NYTimes.com Article: Northwest Airlines Beats Expectations

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Northwest Airlines Beats Expectations

January 23, 2004
 By THE ASSOCIATED PRESS





Filed at 12:00 p.m. ET

MINNEAPOLIS (AP) -- Northwest Airlines reported a profit
for the fourth quarter Friday, but only because the carrier
sold off assets and had other one-time gains.

For the quarter ended Dec. 31, Northwest reported income of
$370 million, or $4.18 per share, in contrast to a loss of
$488 million, or $5.68 per share, a year earlier. Operating
revenue increased nearly 3 percent to $2.41 billion, from
$2.34 billion.

The latest profit included gains of $492 million. That
included $299 million from the sale of Pinnacle Airlines
Corp.; $45 million in gains from the sale of some of
Northwest's holdings in discount travel Web sites Hotwire
and Orbitz and a debt exchange; and a non-cash gain of $148
million from a transaction involving debt secured by
foreign real estate.

Without the unusual gains, the nation's fourth largest
carrier lost $129 million, or $1.49 a share for the
quarter, an improvement from the loss of $178 million, or
$2.08 per share, reported a year earlier, excluding unusual
items.

The results were 10 cents a share better than the consensus
$1.59 a share loss estimate of analysts surveyed by Thomson
Financial.

But in morning trading on the Nasdaq Stock Market,
Northwest shares were down 52 cents, or 3.7 percent, to
$13.49.

For the full year, Eagan-based Northwest earned $248
million, or $2.74 a share, including unusual gains of $801
million, in contrast to a 2002 loss of $798 million, or
$9.32 a share. Revenue rose slightly to $9.51 billion, from
$9.49 billion.

``Like the other network airlines, we are reporting our
third consecutive year of massive losses from airline
operations,'' said Richard Anderson, chief executive.
``During the past three years, Northwest has experienced
pretax losses totaling nearly $2.2 billion from airline
operations. This financial performance is clearly not
sustainable.''

Anderson said Northwest has completed eight rounds of cost
reductions since 2001, resulting in $1.6 billion in savings
as the company cut virtually all non-labor costs possible.
He said Northwest's non-labor cost per available seat mile
is lower than all of the other major airlines and several
of the low-cost carriers.

``Unfortunately, this is not enough. For Northwest to
succeed, we must now reduce our labor costs to competitive
levels,'' Anderson said.

Northwest has been seeking to reduce its overall labor
costs by nearly $1 billion a year, but its unions have been
cool to concessions. The union representing pilots has said
it would consider concessions if the plan also included
some sort of investment by pilots in the airline. The large
union representing ground workers has an open contract but
is seeking raises. Contracts with flight attendants and
mechanics don't open for renewal until 2005, and those
unions have declined to start talks early.

Anderson reiterated his belief that the airline business
has fundamentally changed and said airlines must bring
costs in line with revenue expectations.

``Relying on the possibility of a cyclical recovery is
futile,'' he said. ``Relying on the sale of assets and
other one-time transactions is also not the answer. The
airline must produce profits from operations to succeed
over the long term.''

------

On the Net:

Northwest Airlines: http://www.nwa.com


http://www.nytimes.com/aponline/business/AP-Earns-Northwest-Airlines.html?ex=1075892844&ei=1&en=eccd08f50cc37f4f


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