ATW Daily News

Northwest posts $377 million loss on noncash charge

Thursday July 24, 2008

Northwest Airlines reported a second-quarter net loss of $377 million owing mainly to a noncash goodwill impairment charge of $547 million, reversed from a $2.15 billion profit in the year-ago period that benefited heavily from one-time bankruptcy exit gains.

Absent the goodwill impairment charge, NWA said it would have posted $170 million in net income for the quarter, down 17% from $205 million earned excluding Chapter 11 restructuring gains in the same period last year. The carrier said it benefited in the 2008 second quarter from a $250 million gain related to fuel hedging.

It already had announced that it will remove more than 40 aircraft from its fleet by year end and cut 2,500 frontline and management employees (ATWOnline, July 10). President and CEO Doug Steenland said yesterday that owing to the "unprecedented run-up in oil prices. . .[NWA] acted swiftly to reduce capacity, preserve liquidity, aggressively manage our costs and grow revenue through fare actions and additional fees and charges."

He added that "given the current fuel environment, the merger [with Delta Air Lines] makes even more sense as the resulting synergies and cost savings will better allow the combined carrier to manage through these challenges." He said it is possible the merger will close in the 2008 fourth quarter.

Second-quarter revenue increased 5.4% to $2.56 billion while expenses including the goodwill impairment charge rose 37.3% to $3.88 billion, producing an operating loss of $300 million, reversed from an operating profit of $357 million in the year-ago quarter. Mainline traffic was flat at 18.84 billion RPMs on flat capacity of 21.91 billion ASMs, producing a load factor of 86%, unchanged from last year.

Passenger yield rose 5.3% to 13.58 cents as PRASM increased 5.3% to 11.67 cents and CASM heightened 15% to 12.04 cents. CASM excluding fuel lifted 4.2% to 7.38 cents.

by Aaron Karp

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