Northwest Airlines Reports Full Year 2006 Results.
EAGAN, Minn. -- Northwest Airlines Corporation (Pink Sheets:NWACQ) today reported a full year 2006 pre-tax profit of $301 million before reorganization items which compares to a full year 2005 pre-tax loss of $1.38 billion before reorganization items. Including reorganization items, Northwest reported a full year 2006 net loss of $2.8 billion versus a $2.56 billion net loss for the full year 2005.
For the fourth quarter, Northwest reported a pre-tax loss of $7 million before reorganization items versus a fourth quarter pre-tax loss of $386 million before reorganization items in 2005's fourth quarter. Including reorganization items, Northwest reported a fourth quarter 2006 net loss of $267 million versus a $1.3 billion net loss for the fourth quarter of 2005.
Doug Steenland, Northwest Airlines president and chief executive officer, said, "Clearly, the work we have done to reposition Northwest for the long term is showing tangible results as we reported the first profitable year since 2000. To report an annual pre-tax profit is another major milestone in Northwest's restructuring efforts."
"The airline's 2006 results improved by nearly $1.7 billion over 2005. Our efforts have allowed us to implement a new, competitive global network carrier cost structure, which when combined with the unique assets of Northwest Airlines, will produce strong results in the years ahead. Our customers, investors and employees will all benefit from a successful, global airline."
Steenland continued, "Our progress to date is due in large measure to the hard work and personal sacrifices of our employees. One of our goals is to share Northwest's success with employees. I am pleased to report that during the first quarter, Northwest will distribute approximately $44 million through its profit sharing profit sharing, arrangement by which employees receive, in addition to their wages, a share of the net profits of a business. The purpose is to give them an incentive to increase their output through enhanced morale, less wasteful use of materials, better care of and performance incentive payments as well as special holiday payments to our employees. We previously had authorized the sale of 20 percent of the unsecured claims held by employees, which were part of ratified collective bargaining agreements The contractual agreement between an employer and a Labor Union that governs wages, hours, and working conditions for employees and which can be enforced against both the employer and the union for failure to comply with its terms. . The sale of this 20 percent interest will total approximately $181 million in cash for our employees. Last week, we authorized the sale of another 20 percent of the unions' claims."
FOURTH QUARTER FINANCIAL OVERVIEW
Operating revenues in the fourth quarter increased 2.2 percent versus the fourth quarter of 2005 to $2.98 billion. System passenger revenue increased 8.0 percent to $2.2 billion on 2.0 percent more mainline available seat miles Available seat miles (ASM) is a measure of an airline flight's passenger carrying capacity. It is equal to the number of seats available multiplied by the number of miles flown. This measures an airlines capacity for transporting passengers. (ASMs), resulting in a 5.9 percent improvement in unit revenue. Including regional carrier revenues, Northwest's consolidated unit revenue improved 4.4 percent on 0.3 percent more ASMs. Because of the significant improvement in unit revenue reported by Northwest in the fourth quarter of 2005, year-over-year comparisons show smaller improvements than in previous quarters.
Operating expenses Operating expenses
The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. in the quarter decreased 9.9 percent year-over-year, excluding $23 million of unusual items related to the Aircraft Mechanics Fraternal Association The Aircraft Mechanics Fraternal Association (AMFA) is an independent union that represents aircraft maintenance employees of commercial airlines in the United States. AMFA is committed to the principles of craft unionism, in that it seeks to represent only airline mechanics and severance, while mainline unit costs, excluding fuel and unusual items, decreased by 14.0 percent on 2.0 percent more ASMs. Salaries, wages and benefits decreased 22.6 percent, primarily due to a combination of labor cost reductions and headcount reductions. Aircraft rental expense decreased 41.0 percent, primarily due to restructured and rejected aircraft leases.
During the fourth quarter, fuel averaged $1.94 per gallon, excluding taxes, down 2.0 percent versus the fourth quarter of last year.
