Fast Track to Recovery; Northwest's Bankruptcy Reorganization Remains on Schedule

Seven months after filing for court protection from its creditors, Northwest has rapidly slashed costs, trimmed its flight schedule, renegotiated leases and taken the first steps toward revamping its fleet.


Northwest's pricing power has been strengthened since it entered bankruptcy. That is driven partly by low-cost carriers raising fares in response to high fuel prices. But Northwest also cut its seat capacity by 8.2 percent in the last quarter of 2005 and by 10.8 percent in the first quarter of this year.

Northwest halted one high-profile route, its New York-Tokyo flight, but it hasn't made wholesale changes to its route structure. Instead, it has reduced the frequency of flights on many routes and juggled the plane types assigned to many cities.

Pension challenges

Northwest's defined-benefit pension plans are underfunded by $3.7 billion and the carrier wants Congress to give it up to 20 years to fully fund them. Northwest already has frozen its plans for pilots and salaried employees, and wants to freeze accrued benefits for the third plan, which covers the rest of Northwest's workers.

United and US Airways terminated their plans in bankruptcy. But Northwest, working closely with the pilots union, has been lobbying Congress for two years to give it time to make payments and keep its pension plans intact.

A House-Senate conference committee is expected to take action on the bill after its April recess.

"Although Northwest has a reputation for taking a tough line with labor, they are trying to save pension plans, which is an item highly valued by the employees," Baggaley said.

Saving employees' pensions is one way Northwest can try to rebuild a working partnership with its employees, he added.

CEO Steenland said: "If pension legislation containing the necessary solution to permit airlines to fund their frozen pension plans as set forth in the Senate bill is enacted, Northwest will not terminate its pension plans."

Liz Fedor - 612-673-7709

NWA BANKRUPTCY CHECKLIST

After seven months in Chapter 11, Northwest has:

- Trimmed its flight schedule, but hasn't abandoned major markets.

- Restructured its fleet, rejecting some leases, renegotiating others and

ordering new planes.

- Cut capacity and raised prices.

- Lowered labor costs with temporary agreements.

CHALLENGES AHEAD

- Winning long-term pension relief from Congress for its pension obligations.

- Obtaining permanent labor cuts through still-to-be-ratified agreements with

pilots, ground workers and flight attendants.

- Surviving oil price increases that already are higher than it projected.

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