Northwest Airlines announced it made a small profit during the third quarter of the year. The period includes September, when the government shut down air travel for four days following the terrorist attacks. Passenger numbers plunged even when the skies reopened. The only reason Northwest ended up in the black for the quarter was nearly $250 million in emergency government assistance. The aid was its share of the congressional airline industry bailout package. Northwest's third quarter turned out considerably better than Wall Street had anticipated.
Northwest Airline's quarterly profit of $19 million represents a 91-percent drop from last year. Take out of the equation the federal bailout money and Northwest says it would have lost $100 million. That's $1.18 a share handsomely beating the $1.54 loss per share consensus estimate compiled by First Call. Northwest's share price jumped 7 percent on the day's trading.
Northwest Spokesman Bill Mellon says the airline is relatively pleased with it's third-quarter performance. "We had profitable July and August and would have had a profitable September and even without the federal government assistance had the trends of the early part of the month continued for the entire month," Mellon said.
Northwest says between September 11 and the end of the month, it lost about $250 million. Passenger numbers dropped 34 percent. Revenue plunged 40 percent.
The airline slashed costs, cut 10,000 jobs, and contracted its flight schedule by about a fifth.
Now Northwest executives say they're seeing encouraging trends they did not expect. For example, the airline's U.S. flights were 73-percent full during the third week of this month, compared to 46 percent in the third week of September.
Northwest posted its third-quarter profit one day after the nation's largest carrier, American Airlines, announced a loss of more than $400 million. That was the worst loss in American's history, coming in at $2.68 per share, and was even more than Wall Street was expecting.
Next week United, Continental and Delta release their third-quarter numbers. United is expected to lose nearly $10 a share. Its CEO recently told employees unless the hemorrhaging stops, the airline will perish sometime next year.
Northwest says it's still losing between $6 and $8 million a day.
Another $250 million in government grants will help stem that loss. Management says it hasn't yet decided whether to pursue government-backed loans. Billions of dollars in loan guarantees will be made available to the industry as part of the federal aid package.
Analyst Joel Denney with US Bancorp Piper Jaffray says Northwest has done a good job cutting costs. He says the effort began well before Sept. 11 in response to the slowing economy.
"They had gone through a couple of rounds of cost cuts because they lost money in the second quarter and didn't want to lose money in the third quarter," he said.
Northwest is also saving money by grounding some of the older planes it owns. Some other airlines also cut capacity, but they don't own as many of their planes and have to continue making lease payments on aircraft that are not flying.
But Denney says it will still be very difficult for Northwest to post a profit in the fourth quarter even with the additional federal money. "I don't think they can make money in the fourth. They're cash-burn rate is $6 to $8 million per day, which is improving from what they were a month ago, but it's still dramatically lower than what they need and trying to turn that from loss position into profitability this quarter is not going to be possible," Denney said.
Northwest says it has taken a number of steps to streamline security screening. It recalled about 175 furloughed employees to work at checkpoints.
The airline also says it's spending $16 million to add 25 security checkpoints at its hubs in Minneapolis-St. Paul, Detroit and Memphis. The airline's short-term goal is to move ticketholders through security in about the same amount of time travelers were accustomed to before the hijackings.
Spokesman Bill Mellon says check points at the Minneapolis-St. Paul airport will soon nearly double from 11 to 20. "Within the next 10 days people should start to see a difference, and by the holiday season really see a big difference and, in effect, being back almost to the wait level to go through security that was in effect prior to Sept. 11," he said.
Even with the multi-million dollar daily losses, Northwest CEO Richard Anderson says he hasn't asked unions for contract concessions, nor does he anticipate additional job cuts.