Northwest axes Airbus orders worth dollars 3.5bn

NORTHWEST Airlines in the US announced yesterday that it had cancelled dollars 3.5bn ( pounds 2.18bn) worth of orders for A320 and A340 aircraft manufactured by Airbus Industrie, the European consortium in which British Aerospace is a partner.

Northwest was to have been the US launch customer for the new A340 aircraft, the first of which enters service with Lufthansa next month. But Northwest has cancelled firm orders for 24 of the aircraft, which were to have been delivered between 1993 and 1997, as part of a radical cost-cutting plan.

It has also cancelled another 50 firm orders for the A320 aircraft, though it will still be taking delivery of 16 new A320s next year.

Northwest has not cancelled any of its orders with the US manufacturer Boeing, but it is delaying orders worth dollars 2.7bn for 747 and 757 aircraft.

Despite the order cancellations, Airbus Industrie is a member of a consortium that has agreed to lend Northwest dollars 250m in order to help ensure its survival through the current downturn in the airline industry.

Other participants in the dollars 250m loan, which was also announced yesterday, are the Dutch airline KLM, which is awaiting regulatory approval for a far-reaching co-operation agreement with Northwest, ABN Amro Bank, Bankers Trust, and the US engine manufacturers General Electric and United Technologies.

As part of its survival plan Northwest has also reached agreement in principle with its employees for dollars 900m worth of wage and benefit concessions over the next three years. In addition it has persuaded lenders to postpone repayment of dollars 340m worth of debt due next year, and secured financing for the delivery of dollars 730m worth of Airbus A320s and Boeing 747s due to be delivered during 1993.

A Northwest spokesman said that given the continued sluggish passenger traffic the Airbus cancellations were 'a prudent move'. With the dollars 2.2bn worth of cost savings, debt reschedulings and new financing announced yesterday the carrier was now optimistic about its future.

Trans World Airlines has cleared a big obstacle to its plans to emerge from bankruptcy by gaining the support of the Pension Benefit Guaranty Corporation for its reorganisation plan.

The PBGC, a federal agency that insures the private-run pension plans of around 40 million American workers, has been locked in dispute with TWA's chairman, Carl Icahn, about the amount of cash and guarantees to be provided to the TWA pension fund.

Mr Icahn had previously reached agreement in principle for a plan calling for creditors to cancel dollars 1bn in debt in return for 55 per cent ownership of the carrier, and wage and benefit concessions from employees who will own the other 45 per cent.

But the PBGC feared that by relinquishing control of the carrier Mr Icahn was walking away from his responsibilities to the pension fund, which was underfunded by more than dollars 1bn.

After months of negotiations Mr Icahn has now been persuaded to provide more assistance to the TWA pension funds.

The PBGC will now join unions and creditors in backing the reorganisation plan, which TWA said yesterday was scheduled to be presented to the bankruptcy court on 12 January.

The accord also clears the way for an immediate cash infusion into TWA of dollars 50m by Mr Icahn.