Northwest Airlines projects it'll be worth $7B post-bankruptcy

Plane at gate
A Northwest Airlines plane at the gate.
MPR file photo

Northwest says the company will be worth about $7 billion when it emerges from bankruptcy later this year.

Northwest is forecasting a profit of nearly $800 million this year. And it's projecting profits of $700 million to nearly $900 million in the three following years.

The airline last had four profitable years in a row from 1994 to 1997. And Northwest didn't come close then to posting earnings like those it is projecting now. Its peak earnings, back in 1997, fell just short of $600 million.

Northwest expects to reap the benefits of cutting its labor and other costs by about $2.4 billion a year. Labor costs alone are down about $1.4 billion a year.

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Northwest's CEO, Doug Steenland, said the airline is ready to enjoy the benefits of those savings. And Steenland indicated that should mean good profits for the airline.

"A big piece of our restructuring costs, our restructuring efforts are ramping in. As those benefits on the cost and revenue side come into effect, it improves results," Steenland said.

Northwest's unsecured creditors fare relatively well in the plan. These are people and businesses that provided Northwest with everything from plane parts to hotel rooms.

Under Northwest's plan, unsecured creditors would get on average 74 cents on the dollar for what the airline owes them.

The payments will be in new stock in Northwest Airlines.

Secured creditors would get paid in full, with payment coming in cash or stock. Those creditors had property--such as planes--they could take back from Northwest.

In the United Airlines bankruptcy unsecured creditors got paid in stock. And soon after United left bankruptcy, the stock shot up and unsecured creditors were in a position to recover 20 to 25 cents on the dollar.

As for Northwest employees, they could get about $1.5 billion through profit sharing and the sale of their unsecured claims against the airline.

Still, Wade Blaufuss of the pilots union isn't impressed.

"Well, that is kind of a joke because that represents only pennies on the dollar in relation to the concessions we gave," Blaufuss said. "We've given over the next six years about $3.5 billion in concessions."

The bankruptcy plan doesn't indicate there will be any big changes in service. Northwest will remain a strong provider of international service, and the airline's frequent flyer program will remain intact. In addition, Northwest will be bringing lots of new planes into its fleet in coming years.

Before the plan can go into effect, it must be approved by creditors, as well as the judge overseeing Northwest's bankrupty.