Northwest Airlines Corporation
(NASDAQ: NWAC), the parent of Northwest Airlines, today reported a third
quarter net profit of $42 million or $0.49 per common share. This compares
to a third quarter 2002 net loss of $46 million or $0.55 per common share.
Richard Anderson, chief executive officer, said, “While it is encouraging to
report a profit, the third quarter is traditionally strong for the industry
due to greater demand in the summer months and in particular for Northwest
because of its significant Pacific operation, which has an even greater
summer demand peak.”
Anderson continued, “These results do not signal an end to our challenges or
diminish the need to address our cost structure in light of the changes in
the revenue environment.”
“As we continue to pursue labour cost restructuring, we are also
implementing other business initiatives, including closing the Michigan
reservations centre, rescheduling our Memphis hub, and exiting the domestic
mail business, in order to further reduce our operating expenses and
maximise system revenues. At the same time, we remain focused on ensuring
that Northwest remains a viable, long-term competitor by prudently investing
in new aircraft, facilities and technology, as well as addressing our
customers` travel needs by growing our network and utilising alliances
including the Continental and Delta marketing agreement,” Anderson added.
“Another core strength of Northwest is its people, who again showed their
dedication and commitment to our customers, especially during the August
electrical blackout that impacted a large portion of the eastern U.S. and
during Hurricane Isabel. They also helped us achieve the number one ranking
among major network carriers in domestic on-time arrivals and luggage
performance between June and August, based on information supplied to the
Department of Transportation,” Anderson concluded.
Operating revenues in the third quarter decreased 0.3% versus the third
quarter of 2002 to $2.56 billion, driven by a decrease in passenger revenue
of 1.1%, partially offset by an 8.9% improvement in cargo revenue.
Passenger revenue per available seat mile improved 5.3% on 7.1% fewer
available seat miles (ASMs).
Operating expenses decreased 5.7% versus a year ago to $2.41 billion. Unit
costs excluding fuel increased by 1.0% on 7.1% fewer ASMs. During the
quarter, fuel price averaged 76 cents per gallon, up 6.0% versus the third
quarter of last year. This quarter`s fuel expense included approximately
$30 million, or six cents per gallon, of gains realised from hedging.
“While we are pleased to have contained unit cost growth in a period of
significant capacity reduction, Northwest must still restructure its labour
costs to compete more effectively in the current and future revenue
environment,” said Bernie Han, executive vice president and chief financial
Northwest`s quarter-end cash balance was $2.95 billion, of which $2.80
billion was unrestricted.
In August, Northwest commenced collective bargaining negotiations on a new
agreement with its pilots represented by the Air Line Pilots Association
(ALPA). In late 2002, the company began contract negotiations with its
ground and customer service employees represented by the International
Association of Machinists and Aerospace Workers (IAM).
Northwest met all contribution obligations due for pension plan year 2002
and for calendar year 2003 when it made total contributions equivalent to
$369 million to its contract employee, pilot and management pension plans
during September. The contributions were funded with 11.4 million shares of
common stock of its indirect subsidiary, Pinnacle Airlines Corp., as well as
$60 million in cash. In January, the company contributed the equivalent of
$44 million, or 1.9 million shares of Pinnacle stock to its employee pension
plans, bringing the total 2002 plan year contributions made in calendar year
2003 to $413 million.
In late August, Northwest began scheduled trans-Atlantic service with the
first of 14 new-generation Airbus A330-300 aircraft. Doug Steenland,
president, said, “The A330 features new World Business Class seats, an
“on-demand” in-flight entertainment system throughout the aircraft, and
updated World Business Class meal service. World Business Class
enhancements are also being made to the airline`s 747-400 trans-Pacific
During the quarter, Northwest introduced a redesigned version of its nwa.com
Web site, offering travellers new online services and making existing site
capabilities easier to use. Also, Northwest customers continued to take
advantage of the airline`s innovative self-service check-in program. “Since
its inception, more than 38 million customers have checked-in using a
Northwest check-in kiosk or via the Internet at nwa.com Check-In,” Steenland
Northwest Airlines is the world`s fourth largest airline with hubs at
Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and
approximately 1,500 daily departures. With its travel partners, Northwest
serves nearly 750 cities in almost 120 countries on six continents.
Northwest Airlines will Web cast its third quarter earnings conference call
at 11:30 a.m. Eastern Daylight Time (10:30 a.m. Central) today. Investors
and the media are invited to listen to the call through the company`s
investor relations Web site at http://www.ir.nwa.com.