Northwest Airlines Corporation (NASDAQ: NWAC), the parent of Northwest Airlines, last week reported a first quarter net loss of $171 million or $2.01 per common share, which compares favorably to consensus estimates of a $2.46 loss per share for the quarter.
These financial results compare to a first quarter 2001 reported net loss of $171 million or $2.05 per common share. First quarter 2001 financial results included $48 million in net after-tax non-recurring charges.
Richard Anderson, chief executive officer, said, “Our industry continues to face challenges, particularly with respect to depressed business travel and a weak yield environment. Nevertheless, Northwest’s financial performance compares favorably to its industry competitors. We are somewhat encouraged that the airline generated a profit in March, due in part to an early Easter holiday, but remain cautious as the current economic conditions remain unfavorable.”
Looking forward, Anderson added, “We believe the best way to manage the airline in the near term is to remain fiscally disciplined by continuing to control costs and by adding capacity only when economically justified.”
First quarter 2002 operating revenue was $2.2 billion, down 16.5% from the first quarter last year, but showing a significant improvement relative to fourth quarter 2001 year-over-year performance, which was off 26.6%. Passenger demand continued to strengthen in the quarter, resulting in Northwest reporting an industry-leading and a company record first quarter system load factor of 76%. Northwest’s Pacific entity also continued to rebound ahead of expectations, reporting a company record first quarter 2002 load factor of 87.2%.
Despite the continued weak yield environment, Northwest’s first quarter unit system passenger revenue (RASM) was down only 6.9% year-over-year, compared to a fourth quarter 2001 year-over-year decline of 15.7%. The Company continues to outperform the domestic industry average in RASM with both higher yields and load factor.
Quarterly operating cost per seat mile (CASM), excluding last year’s non-recurring charge, was favorable by 3% on a 12.9% decline in capacity, benefiting from the continued focus on cost management and the benefit of a first quarter 2002 fuel hedge. Unit costs increased 2.5% holding fuel prices constant to last year.
Mickey Foret, executive vice president and chief financial officer, said, “Northwest’s quarterly financial performance is expected to rank near the top of our peer group, reflecting the company’s industry revenue premium and competitive cost structure.”
Foret added, “The company’s financial strength compared to industry competitors is further bolstered by our strong $2.6 billion quarter-ending cash position, the same as year-end 2001, which relative to our size is expected to be the highest in the industry.”
During the first quarter, Northwest issued $300 million of five-year, unsecured notes at a fixed rate of 9.875%. Northwest also, together with the Metropolitan Airports Commission, jointly refinanced $270 million in State of Minnesota bonds, which reduced rates on this long-term financing from 8.92% to an average 6.56%. Additionally, in March, Standard & Poor’s affirmed all ratings on issues of Northwest Airlines, including its BB corporate credit rating and removed the airline from CreditWatch.
“An important element of Northwest’s business strategy is to provide customers with an efficient travel experience. With the opening of the new WorldGateway at Detroit, we have substantially improved the convenience of our three domestic hubs. We also continue to modernize our fleet and expand service,” said Doug Steenland, president.
Northwest took delivery of 12 aircraft in the first quarter 2002, including six Airbus A319s, five Bombardier CRJ regional jets, and one Boeing B747-400 aircraft, in addition to announcing the accelerated retirement of the carrier’s DC10-40 fleet by October, 2002. By the end of 2002, the carrier will have taken delivery of 61 new aircraft.
With the addition of new aircraft, Northwest continues to capitalize on growth opportunities by offering new service from its underdeveloped hubs. In the last three months, the airline connected Cedar Rapids, Little Rock and Omaha to its WorldGateway at Detroit with new nonstop jet service. Northwest established new jet links to its Minneapolis/St. Paul hub from Jacksonville and Richmond. At Memphis, Northwest is restoring the evening schedule of flights serving 54 cities across the U.S., including new service to Washington Dulles Airport.
Discussing security issues, Steenland also noted, “During the first quarter, Northwest worked closely with the new Transportation Security Agency (TSA) to enable a smooth transition of security checkpoint responsibilities from the airlines to the federal government. We are continuing a dialogue with TSA and the Federal Aviation Administration to explore ways to make the security screening process more effective, yet expeditious.”
Northwest Airlines is the world’s fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam and more than 1,400 daily departures. With its travel partners, Northwest serves nearly 750 cities in almost 120 countries on six continents.