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Last Updated: Wednesday, 14 September 2005, 21:34 GMT 22:34 UK
US airlines make bankruptcy move
Delta plane
The US airline industry is a tough marketplace at present
Two of the largest US airlines have filed for bankruptcy protection within minutes of each other.

Delta and Northwest now aim to join United and US Airways, which are already operating under Chapter 11.

Chapter 11 gives a US company time to rearrange its finances while still conducting business.

The US airline industry - recently hit by high fuel costs and tough competition - has failed to recover from the post-11 September downturn.

Delta is the third-largest airline in the US by revenues and Northwest is the fourth.

Cost-cutting

Atlanta-based Delta said the move would help "address its financial challenges and support its ongoing efforts to become a simpler, more efficient and cost-effective airline".

LARGEST US CARRIERS
1. American
2. United
3. Delta
4. Northwest
5. Continental
6. US
By revenue. Source: Fortune 500

"The action we have taken is a necessary and responsible step to preserve Delta's value for our creditors, customers, employees, business partners and other stakeholders as we address our financial challenges and work to secure our future," added Delta chief executive Gerald Grinstein.

Northwest said it would continue to operate as normal.

"As we have consistently stated, the airline industry has changed permanently," said Doug Steenland, Northwest president and chief executive.

"Northwest must significantly lower its costs to compete with other carriers.

"By filing for Chapter 11 now, we ensure that we have the means to complete the transformation of Northwest quickly and effectively."

Worldwide problem

Bankruptcy speculation has dogged both Delta and Northwest for months.

Delta has lost $10bn (5bn) since 2001, and is saddled with $14bn in debt.

Minnesota-based Northwest's problems are focused on high labour costs, which it is trying to cut by $1.1bn.

Delta and Northwest are known as "legacy" airlines in the US, as they are two of its long-established, traditional flyers.

In Europe such airlines are generally known as "flag carriers", as they were historically state-owned.

On both sides of the Atlantic, such airlines have faced increased competition from a new generation of low-cost carriers in recent years.

This additional competition, in combination with higher fuel costs and reduced passenger numbers after the September 11 attacks, has caused financial difficulties for those legacy airlines that have not been able to successfully reform quickly enough.




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SEE ALSO:
Skies clear for US airline merger
12 Sep 05 |  Business
Delta to sell Atlantic for $425m
15 Aug 05 |  Business
Delta dives on bankruptcy fears
09 Aug 05 |  Business
Delta memo fans bankruptcy fears
27 Jul 05 |  Business
Northwest Airline shares 12% down
14 Jun 05 |  Business
Northwest pilots accept pay cuts
05 Nov 04 |  Business


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