Focus keeps Northwest flying
By Jane Roberts
September 19, 2004
Northwest Airlines is not facing Chapter 11 like peers US Airways,
Delta
and United because it has managed costs for the long term, said CEO
Richard
Anderson.
"We've stuck to our knitting," Anderson told The Commercial Appeal's
editorial board last week.
Anderson said Northwest has focused on serving small and medium markets
across the nation's heartland and maintaining the trump card of being
the
only major U.S. carrier that also flies as a cargo carrier.
"We've been clear about what we are going to do and not going to do,"
he
said. "We're not going run an airline within an airline as our
competitors
have done.
"We've never flown transcontientals, we don't fly up and down the East
Coast or up and down the West Coast."
Today, Northwest is also stepping up its "apology level" when things go
wrong, sending even customers who didn't register complaints
certificates
for frequent flier miles when Northwest-controlled delays waylay
passengers.
"The model is changing," he said. "If something goes wrong that is our
fault, we need to take responsibility for it. That distinguishes us in
the
airline industry."
While Delta has nearly pulled out of Dallas/Fort Worth as it tries to
ride
out financial troubles, Memphians don't need to worry about Northwest's
hub
here, he said.
"We view Memphis as a strategic part of Northwest. It gives us coverage
in
a region of the country we couldn't easily cover from Minneapolis or
Michigan," Anderson said.
Northwest is also concentrating on keeping cash balances high "so we
have
time to continue to evolve," he said.
Northwest finished the second quarter with more than $2.8 billion in
liquidity.
"Of the majors, Northwest has the highest amount of cash for its size,"
said Piper Jaffray analyst Joel Denney. "They've been very careful to
make
sure they maintain strong liquidity."
The aviation industry has already withstood two rounds of bankruptcies
since the airlines were deregulated in the 1978.
Now in the third round, two of the six airlines still afloat are in
bankruptcy, and Delta teeters on the brink.
"That puts a lot of pressure on our costs," Anderson said, "because the
low-cost producer ends up setting the market price."
Northwest is slightly better insulated than its U.S. peers because up
to 25
percent of its business comes from Pacific flights, where its cargo
business has long capitalized on the influx of Asian exports.
"We have good prospects in China," Anderson said. "It's a business
we've
been in a long time. It would be very difficult for anyone else to
replicate."
The closest is United Airlines, which purchased Pan Am's Tokyo network
in
the 1980s.
Northwest's niche in the cargo market is also insulating because it
carries
loads heavier than the usual express freight.
"It's bigger, heavier freight than FedEx carries," Anderson said.
Although Anderson expects fares will continue to drop, he looks for a
boost
from industry alliances, including Northwest's recent affiliation with
SkyTeam -- a consortium of nine major airlines connecting Europe, Asia
and
Africa -- to help.
Northwest pioneered the idea of airline alliances in 1991 when it
paired
with KLM Royal Dutch Airlines to offer twice- weekly flights between
Minneapolis and Amsterdam.
"Now, we have three flights a day to Amsterdam out of Minneapolis and
four
from Detroit," he said.
Others include daily service from Memphis, Boston, JFK, Newark,
Washington
Dulles, Atlanta, Houston, Chicago, San Francisco, Los Angeles and
Seattle.
"The alliances make sense because we knew there were places in the
world
we'd never have access to. I'm amazed at how much traffic we get,"
Anderson
said.
Its ties to KLM bring Northwest about $1 billion in business a year.
At home, Northwest's Memphis hub is central to its alliance with Delta
and
Continental, based in Atlanta and Houston, respectively.
"Delta is particularly important for Memphis because it is a carrier
that
has always had such deep roots in the South," he said.
The Continental alliance, in place since 1998, is annually worth $150
million to Northwest.
Northwest's domestic alliances are "second rate" compared to the world
alliances, said Alan Bender, aviation professor at Embry-Riddle
Aeronautical University in Florida.
Northwest last week joined SkyTeam, one of three world alliances,
offering
passengers access to more than 14,000 daily departures and reciprocal
frequent flier benefits.
"Until now, Northwest and its partners were all alone competing against
some giants," he said. "Finally, they are now competitive."
Through SkyTeam, Northwest can team to get better buys on fuel or
aircraft
and share ground crews to improve efficiencies.
And in time, streamlined online E-ticketing will be available.
"Northwest joining SkyTeam is a blinding glimpse of the obvius," said
Henry
Harteveldt, airline and travel consultant. "But it's very intelligent.
Now
it's a pitch itself as a global solution to corporate travel planners."
Alliances and restructuring have saved money on the nonlabor side of
the
business. The challenge yet is getting labor costs in line.
Northwest pilots, now among the highest paid in the industry, have
offered
to invest $200 million a year in the airline through 2006 through pay
cuts
and work rule changes.
Northwest says it needs at least $300 million a year from the pilots.
The sides have been talking since July 2003.
"It's sufficient to say the intention is to have a completed pilot
agreement this fall," Anderson said.
