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Consultant Says Northwest Must Shed Contracts

January 23, 2006 By: Susan Young Travel Agent

John E. Luth, chairman, president and CEO, Seabury Group LLC, an investment banking and aviation advisory services firm, told the U.S. Bankruptcy Court for the Southern District of New York that reducing Northwest's debt by $4.2 to $4.4 billion, increasing liquidity by $1.25 billion, and obtaining competitive labor costs are three of the most significant changes that Northwest Airlines must make to finance future aircraft purchases and exit from Chapter 11. Luth's testimony was given at a hearing on Northwest's motions to impose permanent labor cost reductions if the airline is unable to reach consensual agreements with the Air Line Pilots Association, Professional Flight Attendants Association and retirees. Because the International Association of Machinists and Aerospace Workers agreed to present the company's contract settlement proposal to its members for ratification, the bankruptcy court judge granted the joint request of IAM and Northwest to postpone IAM's portion of the proceeding. Luth told the court that Northwest's aging fleet is more than twice as old as the industry average and that to acquire financing for new aircraft, the airline must improve its balance sheet. Luth said that Northwest "probably will need to spend up to $10 to $11 billion during the next 10 years to close the gap relative to its competitors.

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