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Fri, May 18, 2007

Northwest Receives Judicial All-Clear To Exit Chapter 11

May Emerge From Bankruptcy As Soon As End Of Month

ANN REALTIME REPORTING 05.18.07 1500 EDT: Not a bad way to end the week. On Friday, US Bankruptcy Court Judge Allan Gropper gave beleaguered carrier Northwest Airlines his approval to exit bankruptcy, with some $2.5 billion in cost savings.

Northwest spokesman Roman Blahoski told Reuters Gropper hadn't signed off on the ruling -- which will start an 11-day "administrative period" for Northwest to notify shareholders and other affected parties -- but the judge did voice his approval in open court.

"We are pleased to have completed our restructuring successfully. We are now focused on emerging from Chapter 11 as a strong, publicly traded company, which will provide excellent service to our global customer base," said Northwest CEO Doug Steenland. "I want to thank our customers and creditors for their understanding and cooperation during the past 20 months as we completed the restructuring process.

"Most importantly, I want to thank our employees for their hard work and sacrifices that helped Northwest attain its goal of repositioning the airline for long-term success. I am pleased that we plan to share with our employees some $1.6 billion in claims payments and anticipated profit sharing through 2010," Steenland added.

Those words may sound a tad hollow to Northwest's workers, however. Pilots and other Northwest employees have joined in a series of protests, to show their extreme displeasure for the roughly $300 million in bonuses airline executives are due to receive -- including a one-time $26.6 million stock bonus for CEO Steenland -- upon the carrier's exit from bankruptcy.

"This award goes beyond the obscene -- it is so extraordinarily large," Association of Flight Attendants lawyer Robert Clayman told the Associated Press. "Even in the perverse world of executive compensation, it cannot withstand scrutiny." Flight attendants were among the most vocal voices of protest against Northwest's reorganization plan in court this week.

As ANN reported, Northwest entered Chapter 11 reorganization September 14, 2005, along with similarly troubled competitor Delta Air Lines. Over the past 22 months, the carrier struck a hard bargain with its employees, forcing steep cost cuts and other labor concessions in order to regain its solvency.

The airline has reached contract deals with all its workers, except for the flight attendants. Representatives on both sides approved a tentative agreement last month, after two other TAs were soundly rejected by union membership. A vote on that third TA is expected shortly... and it's not yet clear whether the third time will be the charm.

Northwest had stated it hoped to emerge from bankruptcy in June. Providing shareholders don't throw up any last-minute objections, however, the carrier could exit Chapter 11 as soon as May 31.

Whenever that happens, it will mark the first time in over five years a major US carrier hasn't been in bankruptcy, according to Reuters. The times, they are a'changin'...

FMI: www.nwa.com

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