Last week’s filings for bankruptcy reorganisation by Delta Air Lines and Northwest puts about half of the USA’s airline capacity under court protection as the nation’s number three and four carriers seek shelter from creditors.

Pushed by a steep increase in fuel costs since Hurricane Katrina smashed into US oil refineries, the US industry is deep into the restructuring that began with the Internet crash of five years ago and was accelerated by the 9/11 terror attacks, even as the nation’s second-largest carrier, United Airlines, prepares to emerge from nearly three years of bankruptcy in February and US Airways will exit court protection this month.

Both Delta and Northwest are expected to shed aircraft. Northwest’s 145 refurbished DC-9s, all but four of them owned, are expected to be retained. Delta is expected to trim its fleet of nearly 800 aircraft, having begun the process a week before the filing with the sale of its 11 remaining Boeing 767-200s to cargo-carrier ABX Air, removing the least fuel-efficient widebodies from its fleet.

Both carriers are expected to follow the lead of United in its bankruptcy – keep the aircraft best suited for international flying and get rid of smaller types for the domestic market as well as older widebodies such as the ageing 767s that Delta has or the DC-10s that Northwest has (seven of its 20 trijets are leased).

Northwest’s older 747-200s, three of its 747-400s and leased 757-200s are prime candidates for disposal, says Bryson Monteleone of Morten Beyer & Agnew Associates.

The Virginia-based consultancy says GE Commercial Aviation Services owns 35 of Delta’s leased aircraft – 24 Boeing 737-200s, two 737-300s, one 767-300ER and eight Bombardier CRJ200ERs. However, GECAS does not have the greatest risk, with an exposure of $171 million. Philip Morris Capital has the greatest exposure with $224 million, owning 19 Delta airliners, says Monteleone.

GE has about $3 billion in outstanding loans to Delta and Northwest. With about 7% of Delta’s aircraft, GE is a major banker in the carrier’s restructuring and has arranged much of Delta’s short-term finance while in bankruptcy.

Northwest has $1.5 billion in cash and did not arrange short-term financing from outside parties.


Source: Flight International