Northwest Airlines Corporation, the parent of Northwest Airlines, today reported a net loss of $230
million or $2.67 per common share for the first quarter of 2004. This
compares to the first quarter of 2003, when Northwest reported a net loss of
$396 million or $4.62 per common share. Excluding unusual items, the company
reported a loss of $318 million, or $3.71 per common share in the first
quarter of 2003. Richard H. Anderson, chief executive officer, said, “While our relative unit
revenue performance during the quarter was better than many of our
competitors, this was another difficult quarter for Northwest. We did see
some revenue recovery, but that recovery was offset by aircraft fuel prices,
which are near their highest levels in 20 years.”
“We still face the same challenge. Our costs remain higher than the revenues
we generate. In addition, we did not have the benefit of non-core asset
sales or federal government reimbursements reported in several recent
quarters. Until we achieve competitive labor costs, we will be unable to
generate a sustainable profit,” he continued.
Anderson added, “Northwest aggressively managed its operations during the
quarter by controlling non-fuel unit costs, even with a reduction in
available seat miles (ASM). We also continued our three-year non-labor cost
reduction efforts by employing innovative technology throughout the
organization that reduced costs and improved customer service.”
Operating revenues in the first quarter increased by 9.6% versus the first
quarter of 2003 to $2.6 billion. Passenger revenue per available seat mile
increased by 12.5% on 3.1% fewer ASMs. Operating expenses in the quarter
increased 0.4% versus a year ago to $2.7 billion. Excluding $78 million of
unusual items in the first quarter 2003, operating expense increased 3.4%.
Unit costs, excluding fuel and unusual items, increased by 2.3% on 3.1%
fewer ASMs. Fuel prices, which negatively impacted the quarter by $64
million versus the first quarter of 2003, averaged 100.2 cents per gallon,
excluding taxes, up 18.0%.
Northwest’s quarter-ending cash balance was $3.1 billion, of which $2.9
billion was unrestricted.
Bernie Han, executive vice president and chief financial officer, said, “We
continued to maintain our strong cash position during the quarter by taking
prudent actions, including a $300 million unsecured debt financing that
offset debt maturities coming due in early 2004. This transaction was a
reflection of confidence by the financial markets that the airline will
align its operating costs with anticipated revenues to ensure long-term
In April, pension reform legislation was passed by the U.S. Congress and
signed by President Bush. The measure provides temporary deficit reduction
contribution and interest rate relief for defined benefit pension plans at a
number of companies including Northwest. Without this relief, the airline
would have been required to pay hundreds of millions of dollars in
additional pension payments over the next several years.
Doug Steenland, president, said, “Northwest appreciates the work of Congress
and the Bush Administration in enacting this important legislation. We
worked closely with the Air Line Pilots Association, International
Association of Machinists and Aerospace Workers, and Transport Workers Union
officials to inform members of Congress on the need for temporary relief
until Congress and the Administration can address pension reform on a more
Discussing labor, Steenland, said, “We continue to update our union leaders
on a regular basis about the financial challenges facing our airline. We
anticipate sitting down with our pilots and other labor unions in the near
future to further our discussions, with the goal of achieving competitive
labor agreements for all parties.”
Northwest continues to build its network. During the quarter, the airline
announced new service to a number of international and domestic markets. In
June, the airline begins daily nonstop service between Portland, Ore., and
its Pacific hub at Tokyo. The new service, announced in January, will give
Northwest customers eight U.S.-Japan gateways and four West Coast
connections to Tokyo.
During the past six months, Northwest has announced or begun new service to
eight destinations from its WorldGateway at Detroit, 11 destinations from
Minneapolis/St. Paul and seven cities from Memphis, Tenn. New cities being
added to the airline’s network include Newburgh, N.Y., Kitchener/Waterloo,
Ontario, Canada, and Asheville, N.C., all served from Detroit. In addition,
Northwest announced an expansion of its service at Milwaukee.
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. Northwest and its travel partners
serve nearly 750 cities in almost 120 countries on six continents.
Northwest Airlines will Web cast its first quarter earnings conference call
at 11:30 a.m. Eastern Daylight Time (10:30 a.m. Central) today. Investors
and the news media are invited to listen to the call through the company’s
investor relations Web site at http://ir.nwa.com.