NWA Earns $273 Million in 2nd Quarter
By Margarita Bauza, Detroit Free Press
Aug. 1–Northwest Airlines, acknowledging its struggle Tuesday with flight cancellations, reported profits of $273 million excluding bankruptcy reorganization gains for the second quarter, the airline’s first earnings report since it emerged from bankruptcy May 31.
The airline’s pretax profit compared with $179 million in the second quarter of last year.
“They did a very good job in bankruptcy of reducing fuel costs, their debt burden and interest-rate burden,” said Ray Neidl, an airline analyst at Calyon Securities who gave Northwest shares a positive rating.
The company’s stock price rose after the earnings report, but fell 52 cents a share to $17.43 after oil prices rose in the afternoon.
Neidl said growth should slow after the summer, but the airline would continue to flourish.
“I think it’s a good demand environment that can be sustained for the summer travel season,” Neidl said, cautioning that sustaining growth hinges on resolving labor disputes.
The airline, Detroit Metro Airport’s largest carrier, canceled more than 2,000 flights in July after dropping more than 2,300 in June. The problems have become acute at the end of the months, when pilots approach their maximum allowed flight hours and fail to report to work.
“You can’t annoy your customers for too long a period,” Neidl said. “Something has to be fixed. Pilots have to get real and realize they will jeopardize their own career. …
“I don’t care what you say, we have a more competitive environment,” Neidl said. “The guys with the lowest costs are the ones to survive.”
Northwest indeed cut its costs. The airline slashed annual spending by $2.4 billion during 20 months of bankruptcy, with its biggest savings coming from labor. Labor savings accounted for $1.4 billion of annual spending cuts Northwest achieved during bankruptcy protection.
The airline said it had a net profit of $2.15 billion for the quarter, boosted by $1.94 billion in reorganization items during the quarter, which included two months operating under bankruptcy protection. The airline had a net loss of $285 million in the second quarter a year ago.
“We are well-positioned for profitability and earnings growth,” CEO Doug Steenland said during a conference call, adding that the airline must restore its reliability after the cancellations.
“Operational performance has been unacceptable,” he said. “Our immediate focus is to restore operational reliability. We sincerely apologize for the inconvenience these cancellations have caused our customers.” Steenland acknowledged the troubles had been difficult “for our employees and we especially thank them for their tireless efforts.”
The airline said cancellation problems cost it $25 million during the quarter.
Northwest had canceled 73 flights by 6 p.m. Tuesday, 22 of those at Detroit Metro, according to flightstats.com.
The airline disputed flightstats.com’s numbers Tuesday, saying it had canceled just two flights out of Detroit and 44 system-wide. Andrea Newman, Northwest’s senior vice president of government affairs, said flightstats.com was working from a schedule that doesn’t account for reductions to July’s schedule.
Flightstats.com spokeswoman Meara McLaughlin said the Web site, which culls its data from numerous real-time sources, including airlines, air traffic control and the Federal Aviation Administration, updates flight schedules weekly.
“Our schedules would reflect that,” she said of Northwest’s reduced schedule.
Steenland said the airline continued to talk with the Air Line Pilots Association but declined to disclose details.
The Associated Press contributed to this report.
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