updated 1/20/2006 6:11:19 PM ET 2006-01-20T23:11:19

Northwest Airlines Corp. must slash costs and cut debt to attract the investors it needs to finance $10 billion to $11 billion of new planes it plans to buy over the next decade, an industry specialist told a New York bankruptcy court on Friday.

It was the fourth day of hearings devoted to the carrier's request to reduce its costs by tossing out contracts with its pilots and flight attendants. The airline has maintained that it needs to cut these costs to get financing to help it climb out of bankruptcy.

John Luth, chief executive of Seabury Group which is advising Northwest's bankruptcy restructuring, said reducing costs and debt would help the airline attain a higher credit rating, allowing it to borrow money less expensively.

Northwest's fleet of aircraft is considered aged by industry standards. The fleet's craft are, on average, 18 years old, which can mean the carrier spends more on fuel costs as well as maintenance.

"The fleet is economically unviable in its current state" given high fuel prices, said Luth. He added that the carrier "has a big nut to tackle here on its fleet renewal program."

Luth testified the airline should aim to get a BB credit rating, a measure of a business's credit-worthiness, to get inexpensive financing for its airplane fleet overhaul. He said Northwest should aim to get that BB-rating within five years.

Northwest, which filed for bankruptcy protection in September 2005, has no credit rating because it has, in effect, defaulted on its debt.

Luth also said on Friday that Northwest plans to raise $2.25 billion as part of its so-called exit financing. Of this $500 million would be raised through the sale of corporate debt and $750 million would be raised through the sale of shares. The remaining $1 billion would come from refinancing existing debt.

The company is raising money through so-called debtor-in-possession finance which will allow it to pay regular business expenses. Much of this financing hinges on the airline's ability to cut costs, notably its labor expenses.

Northwest Airlines has asked employees for $1.4 billion in wage and benefit concessions. Its pilot and flight attendant unions have maintained the carrier is using the bankruptcy process to get more in concessions than it needs to get out of its financial problems.

Friday was the final day of testimony by Northwest arguing on behalf of its motion to do away with pilot and flight attendant collective bargaining agreements. Testimony from pilots began late Friday.

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