A Wall Street analyst's forecast that Northwest Airlines is headed to a "brink-of-bankruptcy showdown" with its unions helped drive the airline's stock down 11 percent Thursday.
Northwest closed at $6.14, down 77 cents, a new 52-week low. So far this year, the stock is down 37 percent.
Eagan-based Northwest, which has lost about $2.5 billion in the past four years, has not had much success in achieving its goal of cutting annual labor costs by $1.1 billion. After about two years' of leaning on its union employees for contract givebacks, it's only $300 million toward that goal. That's mostly the result of a deal cut with its pilots.
The carrier's other unions so far have rejected its giveback pitches. Meanwhile, analysts expect Northwest will lose about $1 billion more this year.
"We think this will unfortunately be a brink-of-bankruptcy showdown," wrote UBS Investment Research analyst Robert Ashcroft in a report issued Thursday.
He expects Northwest will rapidly burn through its cash this year. It had about $2.5 billion at the end of 2004. Ashcroft predicts it'll be down to $1.1 billion by the end of 2005.
Last month, Continental Airlines managed to extract concessions from its workers in a "sedate non-crisis process," Ashcroft noted. But he observed that Continental's labor relations are "far better" than Northwest's.
Relations between the airline and its mechanics are especially testy. The airline's layoffs of mechanics since 2000 soon will likely top 4,4000. And the mechanics are in a major funk about Northwest's outsourcing of maintenance work.
"(Northwest's) negotiations are already fractious, with its mechanics union leader publicly accusing Northwest of actions jeopardizing safety," wrote Ashcroft.
In similar showdown dramas, shares of American and Delta airlines took "significant damage" and Ashcroft expects Northwest shares would also. They could fall to around $2.50 a share this year, he indicated.