By Terry Maxon,The Dallas Morning News

DALLAS – Delta Air Lines Inc. and Northwest Airlines Corp., devastated by high fuel expenses and low fares that don’t cover their costs, sought protection from creditors in a New York federal bankruptcy court Wednesday.

Both carriers blamed high fuel prices for forcing them into Chapter 11 proceedings, saying the skyrocketing fuel bill left them with not enough time to finish their other efforts to slash costs.

“We had developed a plan to restructure Northwest outside of Chapter 11 and have been implementing that plan,” Northwest President and Chief Executive Doug Steenland said. “Unfortunately, in addition to an uncompetitive cost structure, our efforts have been overtaken by skyrocketing fuel costs.”

“Delta’s financial problems are severe, but by no means insurmountable,” Delta Chief Executive Gerald Grinstein said.

The filings leave American Airlines Inc. as the only major legacy airline that has never filed for protection from creditors, although it came within minutes of a bankruptcy filing in April 2003 before its three major labor groups signed off on concessions.

UAL Corp. and its United Airlines Inc. unit are currently in bankruptcy proceedings, as is US Airways Group Inc. Continental Airlines Inc. made two stops in bankruptcy court in 1983-85 and 1990-93.

Aviation pioneers Pan American World Airways Inc. and Eastern Airlines Inc. died in bankruptcy in 1991, a second version of Braniff Inc. parked its airplanes in 1989 and Trans World Airlines Inc. sold its assets to American in 2001 while in bankruptcy.

With four of the nation’s seven largest carriers in bankruptcy, American and Dallas-based Southwest Airlines Co. are looking to see how their rivals’ problems – and potential to lower their costs in bankruptcy – might affect them.

“Quite honestly, I don’t think we know what Delta’s and Northwest’s filing bankruptcy means to us,” American spokesman Tim Wagner said. “We have chosen a different path since all of the challenges, economic and global economic downturns hit the industry several years ago.”

In intense negotiations with employees in early 2003, American officials worked out new union contracts that cut its operating costs dramatically, either through lower pay levels or more productivity. It also has attempted to involve employees more in decision-making and problem solving at the carrier.

“We never believe bankruptcy court was the place for our company because we always wanted to control our own fate rather than have the courts dictate it,” Wagner said.

Southwest spokeswoman Linda Rutherford said that “it’s really too early” to predict any short-term effects on Southwest.

“The news is only hours old,” she said. “We don’t yet know what it means toward the competitive marketplace. We’ll have to wait to see if that means any opportunities for Southwest in the markets we serve.”

Southwest has done relatively little in response to the United bankruptcy, now nearly 3 years old. But it has beefed up its Philadelphia service in competition with US Airways.

It also invested in ATA Airlines Inc. to get gates and connections at Chicago’s Midway Airport. Southwest got its first real foothold there in November 1991 when it grabbed gates after bankrupt Midway Airlines Inc. went out of business.

“Generally speaking, we don’t make knee-jerk actions,” Rutherford said. “Any decision we make has to make sense within the Southwest business plan and the demand in an area. We try to be ready for a marketplace opportunity if there is one.”

Aviation consultant Michael Boyd, president of the Boyd Group in Evergreen, Colo., disputed the contention that American, Continental and other carriers not in bankruptcy court will be hurt as their competitors lower their costs through Chapter 11 proceedings.

“United’s been in bankruptcy for nearly three years, and American was able to get its costs down even more than United’s,” Boyd said.

The filing by the two carriers won’t put undue strain on the airlines still out of bankruptcy, he said. “That’s another canard. If that was true, the United filing would have pushed everybody into bankruptcy.”

For Northwest and Delta, “the price of fuel went up so fast that two carriers got caught in the headlights,” Boyd said. “The legacy carriers largely fixed their problems after 9/11. We’ve just found two carriers who couldn’t get their costs down low enough to accommodate the rising costs of jet fuel.”

He predicted that Delta faces more significant problems in reorganization than Northwest, which had “one of the most powerful route systems” in the industry.

“Northwest has no fundamental problems other than its labor costs didn’t go down fast enough to accommodate the rise in jet fuel,” and it needs to get a handle on its pension costs, he said.

“I’m not overly worried about Northwest,” Boyd said. “It’s going to be more of a challenge for Delta because they have to fix their fleet. They’re way, way overequipped with regional jets.”

University of Portland management Professor Richard Gritta said more carriers may decide to seek Chapter 11 protection with so many of their competitors lowering their costs that way.

“When you’re in Chapter 11, you have a leg up on everybody,” he said. “You can abrogate contracts, you can play games.”

The carriers in bankruptcy must take advantage of this opportunity to restructure themselves from top to bottom, because time is running out, Gritta indicated.

“These guys are getting down to the nub. They can’t avoid the low-cost carriers anymore. They’ve got to do it right. Otherwise, they’ve gone,” he said.

“We’ve already lost Braniff. We’ve already lost Pan Am. We’ve already lost Eastern. We’ve already lost TWA. And it would not be out of the question to lose another one.”

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