Northwest's year-ending unrestricted cash and short-term investments balance was approximately $2.1 billion excluding $424 million of restricted cash and short-term investments.
Neal Cohen cohen
(Hebrew: “priest”) Jewish priest descended from Zadok (a descendant of Aaron), priest at the First Temple of Jerusalem. The biblical priesthood was hereditary and male. , executive vice president and chief financial officer, said, "We remain on target to complete our restructuring in the second quarter. We continue to work with our stakeholders Stakeholders
All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government. to successfully complete this process."
"When we entered Chapter 11 protection in mid-September of 2005, we outlined three goals that would ensure our future success--establish a competitive cost structure including both labor and non-labor costs; develop a more efficient business model that would allow us to continue to deliver superior choice and service to our customers; and strengthen Northwest's balance sheet with debt and equity levels consistent with long-term profitability," Steenland said. Some of Northwest's 2006 milestones included:
* Announcing its first profitable year since 2000. The 2006 full-year results improved by nearly $1.7 billion over 2005. Northwest expects to report further financial improvement in 2007.
* Right-sizing and re-optimizing its fleet and network by reducing systemwide capacity by approximately 10 percent during the first year in bankruptcy (as measured by the 12 months ending September 30, 2006) and by removing a number of mainline and regional aircraft from the Northwest fleet. For the full year 2006, NWA NWA Northwest Airlines (ICAO code)
NWA Northwest Arkansas
NWA National Wrestling Alliance
NWA National Weather Association
NWA National Works Agency (Jamaica)
NWA Network Analyzer reduced its systemwide consolidated available seat miles by 7.5 percent.
* Further improving the airline's revenue premium to the industry by a 12.3 percent year-over-year improvement in consolidated passenger unit revenue.
* Achieving a competitive network carrier cost structure, with a 10.8 percent year-over-year improvement in cost per available seat mile (CASM CASM Cost per Available Seat Mile
CASM Communities and Small-scale Mining
CASM Canadian Academy of Sports Medicine
CASM Certificate of Advanced Study in Mathematics (Univeristy of Cambridge, UK)
CASM Coherent Adaptive Subcarrier Modulation ) excluding fuel and unusual items on reduced capacity, through the implementation of $2.4 billion annual cost reductions including: $1.4 billion in labor cost reductions, achieving market-based aircraft rates through $400 million in annual fleet ownership cost savings and $150 million reduction in annual interest expense related to unsecured debt Unsecured debt
Debt that does not identify specific assets that the debtholder is entitled to in case of default. . Northwest also realized approximately $100 million of the identified $350 million in non-labor savings in 2006, with the majority of the remaining savings to be realized in 2007.
* Protecting employee pensions and avoiding pension plan terminations by freezing its defined benefit pension plans, achieving pension reform legislation and implementing new defined contribution plans Defined contribution plan
A pension plan whose sponsor is responsible only for making specified contributions into the plan on behalf of qualifying participants. Related: Defined benefit plan .
* Reducing the company's total debt by nearly $4.3 billion through the elimination of unsecured debt, restructured aircraft and other secured obligations, and the refinancing of bank debt into a new DIP/Exit financing facility providing a competitive balance sheet and favorable capitalization ratios Capitalization ratios
Also called financial leverage ratios, these ratios compare debt to total capitalization and thus reflect the extent to which a corporation is trading on its equity. .
* Reaching new agreements and affirming existing new aircraft arrangements as part of Northwest's re-fleeting goal was another accomplishment. NWA affirmed its deliveries of Airbus A330 aircraft and now has the youngest trans-Atlantic fleet in the industry. NWA also affirmed its position as the North American North American
named after North America.
North American blastomycosis
see North American blastomycosis.
