Tuesday, September 13, 2005
Two things worth mentioning today, though. First, DrJonz at The Attic sends along today's news that Northwest and Delta may go to Chapter 11 so as to avoid making pension payments on Thursday.
Northwest said in a regulatory filing today that it was required to make a $65 million pension payment on Thursday, which it could only miss if it were operating under bankruptcy protection.
Northwest and other companies had asked the Treasury Department to let them skip their September pension payments, citing the impact of Hurricane Katrina on the nation's economy. But in a statement today, the department said it had decided against the move, saying that it was more appropriate to limit relief to companies in the Gulf Coast region.
... Northwest and all the large domestic airlines have been hit hard by the spike in jet fuel prices in the aftermath of Hurricane Katrina, which interrupted production at refineries on the gulf coast.
Even before the storm, however, airlines were already paying about 50 percent more for jet fuel this year than in 2004.
Neither Northwest nor Delta have hedging contracts that would have allowed them to lock in the price of fuel, meaning they must immediately cover price increases in cash whenever they occur.
Given that, and with its cash draining away in recent weeks, Northwest officials apparently decided to file quickly rather than wait any longer, people briefed on the airline's strategy said today.
Add on the strike at Northwest and you could have seen this coming. As a matter of fact, someone did. It's the pensions that are killing them; Northwest has been trying to get relief for quite some time. President Douglas Steenland's testimony made it plain that they were not going to make up the nearly $4 billion pension deficit -- and that's before Hurricane Katrina. I have some difficulty understanding why the Treasury would rather take on the pension guarantee than suspend a $65 million payment.
The other story is quite trivial but also aggrevating: A union in Las Vegas is using temporary workers to picket a WalMart.
They're not union members; they're temp workers employed through Allied Forces/Labor Express by the union�United Food and Commercial Workers (UFCW). They're making $6 an hour, with no benefits; it's 104 F, and they're protesting the working conditions inside the new Wal-Mart grocery store.Hat tip: Andrew Roth.
"It don't make no sense, does it?" says James Greer, the line foreman and the only one who pulls down $8 an hour, as he ambles down the sidewalk, picket sign on shoulder, sweaty hat over sweaty gray hair, spitting sunflower seeds. "We're sacrificing for the people who work in there, and they don't even know it."
..."We're just trying to help the women that get discriminated against in Wal-Mart," says Greer. "We're out here suffering a lot for these people." He pauses, moves his sign so that it blocks the scorching sun on his leathery face, and considers the working conditions of his colleagues out here working for the union.
"We had one gal out here in her 40s, and she had a heat stroke. I kept making her sit down, I noticed she was stepping (staggering), and I made her sit in the shade," Greer said. She went home sick after her shift and didn't ever return to work.
Another woman, Greer said, had huge blisters on her feet and he took her inside to the Wal-Mart pharmacy. The pharmacist recommended some balm, and Greer bought it for her. Since then, he said, other picketers have purchased the balm for their blisters inside the Wal-Mart they are protesting.
UPDATE (9/14): Delta goes down.
The bankruptcy filing by Delta sets into motion what is likely to be at least months of negotiations with bond holders and other creditors over how to restructure the airline. Delta executives believe that because Delta has already spent the past year implementing a turnaround plan, it could avoid a prolonged fight with its creditors over the company's fate.I.e., they're playing chicken with Congress.
Still up in the air is what happens to Delta's employee pensions, which are underfunded by $5.3 billion. Delta and Northwest have lobbied for proposed pension legislation now working its way through Congress. The proposed legislation would give the companies more time -- 14 years under the current version of the U.S. Senate bill -- to catch up with their required payments. However, in bankruptcy, the company's creditors could push for the company to terminate its obligations and dump them onto the federal Pension Benefit Guaranty Corp., following in the footsteps of United and U.S. Airways. Delta executives previously have said that if they win passage of the pension bill the company can continue to honor its pension obligations, even in bankruptcy.
UPDATE 2 (10 minutes later): And Northwest throws in the towel too.