under increased scrutiny lately as reports surfaced claiming the airline attempted to suppress an FAA memo citing overlooked maintenance issues by the replacement mechanics NWA brought onboard in the strike’s wake.

Issues seem to be mounting for the troubled carrier. On Saturday a DC-9 was forced to make an emergency landing in St. Louis due to the loss of power in one of its engines. While it may prove to be nothing more than an ill-timed coincidence, this problem -- as well as an additional issue with lowering the same plane’s nose gear -- has done nothing to quiet the voices questioning if Northwest is monitoring safety issues as closely as it claims.

Adding to speculation of an impending bankruptcy filing the airline willfully failed pay $42 million in payments to creditors this week, according to media reports, as well as an $18.7 million payment to Northwest Airlink commuter operator Mesaba Aviation. If the payment is not made by next Tuesday, Mesaba may take action against Northwest, according to a regulatory filing by the regional carrier.

Filing for Chapter 11, although seen as a last resort in almost every circumstance, might help address some immediate issues facing the troubled carrier. The filing would allow the airline to ask for – and likely receive – immediate concessions from its employees, possibly adding influence to its negotiating position with AMFA. Northwest could also legally delay payments to several of its contractors, including Mesaba.

Balancing these benefits is the need for the airline to submit a reorganization plan to its creditors and shareholders within 18 months from the date bankruptcy is filed. However, submitting such a plan may be delayed under current bankruptcy guidelines due to expire on October 17th -- an added incentive for Northwest to file early.

FMI: www.nwa.com