Bankruptcy

Airlines Take Different Flight Paths

As US Airways readies itself to emerge from bankruptcy, Delta and Northwest file for Chapter 11 protection.
Stephen TaubSeptember 14, 2005

US Airways Group Inc. announced that its creditors have approved the airline’s reorganization plan, one day after America West shareholders gave the nod to a merger of the two companies.

US Airways, which filed for bankruptcy protection one year ago, still must win court approval of its reorganization at a hearing Thursday morning.

“We have worked enthusiastically to put together a robust plan that will benefit our customers, our stakeholders and our employees,” said president and chief executive officer Bruce R. Lakefield, in a statement. “The result will be a more stable and more competitive US Airways.”

Meanwhile, last Wednesday afternoon Delta Air Lines Inc. and Northwest Airlines Corp. filed for Chapter 11 protection. The filings, brought on by high oil prices and labor costs as well as tough competition from low-cost competitors, were long anticipated even before Hurricane Katrina led to a surge in the cost of fuel.

Also reportedly on the verge of bankruptcy is FLYi Inc., the parent of Independence Air Inc. According to a Merrill Lynch report, bankruptcy filings by all three carriers could lead to the removal of 100 to 200 aircraft from the domestic market, most likely resulting in higher ticket prices. However, press reports suggest that passengers are not expected to suffer any immediate effects from today’s filings.

“In the longer term, we would not be surprised if any of the potential airline bankruptcies borrow a page from the America West/US Airways playbook and emerge from bankruptcy in the form of a merger,” added Merrill Lynch. “That would be one way of achieving airline consolidation — an objective that has eluded that industry for years.”