Northwest Airlines Corporation (NASDAQ: NWAC), the parent of Northwest Airlines, today reported a third quarter net loss of $46 million or 55 cents per common share. This compares to a third quarter 2001 net profit of $19 million or 20 cents per diluted common share.
The third quarter 2001 financial results included a $158 million after-tax grant from the Federal Government under the Airline Stabilization Act and $39 million in after-tax non-recurring charges related to aircraft write-downs and severance costs resulting from the events of September 11, 2001. Excluding these items, Northwest reported a third quarter 2001 net loss of $100 million or $1.18 per common share. Northwest’s third quarter 2002 financial results were favorable to consensus estimates of a 82 cent loss per share.
“Northwest, like the rest of the industry, continues to address the impact of diminished revenue resulting from a post-September 11, 2001 drop in passenger demand and the continued depressed levels of business travel. While we cannot forecast when the airline will return to profitability in this difficult period, the performance of Northwest relative to that of other network carriers compares favorably,” said Richard Anderson, chief executive officer.
Anderson continued, “Northwest has been aggressively managing its costs since March, 2001 and has taken a series of cost reduction and revenue enhancing steps designed to address the challenges in the current environment. During the third quarter and in early October, we took additional measures to adjust our workforce and contain costs to respond to the weak revenue environment. Our commitment to vigilant cost control is estimated to result in an incremental $300 million of annualized 2003 cost savings, in addition to the $1.7 billion annualized savings from past actions and flight schedule reductions. As we look forward, we will continue to make adjustments to adapt to the business environment to ensure the competitiveness of Northwest.”
Among other measures, Northwest recently announced that it will close a maintenance facility in Atlanta, a reservation center in Long Beach, Calif., as well as three city ticket offices. Additionally, the airline will require employees to pay a portion of their health care premiums. These initiatives, coupled with other cost saving programs, including the increased use of technology and the ongoing focus of improving productivity, will contribute to the incremental savings.
Third quarter 2002 operating revenues of $2.56 billion were down 1.2%, while operating expenses were 7% lower, as compared to the third quarter last year. These quarterly comparisons include the impact of last year’s events of September 11, which resulted in the shutdown of the entire airline industry for several days and the subsequent severe drop in air travel demand.
For the quarter, Northwest’s revenue passenger miles increased 0.1% on 3.7% less available seat miles year-over-year, resulting in an industry-leading system load factor of 78.8%, up 3 points year-over-year and 5.5 points better than the collective average of the other major airlines.
Despite the industry-wide weak yield environment resulting from the lack of business travelers, Northwest’s third quarter unit system passenger revenue (RASM) was up 2.4% year-over-year. Northwest continues to outperform the domestic industry average in RASM with both higher yields and load factors. In the month of August, the most recently available industry data, Northwest had a 12% domestic unit revenue advantage to the average of its competitors, driven principally by an 11% yield advantage.
Third quarter 2002 operating cost per seat mile (CASM) decreased by 2.2% year-over-year, despite capacity declining 3.7%, benefiting from cost reduction initiatives and lower fuel prices.
“These are challenging times for the industry, but Northwest is relatively well-positioned with its stronger liquidity, its disciplined cost focus, and its above-industry revenue performance,” said Bernie Han, executive vice president and chief financial officer.
In the latest of a number of private and public market financings closed since September 11, 2001, Northwest in August 2002, successfully completed a pre-funded $749 million secured aircraft bond financing in the public capital markets to finance future aircraft deliveries. The financing was structured as enhanced equipment trust certificates (EETCs) that have an average life of 8.1 years, a final maturity of 19 years, and an initial average weighted interest rate of 4.07%. This transaction was Northwest’s largest EETC ever completed.
Northwest had over $2.5 billion in total cash at quarter-end, including $116 million in restricted cash.
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