Cuts narrow NWA's deficit
linkBut 1Q loss still hits $1.1 billion
BY MARTIN J. MOYLAN
Pioneer Press
Steep wage cuts, a reduced schedule and lower plane-lease rates helped Northwest Airlines almost break even on its operations in the first quarter, which ended March 31.
The airline, which is in Chapter 11 bankruptcy reorganization, posted an operating loss of $15 million, compared with a loss of $301 million in the first quarter of 2005.
Including $975 million in reorganization charges, though, the Eagan-based airline had a net first-quarter loss of $1.1 billion. That's up from $537 million in 2005.
"Although we have made progress in our restructuring process, we still have work to do to position the company for long-term success," said CEO Doug Steenland.
The operating results provide a glimpse of how Northwest is managing to reshape itself to compete in an airline industry battered by high fuel costs and anemic pricing power.
Northwest had interim or permanent wage and benefit cuts in place for all its employees. It also had fewer employees: 31,318, down 20 percent from a year before. Overall, labor costs in the quarter fell by $288 million to $676 million.
The airline also reduced its flying by 11 percent year-over-year. That meant fuller flights with more fare-paying passengers. Northwest filled 82.3 percent of its seats in the first quarter, up from 78.4 percent in 2005's first quarter.
With its fleet, Northwest reported that it has rejected or reworked leases on 211 planes. It is working toward saving $400 million a year on leases for some 400 planes. Aircraft rental expenses dropped by $36 million in the quarter.
However, the cost of aircraft-maintenance materials and repairs increased by $45 million — or 31 percent — as Northwest shifted maintenance once done in-house to outside vendors.
The airline outsourced most aircraft maintenance after its mechanics went on strike in August.
Northwest used 13 percent less fuel in the quarter. But its cost per gallon jumped 36 percent. Its fuel bill, including taxes, rose 18 percent to $744 million.
Fuel costs have been much higher than expected, said Chief Financial Officer Neal Cohen.
"There remains great uncertainty around this key element of our plan,'' he said in a statement. " … Every dollar per barrel increase (in oil) impacts Northwest's fuel costs by $43 million annually."
Excluding fuel, Northwest's cost of flying one seat one mile, an industry performance benchmark, fell to 8 cents, down about a half cent from the year-ago quarter.
Operating revenue increased 3.3 percent versus the first quarter of 2005 to $2.9 billion.
The airline was able to charge more for tickets. Its yield — what it gets on average to fly a passenger one mile — rose 8 percent to 12.1 cents.
Compared with its closest peer, United Airlines, Northwest managed a narrower operating loss, reported comparable revenue statistics, and had somewhat better operating-cost measures, noted Standard & Poor's credit analyst Philip Baggaley.
United lost $171 million on an operating basis in the first quarter.
Northwest's large bankruptcy-related charges are similar to ones taken by other carriers, Baggaley wrote in a Wednesday report. The charges are mostly for restructuring aircraft leases and debt, and Northwest would record a gain on the discharge of the liabilities upon leaving bankruptcy.
With $1.3 billion in free cash and short-term investments, Northwest's liquidity remains tight. But it should be adequate, given that its cash should grow in the second quarter as travelers book summer travel, Baggaley said.
Northwest's pilots and two groups of ground workers have approved giveback contracts. Flight attendants on Sunday started voting on a contract. Meanwhile, Northwest is talking with two groups of ground workers who rejected proposed deals.
Martin J. Moylan can be reached at [email protected] or 651-228-5479.
NORTHWEST AIRLINES
First Qtr. ended March 31
(in thousands, except per share)
2006 2005
Revenue $2,890 $2,798
Net Inc. $(1,104) $(537)
(loss)
Per Share $(12.65) $(6.19
linkBut 1Q loss still hits $1.1 billion
BY MARTIN J. MOYLAN
Pioneer Press
Steep wage cuts, a reduced schedule and lower plane-lease rates helped Northwest Airlines almost break even on its operations in the first quarter, which ended March 31.
The airline, which is in Chapter 11 bankruptcy reorganization, posted an operating loss of $15 million, compared with a loss of $301 million in the first quarter of 2005.
Including $975 million in reorganization charges, though, the Eagan-based airline had a net first-quarter loss of $1.1 billion. That's up from $537 million in 2005.
"Although we have made progress in our restructuring process, we still have work to do to position the company for long-term success," said CEO Doug Steenland.
The operating results provide a glimpse of how Northwest is managing to reshape itself to compete in an airline industry battered by high fuel costs and anemic pricing power.
Northwest had interim or permanent wage and benefit cuts in place for all its employees. It also had fewer employees: 31,318, down 20 percent from a year before. Overall, labor costs in the quarter fell by $288 million to $676 million.
The airline also reduced its flying by 11 percent year-over-year. That meant fuller flights with more fare-paying passengers. Northwest filled 82.3 percent of its seats in the first quarter, up from 78.4 percent in 2005's first quarter.
With its fleet, Northwest reported that it has rejected or reworked leases on 211 planes. It is working toward saving $400 million a year on leases for some 400 planes. Aircraft rental expenses dropped by $36 million in the quarter.
However, the cost of aircraft-maintenance materials and repairs increased by $45 million — or 31 percent — as Northwest shifted maintenance once done in-house to outside vendors.
The airline outsourced most aircraft maintenance after its mechanics went on strike in August.
Northwest used 13 percent less fuel in the quarter. But its cost per gallon jumped 36 percent. Its fuel bill, including taxes, rose 18 percent to $744 million.
Fuel costs have been much higher than expected, said Chief Financial Officer Neal Cohen.
"There remains great uncertainty around this key element of our plan,'' he said in a statement. " … Every dollar per barrel increase (in oil) impacts Northwest's fuel costs by $43 million annually."
Excluding fuel, Northwest's cost of flying one seat one mile, an industry performance benchmark, fell to 8 cents, down about a half cent from the year-ago quarter.
Operating revenue increased 3.3 percent versus the first quarter of 2005 to $2.9 billion.
The airline was able to charge more for tickets. Its yield — what it gets on average to fly a passenger one mile — rose 8 percent to 12.1 cents.
Compared with its closest peer, United Airlines, Northwest managed a narrower operating loss, reported comparable revenue statistics, and had somewhat better operating-cost measures, noted Standard & Poor's credit analyst Philip Baggaley.
United lost $171 million on an operating basis in the first quarter.
Northwest's large bankruptcy-related charges are similar to ones taken by other carriers, Baggaley wrote in a Wednesday report. The charges are mostly for restructuring aircraft leases and debt, and Northwest would record a gain on the discharge of the liabilities upon leaving bankruptcy.
With $1.3 billion in free cash and short-term investments, Northwest's liquidity remains tight. But it should be adequate, given that its cash should grow in the second quarter as travelers book summer travel, Baggaley said.
Northwest's pilots and two groups of ground workers have approved giveback contracts. Flight attendants on Sunday started voting on a contract. Meanwhile, Northwest is talking with two groups of ground workers who rejected proposed deals.
Martin J. Moylan can be reached at [email protected] or 651-228-5479.
NORTHWEST AIRLINES
First Qtr. ended March 31
(in thousands, except per share)
2006 2005
Revenue $2,890 $2,798
Net Inc. $(1,104) $(537)
(loss)
Per Share $(12.65) $(6.19
You're right, Finman. 
