Northwest's loss widens in 2Q

August 08, 2006|By BLOOMBERG NEWS

DETROIT -- Northwest Airlines Corp. said yesterday that its second-quarter loss widened because of spending related to its bankruptcy.

The loss increased to $285 million, or $3.27 a share, from $226 million, or $2.69, a year earlier, the airline said. The 2005 per-share figure reflects payment of preferred dividends. The company made a $179 million second-quarter profit excluding bankruptcy reorganization costs of $464 million, or $5.31 a share.

Excluding a gain from a stock sale and write-downs on aircraft values, the year-earlier loss would have been $288 million.

Sales rose 3 percent to $3.29 billion, as revenue for each seat flown a mile by Northwest and its commuter-airline partners rose 16 percent. The yield, or average fare per mile, increased 12 percent.

Capacity declined 9.9 percent as the airline dropped unprofitable routes, ended some aircraft leases and began retiring some older aircraft.

"The company's unit revenue and yield performance was exceptionally strong and rivaled only by US Airways among major carriers," said Douglas Runte, an analyst with RBS Greenwich Capital Markets.

Northwest charged higher fares and flew fewer routes as it sought to return to profitability after filing for Chapter 11 bankruptcy protection in September. Last month, the carrier reached its goal of cutting annual labor costs by $1.4 billion, part of the $2.5 billion in spending reductions Northwest says it needs to emerge from court supervision as early as next year.

"The cost cutting and network changes they've undertaken are beginning to show a significant impact," said Philip Baggaley, a Standard & Poor's analyst. "Their labor costs were down 30 percent. They shrank the airline somewhat, but even so, that's a huge number."

Northwest and other major U.S. carriers have used a drop in industry capacity and increased travel demand to raise fares at least eight times this year, producing the industry's first profitable quarter since 2000.

Northwest's operating costs declined 12 percent in the quarter to $3 billion, held down by the drop in labor costs and 48 percent fall in aircraft rental costs.

"With fuel costs forecasted to remain at record levels, we must maintain our relentless focus on all elements of our plan," Chief Executive Officer Doug Steenland said in the statement.

The airline's spending on fuel rose 12 percent to $886 million.

Its shares rose 2 cents to 55 cents yesterday in over-the-counter trading.

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