Northwest facing bankruptcy after $225 million second quarter net loss
Northwest Airlines Corp., parent company of Northwest Airlines, said Tuesday it faces bankruptcy unless it can save $1.1 billion in labor costs and freeze its defined benefit pension plans.
“Many of our major competitors have significantly lowered their labor costs, both in and outside of bankruptcy, leaving Northwest with the highest labor costs in the industry,” said Doug Steenland, Northwest’s president and chief executive officer. “Failing to do so will force Northwest to consider other alternatives, including filing under Chapter 11 of the U.S. Bankruptcy Code.”
The statement follows Northwest’s announcement of a net loss of $225 million in the second quarter, compared to a net deficit of $182 million in the same quarter last year.
Northwest’s operating loss equaled $180 million, compared to an operating loss of $52 million in the second quarter 2004. This despite an increase in operating revenues of 11.3 percent to $3.2 billion. Cargo revenue was up 23.8 percent to $239 million.
“During the first six months of 2005, Northwest has been averaging losses of $4 million per day. The company needs to reduce costs and achieve positive results by, in particular, addressing labor expenses and pension funding,” said Neal Cohen, executive vice president and chief financial officer at Northwest.
Northwest’s fuel costs, including taxes, soared 58.3 percent in the second quarter to $790 million.
The airline said it anticipates reducing its mainline system capacity by 3 to 4 percent in the fourth quarter.
For the first six months of 2005, Northwest posted a net loss of $667 million, compared to a deficit of $398 million in the same period last year. Operating loss in the first half deepened to $472 million, from $160 million after the first two quarters in 2004. Northwest’s operating revenues increased 9.5 percent to $5.9 billion, from $5.5 billion.
