Company’s debt downgraded

Tuesday, Sept. 6, 2005 | 11:04 a.m.

MINNEAPOLIS -- Standard & Poor's downgraded Northwest Airlines Corp.'s debt further into junk status today, days after the nation's fourth-largest carrier warned it is running out of time to avoid bankruptcy.

Northwest's S&P rating fell from CCC+ to CCC- for its long-term corporate debt.

"Northwest is managing through a strike by its mechanics well, but dramatically increased fuel expense and delays in securing needed concessions from other unions have deepened losses and are eroding its liquidity," said S&P credit analyst Philip Baggaley.

On Thursday Northwest warned that it expects to lose $350 million to $400 million during the third quarter, and that its unrestricted cash had fallen to $1.7 billion, down from $2.14 billion just two months earlier.

Even though it will be flying less than usual, Northwest expects to pay $900 million for fuel during the fourth quarter, 39 percent more than the same period last year.

Northwest, which has been dealing with a strike by mechanics, cleaners and custodians since Aug. 20, is seeking $1.1 billion in annual labor savings and it is pressing for a new law that would let it spread out payments to its underfunded pensions. But Baggaley said there's no assurance that either of those things will happen in time to keep Northwest out of Chapter 11.