By Joel J. Smith and Dalia Naamani-Goldman / The Detroit News
Standard & Poor's downgraded Northwest Airlines Corp.'s credit ranking Tuesday, the latest signal the financial crisis is getting worse at Detroit Metropolitan Airport's largest carrier.
The agency pushed Northwest further into junk status, a move that will make it more difficult and expensive for Northwest to borrow money.
"Northwest is managing through a strike by its mechanics well, but dramatically increased fuel expenses and delays in securing needed concessions from other unions have deepened losses and are eroding its liquidity," said Standard & Poor's analyst Phillip Baggaley.
Baggaley cited a Northwest filing last week with the U.S. Securities and Exchange Commission in which the carrier said it could be pushed sooner into Chapter 11 bankruptcy because of soaring fuel prices in the aftermath of Hurrican Katrina, which disrupted oil supplies.
Northwest further predicted third-quarter losses of $350 million to $400 million, projected fuel costs this year would be $900 million higher than in 2004 and said progress was slow toward winning $1.1 billion in concessions from workers.
Baggaley said the timetable for a possible bankruptcy filing is being pushed up as rising fuel costs cut into the carrier's cash reserves, which dropped $440 million in the two month period ending Aug. 31. Northwest is sitting on $1.7 billion in cash, mostly borrowed money.
Northwest, which has not set a date for obtaining labor concessions, declined to comment Tuesday on the credit downgrade or the timing or likelihood of a bankruptcy filing.
Among the unions from which Northwest wants cuts is the striking Aircraft Mechanics Fraternal Association, which represents more than 4,400 mechanics, cleaners and custodians.
At Metro Airport, AMFA members continued to walk the picket line Tuesday, in the strike's 19th day, although their mood was less upbeat than just a week ago.
Many looked weary as they circled the small picket area in silence in front of the Northwest terminal. During the first two weeks of the strike, picketers waved at passing cars, encouraging drivers to honk their horns in support.
Still, union leaders maintain that morale remains high, bolstered in part by Monday's AFL-CIO Labor Day parade in Detroit.
"It went real well yesterday," said Bob Rose, president of AMFA Local 5, which represents Northwest workers in Detroit. "They're probably tired of walking every day."
Mechanic Pat Holleran, 53, took a break from picketing Tuesday to unwind with fellow workers in the parking lot of a nearby United Auto Workers local in Romulus. After a four-and-a-half hour picket shift, strikers can relax with hot dogs and soda under umbrellas.
Strikers want to hold out until Northwest files for bankruptcy, Holleran said, as others nodded in agreement.
While Northwest is still operating, Holleran said time will tell how long the airline can go on without its work force.
"I'm prepared to sit as long as it takes," said Holleran, a 26-year Northwest veteran.
Holleran spoke despite a new gag order from union leaders in Detroit that forbids strikers from talking to reporters.
"There's too much bad press," said Dennis Sutton, vice president of AMFA Locat 5. He said many employees were giving different figures regarding job losses and negotiations.
"A lot of our members have done interviews and by the time it's edited, it doesn't come across with the message we're trying to say."
In another development, the Federal Aviation Administration and U.S. Transportation Department continued investigating reports that Northwest may not be following all maintenance procedures. Northwest denies the claim.
The charge was filed last week by an FAA inspector.
