Northwest Airlines today emerged from 20 months of bankruptcy court protection, bringing the domestic airline industry into a new era of solvency.
President and CEO Doug Steenland today said Northwest has repositioned itself as a "stronger, globally focused airline with a great route network, a revitalized fleet, a competitive cost structure and a recapitalized balance sheet."
Calyon Securities analyst Ray Neidl said the carrier is in a "strong competitive position" following its operational overhaul while under court protection. "In bankruptcy, the airline made major achievements in reducing its cost structure by $2.4 billion annually, solved its pension problem, right-sized its fleet and network and reduced its debt by over $4 billion," Neidl said today in a research note. Its most notable weak spot, according to Neidl, remains with labor agreements. "Overall the franchise is strong, management deep," Neidl noted. "The main concern going forward that is company-specific is labor relations."
Northwest filed for bankruptcy within minutes of fellow SkyTeam airline alliance member Delta Air Lines
(BTN, Sept. 19, 2005), which exited late last month
(BTN, May 7). At the time of the dual filings, insolvent carriers operated more than 40 percent of domestic capacity, as US Airways and United also were under Chapter 11 protection. The industry has since regained a relative degree of financial health, reporting its first aggregate profit in 2006 after years of losses.
Northwest reported a pre-tax profit of $100 million for the first quarter of 2007, before reorganization expenses, which brought the tally to a $292 million net loss. Steenland today highlighted Northwest's viability as a profitable domestic player.
"We believe the work that was accomplished during our restructuring—achieve a competitive cost structure, develop a more efficient business model and recapitalize our balance sheet—will clearly benefit our shareowners," Steenland noted. "We believe that we have a viable business plan that will continue to deliver profits in the future."