Northwest CEO: 'Our passengers will have to pay more.'

Northwest CEO Doug Steenland
Northwest CEO Doug Steenland says higher fares are inevitable for airline passengers because of record high oil prices.
MPR Photo/Annie Baxter

(AP) - Northwest Airlines has matched a major fare increase by Continental and United, and signaled that belt-tightening measures are on the way, too.

Oil has been lingering above $100 a barrel, pushing up the cost of jet fuel. Doug Steenland, chief executive of Northwest Airlines Corp., said at those prices the airline will spend $1.7 billion more on fuel than it expected when it emerged from bankruptcy in May.

Last week UAL Corp.'s United Airlines and Continental Airlines Inc. raised some round-trip fares as much as $50. Now Northwest has matched.

"Airfares have to go up, and our passengers will need to pay more. Airlines simply cannot absorb these cost increases," Steenland told workers in a hot line message recorded over the weekend.

Higher prices will result in fewer passengers, Steenland said, and the size of the airline will need to reflect that.

"First we have to tighten our belt. We need to find ways to preserve cash by reducing capital expenditures and operating costs. Fortunately, we have over $3 billion of cash on hand."

Steenland did not elaborate on what cost-saving measures he had in mind, and spokeswoman Tammy Lee declined to expand on Steenland's comments.

Northwest shares dropped 90 cents, or 9.5 percent, to $8.60 on Monday. They've lost half their value since Feb. 20.

(Copyright 2008 by The Associated Press. All Rights Reserved.)