NWA Posts $475M Loss in Third-Quarter

Northwest Airlines Corp.'s quarterly loss ballooned tenfold to $475 million because of bankruptcy costs and more expensive fuel, the airline said Thursday.

It was more bad financial news for the nation's fourth-largest carrier, which filed for Chapter 11 bankruptcy protection on Sept. 14.

Northwest is the dominant carrier at Detroit Metro Airport, with a major hub that serves more than 60% of the passengers who begin or end their trips there, and more than 8,000 Michigan employees.

Northwest said it lost $5.45 per share during the quarter that ended Sept. 30, up from $46 million, or 54 cents per share during the same period last year.

Northwest said it paid $1.845 per gallon for fuel during the quarter, up 48% from the same period last year.

The loss also includes $82 million in charges for freezing pensions for nonunion workers and $159 million in bankruptcy costs.

Excluding the losses, Northwest said it would have lost $234 million, or $2.69 per share. The consensus of industry experts surveyed by Thomson Financial was for a loss on that basis of $4.13 per share.

Operating revenue was $3.38 billion. Analysts expected $3.27 billion.

"Our third-quarter results clearly demonstrate the need for Northwest to restructure expeditiously," said president and CEO Doug Steenland.

He said the company is trying to cut labor and other costs, renegotiate the leases on its aircraft, and develop a more efficient business model so it can begin making money again. Those goals would add up to $2.5 billion in "overall profit improvement," Steenland said.

A bankruptcy judge in New York gave Northwest permission Thursday to eliminate another 106 planes if it can't renegotiate lease and mortgage payments on them.

Those planes include 27 Airbus jets, 10 Boeing 747s, five Boeing 747 cargo planes and 49 turboprop planes that Northwest leases to its commuter carrier Mesaba Airlines. Last week Judge Allan L. Gropper granted Northwest's request for the same authority on 108 planes.

Northwest has said it does not plan to abandon all of those aircraft, but it can now negotiate more favorable leases on them.

"It shows that they really mean business, that they're going to get this thing done right in bankruptcy so they can be a viable competitor long term," Calyon Securities analyst Ray Neidl said.

Northwest's next battle in bankruptcy court is to take place Nov. 16 over union contracts.

Northwest wants Gropper to terminate its nine union contracts and allow the cash-strapped airline to impose lower wages and layoffs on its 29,000 union workers if the carrier can't convince its unions to make $1.4 billion in concessions. Northwest seeks wage cuts ranging from 5% to 30%.

Northwest has asked its:

Ground workers union to give up $190 million annually, with most members taking a 12.5% pay cut.

Flight attendants to take $195 million in cuts, which includes outsourcing of 75% of the attendants on international flights and all of those flying in any new Northwest subsidiary.

Pilots to accept $611 million in annual wage and benefit reductions, including $250 million in concessions the pilots union made last year.

Northwest last reported results in July. Since then, its mechanics have gone on strike, fuel prices have increased dramatically, and it has filed for bankruptcy protection.

Detroit Free Press

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