Northwest placed on CreditWatch after mechanics’ strike

Northwest placed on CreditWatch after mechanics’ strike    Northwest Airlines Corp. and its subsidiary airline Northwest Airlines Inc. were Monday placed on CreditWatch with negative implications by Standard & Poor’s.
   The investment rating service said the move was triggered by the collapse of mechanics’ contract negotiations and subsequent strike action.
   “Northwest has been able to continue flying, but still needs to reach concessionary contracts with not only its mechanics, but also other unions, before the Oct. 17 bankruptcy law change,” said Standard & Poor’s credit analyst Philip Baggaley.
   “Prospects for pension legislation that allows airlines to stretch out repayment of funding deficits ($3.8 billion for Northwest) will likely also figure in management’s decision whether to file for bankruptcy in October,” Baggaley added.
   According to S&P’s, recent negotiated labor concessions at other “legacy carriers,” has straddled Northwest with the highest labor costs of its peer group. At the beginning of the year, Northwest set a $1.1 billion labor savings target. So far the airline has only convinced its pilots and management to offer $300 million labor concessions.
   “Northwest is believed to still have fairly healthy liquidity (unrestricted cash was $2.1 billion at June 30), but very high fuel prices are eroding that financial cushion,” Standard & Poor’s said.