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Northwest Airlines: As fixed as it can get?

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A passenger checks baggage and flight information at the Minneapolis/St. Paul International Airport.
MPR Photo/Charlie Knutson

In the past 20 months, Northwest has slashed about $2.4 billion in annual costs, more than half of that from pay and benefit cuts for unionized workers.

The airline dropped some unprofitable routes and ditched 70 gas-guzzling planes, swapping them out for more fuel efficient aircraft. And it eliminated about $4.2 billion in debt.

The judge overseeing Northwest's bankruptcy case declared the airline's cost-cutting measures a "resounding success."  And many analysts have echoed that sentiment.

So is Northwest fixed?

"Oh, is that a loaded question!" says Bill Hochmuth, a stock analyst with Thrivent Financial.  

Hochmuth says Northwest is definitely in better shape than it has been in quite some time. Not counting bankruptcy costs, Northwest suffered a pretax loss of $129 million in the first quarter of last year. By comparison the company had a profit of $100 million in the first quarter of this year.

Northwest projects pre-tax profits of about $1 billion or more a year for the next several years.

But Hochmuth says there could yet be threats to Northwest's renewed profitability.

"(There's) fuel that has gone up significantly since the beginning of the year, an economy that seems to be weakening, and a fare environment, where, earlier this year it was easier to raise fares. Now it's very difficult to raise fares," he says.

We're stressed to the max. We're at minimum staff. We're fatigued. We're overworked, underpaid, and we're angry. This is not the way to fix a company that's in a customer service business.

Analysts are quick to point out that the whole airline industry must grapple with those issues.

"Fundamentally, Northwest probably has the strongest route system of any  airline, because they have a hub in Tokyo, where they can interconnect people,"  says airline consultant Mike Boyd.  "They have a strong understanding of Far East markets, plus they're getting a new fleet of Boeing  787s, which is going to give them a big cost advantage over their competitor across the Pacific, which is United." 

If there is a deficiency in Northwest's future strategy, airline consultant Bob Mann says it has to do with the airline's approach to dividing up flying between regional partners. Northwest launched its own subsidiary, Compass, acquired its former regional partner Mesaba, and continues to contract with Pinnacle, which previously only flew for Northwest but which now can operate independently.  

"How they roll that all together and roll it out as a domestic market strategy along with the main line is the one piece I think hasn't been fleshed out," Mann says.

When asked to clarify how that flying will work, a Northwest spokesman said no decision has yet been made.

In some observers' eyes, the biggest question lingering as Northwest exits bankruptcy is whether the airline can repair its tattered relationship with labor.

"Northwest Airlines is not fixed," said pilots union spokesman Wade Blaufuss at a recent labor rally. 

Blaufuss decried how Northwest "fixed" its bottom line by cutting pilots' take-home pay as much as 40 percent, and then rewarded top brass with $300 million in stock.

NWA flight attendant
A flight attendant for Northwest Airlines.
MPR Photo/Annie Baxter

Both the pilots and flight attendants unions have complained that workers gave up more than Northwest needed to return to profitability.

"We're stressed to the max. We're at minimum staff. We're fatigued. We're overworked, underpaid, and we're angry," Blaufuss told the rally.  "This is not the way to fix a company that's in a customer service business." 

A recent Wall Street Journal article quoted Northwest's vice president of operations, Andy Roberts, saying "morale is severely tested." The article also quotes him saying that what used to be glamorous jobs now don't look so good. The company has to seek out job applicants, even pilots.   A Northwest spokesman declined to address those issues.

Many aviation observers say that high turnover and low morale plague airlines industry wide.  But analyst Bill Hochmuth says the labor unrest at Northwest merits special attention, even if it hasn't caused operational problems so far. "I know it's a concern going forward from industry analysts, including  myself," Hochmuth says.

Hochmuth says the question is whether labor unrest gets to the point of affecting customer service.

So is Northwest fixed?  Hochmuth says, given difficult industry conditions, it's about as good as it can get.