By Jane Roberts
September 19, 2004
Northwest Airlines is not facing Chapter 11 like peers US Airways,
Delta
and United because it has managed costs for the long term, said CEO
Richard
Anderson.
"We've stuck to our knitting," Anderson told The Commercial Appeal's
editorial board last week.
Anderson said Northwest has focused on serving small and medium markets
across the nation's heartland and maintaining the trump card of being
the
only major U.S. carrier that also flies as a cargo carrier.
"We've been clear about what we are going to do and not going to do,"
he
said. "We're not going run an airline within an airline as our
competitors
have done.
"We've never flown transcontientals, we don't fly up and down the East
Coast or up and down the West Coast."
Today, Northwest is also stepping up its "apology level" when things go
wrong, sending even customers who didn't register complaints
certificates
for frequent flier miles when Northwest-controlled delays waylay
passengers.
"The model is changing," he said. "If something goes wrong that is our
fault, we need to take responsibility for it. That distinguishes us in
the
airline industry."
While Delta has nearly pulled out of Dallas/Fort Worth as it tries to
ride
out financial troubles, Memphians don't need to worry about Northwest's
hub
here, he said.
"We view Memphis as a strategic part of Northwest. It gives us coverage
in
a region of the country we couldn't easily cover from Minneapolis or
Michigan," Anderson said.
Northwest is also concentrating on keeping cash balances high "so we
have
time to continue to evolve," he said.
Northwest finished the second quarter with more than $2.8 billion in
liquidity.
"Of the majors, Northwest has the highest amount of cash for its size,"
said Piper Jaffray analyst Joel Denney. "They've been very careful to
make
sure they maintain strong liquidity."
The aviation industry has already withstood two rounds of bankruptcies
since the airlines were deregulated in the 1978.
Now in the third round, two of the six airlines still afloat are in
bankruptcy, and Delta teeters on the brink.
"That puts a lot of pressure on our costs," Anderson said, "because the
low-cost producer ends up setting the market price."
Northwest is slightly better insulated than its U.S. peers because up
to 25
percent of its business comes from Pacific flights, where its cargo
business has long capitalized on the influx of Asian exports.
"We have good prospects in China," Anderson said. "It's a business
we've
been in a long time. It would be very difficult for anyone else to
replicate."
The closest is United Airlines, which purchased Pan Am's Tokyo network
in
the 1980s.
Northwest's niche in the cargo market is also insulating because it
carries
loads heavier than the usual express freight.
"It's bigger, heavier freight than FedEx carries," Anderson said.
Although Anderson expects fares will continue to drop, he looks for a
boost
from industry alliances, including Northwest's recent affiliation with
SkyTeam -- a consortium of nine major airlines connecting Europe, Asia
and
Africa -- to help.
Northwest pioneered the idea of airline alliances in 1991 when it
paired
with KLM Royal Dutch Airlines to offer twice- weekly flights between
Minneapolis and Amsterdam.
"Now, we have three flights a day to Amsterdam out of Minneapolis and
four
from Detroit," he said.
Others include daily service from Memphis, Boston, JFK, Newark,
Washington
Dulles, Atlanta, Houston, Chicago, San Francisco, Los Angeles and
Seattle.
"The alliances make sense because we knew there were places in the
world
we'd never have access to. I'm amazed at how much traffic we get,"
Anderson
said.
Its ties to KLM bring Northwest about $1 billion in business a year.
At home, Northwest's Memphis hub is central to its alliance with Delta
and
Continental, based in Atlanta and Houston, respectively.
"Delta is particularly important for Memphis because it is a carrier
that
has always had such deep roots in the South," he said.
The Continental alliance, in place since 1998, is annually worth $150
million to Northwest.
Northwest's domestic alliances are "second rate" compared to the world
alliances, said Alan Bender, aviation professor at Embry-Riddle
Aeronautical University in Florida.
Northwest last week joined SkyTeam, one of three world alliances,
offering
passengers access to more than 14,000 daily departures and reciprocal
frequent flier benefits.
"Until now, Northwest and its partners were all alone competing against
some giants," he said. "Finally, they are now competitive."
Through SkyTeam, Northwest can team to get better buys on fuel or
aircraft
and share ground crews to improve efficiencies.
And in time, streamlined online E-ticketing will be available.
"Northwest joining SkyTeam is a blinding glimpse of the obvius," said
Henry
Harteveldt, airline and travel consultant. "But it's very intelligent.
Now
it's a pitch itself as a global solution to corporate travel planners."
Alliances and restructuring have saved money on the nonlabor side of
the
business. The challenge yet is getting labor costs in line.
Northwest pilots, now among the highest paid in the industry, have
offered
to invest $200 million a year in the airline through 2006 through pay
cuts
and work rule changes.
Northwest says it needs at least $300 million a year from the pilots.
The sides have been talking since July 2003.
"It's sufficient to say the intention is to have a completed pilot
agreement this fall," Anderson said.
