Article:
http://abclocal.go.com/wpvi/story?section=news/business&id=5319513
I chose this article because the question why NWA went bankrupt was not raised or mentioned in the presentation. We can also see in this article how the process of merging with Delta started.
The company went bankrupt, essentially because of rising fuel costs, which was different from the crisis of 09/11, since it was based on increasing costs, not on demand losses. After 9/11 the government acted quickly and injected $10 billion in the airline market, providing loans to cover losses.
This plan was cited in our presentation and generally called the Air Stabilization Act, reducing the company’s losses by $249 million, caused by the 2001 crisis; we can affirm this based on information provided in NWA’s financial statements.
But the 2005 crisis was slightly different, namely a cost crisis. This time the government didn’t offer any financial support to companies that were already facing financial issues since 2001.
The reason of the airline fuel crises can be based on several reasons such as, structure supply industry capacity (supply times demand), Hurricane Katrina that hit several refineries, as well as international events that happened in previous years. We cite here the Ukraine-Russia gas crisis as well since the invasion of Iraq by the US contributed to the rising oil prices. While the Airline Stabilization Act helped the industry in the short term, it was part of the reason fuel costs increased down the road because demand increased.
As we can see in the article NWA emerged from bankruptcy some 20 months after it defaulted. Here we can see that the company was not facing operational problems, the majority of its problems were financial, which they reduced by $4.2 billion.
In 2008, a new cost crisis showed the market, this time the best solution was for companies to combine their operations to face the challenges and gain from operational synergies.
Additional sources:
http://usatoday30.usatoday.com/travel/flights/2005-08-10-gas-shortages_x.htm
http://money.cnn.com/2005/09/14/news/fortune500/bankruptcy_airlines/