When they struck Northwest on 20 August, the Aircraft Mechanics Fraternal Association said the airline was going to go into bankruptcy anyway and would just blame the union. Amost two weeks into the AMFA strike, the airline said it may well be forced into Chapter 11 soon - but not because of the union.
The strike has not had a significant impact on revenue, it said in a Securities and Exchange Commission filing, but it is running out of time to avoid bankruptcy because of spiking fuel prices. Predicting it will lose as much as $400 million this quarter, Northwest expects to pay $1.90 to $1.95 per gallon of jet fuel, for a total of $900 million for the quarter.
It will spend at least that much in the fourth quarter, for a total of $3.3 billion for all of 2005. That is a 50% increase over the $2.2 billion it spent on fuel in 2004. Its cash had fallen to $1.7 billion as of the first of the month, down from $2.1 billion on 30 June. Some of the decrease was due to holdbacks or set-asides required by the company that processes its credit-card transactions. (This is the same dilemma that has squeezed rival Delta into a corner).
Northwest pilots said they would negotiate a new round of paycuts, but the airline said it has run out of collateral for additional loans. So who’s happy now?