30/07/10, 05:47:09 EDT

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Northwest profit at $244 million in third quarter

freep.com

In its first full quarter since emerging from bankruptcy in May, Northwest Airlines Corp. reported Monday a third-quarter profit of $244 million, up from a loss in the year-ago quarter.

Results from Michigan's largest passenger carrier exceeded analysts' expectations. Northwest Chief Executive Doug Steenland described the profit report as a remarkable turnaround for the airline.

"This strong performance makes it possible for us to continue to invest in the airline so that we can enhance shareholder value, remain competitive, and preserve and enhance the jobs of our coworkers," Steenland said.

Third-quarter net income was 93 cents a share, compared with a loss of $1.18 billion, or $13.50 a share, in the same period a year ago. Sales declined to $3.38 billion from $3.41 billion a year ago.

Analysts surveyed by Thomson Financial predicted earnings per share of 76 cents on revenue of $3.36 billion.

"They beat my expectations," said Ray Neidl, an analyst with Caylon Securities in New York, adding that Northwest performed well because it was able to keep fuel costs under control, bring down debt on its balance sheet and because of its strong Pacific operations.

Northwest and other U.S. carriers have increased prices and cut capacity, which helps profitability. The Eagan, Minn.-based carrier also said its international operations bolstered results. As part of its reorganization plan, Northwest is increasing its global routes while paring its U.S. flights.

Steenland said the airline's quarterly results are proof that Northwest overcame operational problems this summer.

Northwest scratched more than 4,000 flights between June and July combined. Most of the cancellations came at the end of each month as pilots reached their flight-time maximums.

The airline and the pilots later reached agreements that included the airline paying overtime, cutting its flight schedule, calling back furloughed pilots and hiring new ones.

During a conference call Monday, Northwest officials said those cancellations caused the airline to take a $25-million hit in June and to lose another $20 million to $25 million in July.

Cancellations also had an impact at the beginning of August, but the latter half of August was strong, officials said during the call.

When asked whether cancellations would be a problem during the holidays, Steenland said company officials are "running a reliable airline."

Steenland also addressed speculation about a merger. He declined to say whether Northwest was in talks with other airlines, but he didn't rule out the possibility of a merger.

"Further consolidation is inevitable," Steenland said. "One will likely conclude that six network carriers are too many." Northwest officials also said the airline is considering the sale of certain assets, such as its World Perks frequent flier program.

Company officials said the airline isn't expecting compensation from Boeing for its delay in delivering the new 787 Dreamliner, which it expects to start using on international routes in the first quarter of 2009. Northwest plans to use the new jet on its Shanghai routes to and from Detroit.

Northwest had said that it would start using the Dreamliner in August of 2008. Boeing is struggling with parts shortages and assembly delays.

 Printable Version  | published Oct 30, 2007