Bankruptcy Imminent at Northwest: Report

Updated from 5:38 p.m. EDT

Northwest Airlines' (NWAC Quote) stock lost more than half of its value Tuesday amid speculation the airline was close to filing for bankruptcy protection.

On its Web site, Northwest's arm of the Air Line Pilots Association said the company's board will meet Wednesday to decide whether to seek relief under Chapter 11. The union has a seat on Northwest's board, and ALPA's representative will attend the meeting.

The New York Times had reported earlier Tuesday that Northwest and Delta Air Lines (DAL Quote) are preparing to file for bankruptcy as soon as Wednesday.

Citing people close to both companies, the report says Delta and Northwest are finishing details of their filings but the fundamental work of each case is complete. If both file, it would mean four of the seven largest U.S. airlines would be operating under bankruptcy protection.

Separately, Northwest submitted documents to the Securities and Exchange Commission late Tuesday that further heightened speculation that bankruptcy is near. In it, Northwest acknowledges failing to make $23 million in aircraft finance payments due in recent days, as well as an $18.7 million payment due Monday to regional partner Mesaba Airlines, a subsidiary of MAIR Holdings (MAIR Quote).

The filing says Northwest hasn't decided whether it will make these payments within the allotted grace periods. Instead, the airline is "engaged in an analysis of its debt, lease and other obligations to determine which obligations should be targeted for restructuring. The obligations with respect to which payments were not made are among those that the company has identified that it could seek to restructure as part of a transformation plan."

Additionally, the filing states that Northwest has a $65 million contribution to its pension plans due Thursday, but adds that if the carrier fails to make the payment, "a lien would automatically arise against its assets unless the company had previously sought bankruptcy protection."