Skip navigation
Watchlist Sponsored By :


Current DateTime: 04:08:51 01 Dec 2009
LinksList Documentid: 24355697
  • The Cost of True Love

      In the popular holiday song "The 12 Days of Christmas," the cost of gifts - from the 12 drummers drumming to a partridge in a pear tree - is quite pricey.

  • Runway Angels

      The superbowl of fashion shows, models walk down the runway at the 2009 Victoria's Secret Show.

  • Smartphone Guide

      Here's a need-to-know guide to nine devices, based on features, price, network and platform.

FEATURED QUIZZES


Current DateTime: 04:08:51 01 Dec 2009
LinksList Documentid: 33793611
  • Test Your Google IQ

      How much do you know about the most popular search engine in the world? Take the following quiz and find out.

  • How Well Do You Know Your Bird?

      Let's talk turkey. Test your turkey knowledge and perhaps pick up a bit of trivia to trot out at your holiday meal.

  • A Healthier & Wealthier You

      Take the following quiz and find out how much you know about the impact of obesity on the health of the U.S. economy.


Current DateTime: 04:08:51 01 Dec 2009
LinksList Documentid: 24890560
  • Holiday Central

      There are plenty of reasons to believe that this Christmas holiday season will not be as bad for retailers as last year.

  • Winterizing Your Portfolio

      If 2009 was the winter of our discontent, will 2010 be a winter wonderland for investors? A lot depends on the recovery—or lack thereof.

  • Investor's Guide to Real Estate

      Some even say the long-awaited recovery is here. Regardless, buyers and sellers alike can profit from our guide.

powered by digg
Northwest CEO Tells CNBC: Co. Will Emerge Strong From Bankruptcy
By: CNBC.com | 31 May 2007 | 09:20 AM ET
Text Size

Northwest Airlines, which is set to exit bankruptcy Thursday, is coming out of the restructuring process "really strong," said Douglas Steenland, chief executive officer at Northwest Airlines.

“We have a best-in-class cost structure, we have a revenue premium to the industry, we received the highest credit rating amongst the network carriers from S&P, and we’re in the middle of a very significant fleet renewal program," Steenland told CNBC. "We think we’re positioned well to compete with the rest of the airlines and to provide great service to our customers.”

Northwest's emergence from bankruptcy marks the end of a 20-month spell in Chapter 11 for the No. 5 U.S. carrier, and the first time in almost five years that a major U.S. airline has not been in bankruptcy.

Northwest has spent the last year and a half hacking $2.4 billion off its annual costs, mostly from an aggrieved work force. Like other so-called "legacy' airlines, it has been forced to drastically slash its costs to keep pace with newer low-cost carriers and deal with wild spikes in fuel costs.

The company will officially relaunch as a slimmed-down carrier when Steenland rings the opening bell on the New York Stock Exchange Thursday.

Its shares will trade on the Big Board, marking the first time Northwest stock has changed hands on a major public exchange since it was delisted from Nasdaq in September 2005.

Northwest's emergence from bankruptcy protection appears to signal the end of a five-year period of extreme turbulence for U.S airlines, as it and its rivals have made huge strides toward ensuring their long-term survival.

But despite major cost cuts, Northwest faces intense competition, soaring fuel prices and furious employees who resent forfeiting $1.4 billion annually only to see their bosses net enormous payouts from stock and options awards.

Employee rage swelled this month when the company revealed a management compensation plan that awards Steenland stock and options potentially worth more than $20 million.

"Northwest may be emerging from Chapter 11, but it has a long way to go," said Anthony Sabino, a law professor at St. John's University in New York.

"Much of the carrier's unionized work force is tremendously unhappy. And in an intensely competitive and service-oriented industry such as the airlines, the bad blood could cost Northwest dearly, if not doom it altogether," he said.

Surviving in a Troubled Industry

Northwest, which has cut its debt and leasing obligations by $4.2 billion, is not facing these challenges alone. Three of the big U.S. carriers --- Northwest, Delta Air Lines and UAL Corp's United Airlines -- have all been in Chapter 11 in the last five years.

U.S. Airways Group also went bankrupt and was saved from liquidation only by a merger with America West Airlines. AMR Corp.'s American Airlines restructured without entering bankruptcy.

Without exception these airlines grappled with peeved workers, low-fare competition and soaring fuel prices.

The industry mounted a recovery in 2006 thanks to a string of revenue-boosting fare rises, but several failed fare increases in 2007 suggest rising fares are at an end.

Meanwhile, domestic competition is increasingly vigorous thanks to new entrants such as Virgin America Airlines and Skybus Airlines Consequently, top airlines have warned of excess domestic capacity, which could erode pricing power.

In a government filing Tuesday, Northwest predicted softening domestic revenue in 2007 due to industry supply increases and a slowing economy.

"I think they are very sensitive to the tenuous state of domestic demand," said Velocity Group airline consultant Doug Abbey.

He said, however, that Northwest is better positioned than most airlines to support higher fares because of its dominance at its hubs in Detroit and Minneapolis.

"They really dominate those airports with relatively little low-cost competition," Abbey said. "They're in a strong position to maintain higher yields."

Some airlines have reacted by moving capacity to lucrative international routes where they face less competition.

Northwest also has tweaked its domestic operations by acquiring its regional partner Mesaba Airlines. It also has launched a regional subsidiary called Compass Airlines.

Consolidation Outlook

Some, such as U.S. Airways CEO Doug Parker, have said airline mergers are the key to long-term survival as they alleviate excess capacity.

Early this year, talk of potential industry consolidation was rampant. Speculation died down in recent months, although some still believe consolidation is in the cards – perhaps even a Northwest-Delta merger.

In January, Delta beat back a hostile takeover bid from U.S. Airways, which in 2005 merged with America West Airlines.

"I'm just presuming, absent any crisis, airlines will do moderately well over the next six months, and then if things go south ... then I think we'd see consolidation rear its ugly head again," Abbey said.

Copyright 2009 Reuters. Click for restrictions.
Tools:
Print EmailAdd This share icon
  • digg share

CNBC HIGHLIGHTS

  • Ever wished your cab driver would stop chatting and just get to where you're going? Well, that moment is closer than ever.
  • UPS truck
  • UPS is giving its customers the option to offset its carbon emissions when sending a package.
  • Romania's presidential campaign has been rocked by a video that may show the president striking a 10-year-old boy.
  • alligator
  • Raising alligators is hard work, and the fickle taste of rich consumers has just made it much harder, says the NY Times.
  • A recent issue of ESPN Magazine was one of its top sellers ever, and it only took scantily clad athletes to make it happen.
  • The continued real estate boom in China is partially fueled by a generational flood of newlyweds.
ADD COMMENTS
Remaining characters


Current DateTime: 01:25:14 01 Dec 2009
LinksList Documentid: 29778428

Current DateTime: 01:00:36 01 Dec 2009
LinksList Documentid: 29779196

Current DateTime: 01:30:54 01 Dec 2009
LinksList Documentid: 29779199

Current DateTime: 01:00:39 01 Dec 2009
LinksList Documentid: 29779198
  Data is a real-time snapshot  *Data is delayed at least 15 minutes
Global Business and Financial News, Stock Quotes, and Market Data and Analysis

© 2009 CNBC, Inc.  All Rights Reserved.
A Division of NBC Universal
Thomson ReutersThomson Reuters