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Northwest Air loss widens; retirement plan is revamped
AFX
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SAN FRANCISCO (AFX) -- Quarterly losses at Northwest Airlines widened Tuesday on 11% higher revenue as the carrier battles record jet-fuel prices and underfunded pensions.
Second-quarter losses totaled $225 million, or $2.59 a share, against $182 million, or $2.11 a share, in the year-earlier period.
Excluding special items, the losses were $279 million, or $3.21 a share, versus $78 million, or 90 cents.
During the quarter, Northwest recorded a $102 million gain for sales of shares of Prudential Financial Inc. and a $48 million aircraft-related write-down.
Revenue reached $3.195 billion from $2.871 billion.
According to Thomson First Call, Northwest had been expected to lose $3.29 a share, with a loss range of $3 to $3.80 among the nine analysts surveyed. Revenue was expected at $3.08 billion, according to three analysts surveyed by Thomson First Call.
Fuel costs rose 58% to $790 million; jet-fuel prices have set records this year. The company paid an average per-gallon price of $1.642 during the quarter.
Labor costs were 0.5% lower at $959 million but that's still too high, according to the company's president and chief executive.
'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,' CEO Doug Steenland said in a statement.
In an austerity move, the Eagan, Minn., carrier also said it is freezing its defined-benefit retirement plans for salaried workers and replacing it with a defined-contribution plan.
The company is locked in a contentious contract battle with workers represented by the Aircraft Mechanics Fraternal Association as it aims to cut more than $1 billion a year in costs to avoid filing under the bankruptcy laws.
Mediators just released both sides from talks and the parties are in a 30-day cooling-off period.
Northwest is also looking to Washington to change pension-funding legislation to help ease the burden of its underfunded defined-benefit retirement plans.
Northwest shares rose 5.8% to $4.71. The stock is down 58% this year.
Northwest is not alone reporting a loss for the second quarter; Delta Air Lines also failed to turn a profit. But Continental Airlines and American Airlines parent AMR Corp. had stronger-than-expected earnings.
This story was supplied by MarketWatch. For further information see www.marketwatch.com.
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