Airline Bankruptcy Not Expected
to Impact Passengers
By Kara Presnell, 09.29.05

Bankruptcy filings by Delta Air Lines and Northwest Airlines may send a crippling blow to an industry besieged by problems, but it is not likely to impact passengers according to experts.

“We’ve been through a number of airlines that have gone in and out of Chapter Eleven without any real significant impact on passengers,” said SEA-TAC (Seattle-Tacoma) Airport spokeswoman Deanna Zachrisson.

The total number of airlines in bankruptcy protection has now reached four including United Airlines and US Airways.

Economists blame some of the bankruptcy proceedings on several factors that have dogged the airline industry in recent years, including the Sept. 11, 2001, terrorist attacks, the rise of discount air carriers like Southwest and, most recently, hurricanes Katrina and Rita, which have slowed oil refinery work leading to soaring jet fuel costs.

Delta, the number three U.S. airline, was once poised at the top of the industry. It was founded in 1928 and became a top international player in 1991 after it took over the routes of the defunct Pan Am. Since then, however, it has over expanded and not bounced back from the difficulties of the terrorist attacks and ensuing travel slowdown.

“Delta is overleveraged and they weren’t going to stay of out of bankruptcy, [there is] no way,” securities analyst Ray Neidl said.

Delta executives warned early this year that the airline did not have enough cash to meet its needs but that didn’t stop it from expanding its service. The airline established a Hickory, N.C. to Atlanta route in May that is flown three times daily.

It is believed the bankruptcy filing will affect the city’s service. “Those jets are going to keep flying, and we’ve got to be in a position where Hickory is a place that they’re flying out of and into,” said Hickory Mayor Rudy Wright. “A judge is not going to decide the future of Hickory air service. Delta and Hickory’s business and leisure travelers will decide its future.”

Analysts contend that the impact of the filings, despite having little effect on passengers, will be strong and potentially disastrous.

“We are reading the first page of a thriller that will end either in resurrection or the death and burial of an entire industry as we know it today,” said William Rochelle, an airline bankruptcy lawyer in New York.

Delta Airlines has warned its pilots that it will stop paying certain benefits to retired pilots and will no longer make future contributions to a pilot-defined benefits plan, as reported by the Associated Press.

Filing bankruptcy allows the airlines to pursue wage cuts for their employees and cuts in health benefits.

“There is no painless way out of this and there will be a reduction of personnel and benefits,” Delta’s Chief Executive Officer Gerald Grinstein said.

Both airlines are committed to maintaining full flight schedules and normal operations as well as continuing frequent flyer programs.

“It really won’t be an issue for passengers. For pilots and employees and their families, it could be a problem,” Zachrisson said.

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