Profit-sharing checks from bankrupt airlines are as common as wings on pigs. So workers at Northwest Airlines could be forgiven if they cash theirs quickly.
Bankrupt Northwest Airlines Corp. announced $44 million in profit-sharing and other incentive pay on Tuesday, and it said it would have made $301 million in 2006 if not for bankruptcy expenses. Northwest and other airlines have benefited from falling fuel prices and higher ticket prices, and Northwest also cut labor costs by about 10 percent in bankruptcy court.
Including bankruptcy expenses, Northwest lost $267 million, or $3.06 per share, in the fourth quarter, down from a loss of $1.31 billion, or $15.01 per share, during the same period last year. Fourth-quarter revenue rose 2 percent to $2.98 billion. Without bankruptcy expenses and a $35 million tax benefit, Northwest would have lost $7 million during the fourth quarter.
Its full-year results looked better. Northwest lost $2.84 billion, or $32.48 per share, larger than the loss of $2.56 billion, or $29.36 per share, during 2005. But its 2006 loss was all bankruptcy expenses. Not counting those and taxes, it would have made $301 million. Revenue for the year was $12.57 billion, up 2.3 percent from $12.29 billion a year ago.
The operating profits come at an inopportune time. Northwest just met with flight attendants on Friday to try to make a deal they can all agree to. Right now flight attendants are working under a contract Northwest imposed with a bankruptcy judge's permission. But it and the union have said they would rather make a deal.
Northwest gave a cool response to the union's proposed concessions of $156 million, instead of the $195 million Northwest has said it needs. The Association of Flight Attendants said Northwest's demand is outdated in light of its improved performance. No additional talks are planned.
"If anything, it's an embarrassment of riches," said Gary Chaison, an industrial relations expert at Clark University in Worcester, Mass. "They have been pleading a case of poverty - and I think they have been doing it fairly well - and now that they are doing all right it really hurts their credibility to argue that they need a break."
Pilots, too, have been seeking relief after agreeing to pay cuts and work rule changes. The contract they agreed to last year runs through 2011, but union leader Dave Stevens said they may get some relief sooner if there's something Northwest needs from the pilots.
For instance, pilots want to reduce Northwest's ability to make them wait in hotels in between flights for little or no pay, said Stevens, who is chairman of the Northwest branch of the Air Line Pilots Association.
"Their reaction has basically been that they're going to maximize what they bargained for. And they keep forgetting that they bargained for it with the bankruptcy gun pointed at labor's head," Stevens said on Tuesday.
In recent weeks pilots and many ground workers have been able to sell some of the bankruptcy claims they received in exchange for concessions, receiving roughly 85 cents on the dollar. Most Northwest workers are getting the checks for profit-sharing and other incentives, although flight attendants did not get bankruptcy claims because they never agreed to a new contract.
Chief Executive Doug Steenland acknowledged the employee sacrifices.
"Our progress to date is due in large measure to the hard work and personal sacrifices of our employees," he said in a prepared statement.
The airline has shrunk in bankruptcy and now trails fourth-largest Continental Airlines in size. Northwest used to be the fourth largest airline.
Northwest's capacity dropped 7.5 percent during 2006 as it shed unprofitable routes, and its passenger count fell by almost 4 percent.
But the planes that remained were 84 percent full, up from 81.5 percent during 2005. Those full planes flew on cheaper gas (down by 2 percent) with cheaper employees.
"Clearly, the work we have done to reposition Northwest for the long term is showing tangible results as we reported the first profitable year since 2000," Steenland said, referring to profit before bankruptcy expenses. The results are "another major milestone in Northwest's restructuring efforts."
Chief Financial Officer Neal Cohen said Northwest is still on track to finish its restructuring during the second quarter, which ends June 30.
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