Northwest seeks $63.4 million from American Express

Tom Becker

Tuesday, Sept. 27, 2005 | 10:20 a.m.

Northwest Airlines Corp., which filed for bankruptcy this month, asked a U.S. judge to force American Express Co. to turn over $63.4 million its customers spent on their credit cards to purchase airline tickets.

American Express's withholding of the funds violates a court order barring Northwest's creditors from interfering in the bankruptcy case, Jason Halper, a lawyer for the airline, said in papers filed with the U.S. Bankruptcy Court in New York.

Ticket purchases with American Express cards account for roughly 30 percent, or $3 billion, of Northwest's revenue from credit card transactions. The American Express funds are critical to Eagan, Minn.-based Northwest's ability to restructure and exit bankruptcy, Halper said.

American Express's failure to turn over the funds "will severely affect Northwest's cash flow and will impede Northwest's ability to reorganize," Halper said in court documents. Halper declined to comment on the court filings.

Northwest asked the court to issue a temporary restraining order to prevent American Express from failing to make future payments in full and to impose sanctions.

American Express spokesman Robert Glick declined to comment on the filing.

Northwest, the fourth-biggest U.S. carrier, filed for bankruptcy protection Sept. 14, the same day as Delta Airlines Inc. The airlines attributed the filings to rising fuel costs, high labor expenses and increasing competition from low-fare carriers.

American Express, the fourth-biggest U.S. credit-card issuer, and Northwest signed a five-year agreement in January 2004, under which New York-based American Express periodically makes payments to the airline. On Sept. 14, American Express sent Northwest a letter saying it would withhold all payments to Northwest "until further notice," according to court documents.

On Sept. 22, American Express reduced the amount it would withhold for future payments to 50 percent, Northwest said in court papers.

Shares of Northwest fell 8 cents to 63 cents in over-the- counter trading. American Express shares rose 10 cents to $57 in New York Stock Exchange composite trading.