Northwest Airlines Set to Emerge from Bankruptcy

May 31 is the Target Date

An Associated Press story, reported on Yahoo News, says that Northwest Airlines has received approval from a court to leave bankruptcy protection. The airline, based in Eagan, Minn., announced that it would exit bankruptcy on May 31, after Judge Allan Gropper approved the airline's reorganization plan on Friday. Northwest is the nation's fifth-largest airline. It will emerge from protection into an industry facing higher fuel costs and crowded with competitors.

Chief Executive of Northwest, Douglas Steenland, said that the company had met all of its bankruptcy goals: It cut annual operting costs by $2.4 billion, reduced debt and lease expenses by $4.2 billion, and shrank the overall size of its business. The company currently employs 30,787 full-time workers, down from 33,75 in the quarter when it filed for bankruptcy. Its remaining workers, including flight attendants and pilots, took pay cuts to help the airline stay in business.

Yahoo News quotes Steenland as saying, "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." Nearly 97% of creditors eligible to vote on the company's plan approved it.

Under the plan, Northwest will pay its secured creditors in full. Most unsecured creditors will be paid between 66 cents and 83 cents on the dollars in new shares in the company. Existing shares will be canceled, leaving present shareholders with nothing.

An airline industry consultant, Mike Boyd, quoted in the Yahoo News article, said "They're going to be in a very strong position. They have a vision of what they want to do. If you're going to bet on an airline, I'd bet on them." Boyd notes that the airline will be able to build its growth around a global hub in Detroit, giving them access to China as well as a hub in Tokyo.

Northwest has been operating in bankruptcy since Sept. 14, 2005, when it sought the court's protection from quickly rising fuel prices and other cost burdens.