North American cattle tick
see boophilusannulatus. service launch airline of the new Boeing 787, with deliveries beginning in August 2008. The airline also ordered seventy-two 76-seat regional jets that will be introduced to Northwest passengers beginning later in 2007. The dual class jets are optimally sized for many domestic markets and will give the airline potential growth opportunities over time. In addition, Northwest accelerated the retirements of the DC-10, 747-200 and ARJ A compression program for backup archiving from ARJ Software, Inc., Norwood, MA (www.arjsoftware.com). Introduced in the early 1990s and created by Robert Jung (the RJ in ARJ), ARJ never achieved the popularity of PKZIP, although it is considered a worthy competitor. See JAR. 85 regional jets.
* With Northwest's unsecured claims and bonds trading at between 80 and 95 percent of value, potentially allowing Northwest creditors, including employees who were granted claims through ratified, collective bargaining agreements, to have one of the most substantial recoveries to creditors of any major network carrier restructuring.
* Meeting a key aircraft modernization target early in January 2007 when the last DC-10 was retired from commercial service. European, Japanese and Hawaiian routes flown with the DC-10 are now serviced by Airbus A330 and Boeing 747-400 aircraft, which offer additional customer amenities. Over its 34 years of service, Northwest's DC-10s compiled a remarkable service record, completing more than 765,000 flights and carrying more than 125 million customers.
* Achieving its $1.4 billion in annual labor savings target by reaching permanent labor savings agreements with the Air Line Pilots Association (ALPA ALPA
Air Line Pilots Association ), the Aircraft Mechanics Fraternal Association (AMFA AMFA Aircraft Mechanics Fraternal Association
AMFA Alternative Motor Fuels Act (PL 100-494)
AMFA Asociación Movimiento Fe y Alegría (Association for Activities of Faith and Joy; Guatemala) ), the Aircraft Technical Support Association (ATSA ATSA Association for the Treatment of Sexual Abusers
ATSA Aircraft Technical Support Association
ATSA Aviation and Transportation Security Act of 2001 (USA)
ATSA Automated Timber Sale Accounting
ATSA American Tactical Shooting Association ), the International Association of Machinists and Aerospace Workers The International Association of Machinists and Aerospace Workers is an AFL-CIO/CLC trade union representing approx. 646,933 workers as of 2006 in more than 200 industries. (IAM IAM - Interactive Algebraic Manipulation. Interactive symbolic mathematics for PDP-10.
["IAM, A System for Interactive Algebraic Manipulation", C. Christensen et al, Proc Second Symp Symb Alg Manip, ACM Mar 1971]. ), the Northwest Airlines Meteorologists Atmospheric scientists
n. pl. Nama or Na·mas
1. A member of a people of southwest Africa.
2. The Khoikhoin language of the Nama. ) and the Transport Workers Union of America Transport Workers Union of America (TWU) is a United States labor union that was founded in 1934 by subway workers in New York City, then expanded to represent transit employees in other cities, primarily in the eastern U.S. (TWU TWU Texas Woman's University
TWU Transport Workers Union
TWU Trinity Western University
TWU Two Worlds United
TWU Texas Wesleyan University
TWU Transport Workers Union of America
TWU Telecommunications Workers Union ). The company also completed multiple rounds of salaried and management employee pay and benefit cuts, and the needed flight attendant labor cost savings.
* Safeguarding the hard-earned pensions of our employees, a top priority for the airline in 2006. Northwest worked closely with union leadership and the Congress on a solution, the Pension Protection Act, which preserved pension benefits for the 73,000 Northwest pension plan participants Plan participants
Employees or other beneficiaries who are eligible to receive benefits from a company's employee benefit plan. . "We believed fervently that saving our pension plans was the right thing to do for our employees and we never wavered from that commitment," Steenland said.
* Further empowering its employees as well as sharing the financial success of Northwest with them. The airline has formed 45 employee involvement teams in order to solicit employee input on programs ranging from fuel conservation to customer service. In addition to the unsecured claims in Northwest's bankruptcy proceedings bankruptcy proceedings n. the bankruptcy procedure is: a) filing a petition (voluntary or involuntary) to declare a debtor person or business bankrupt, or, under Chapter 11 or 13, to allow reorganization or refinancing under a plan to meet the debts of the party received by the company's unions as part of collective bargaining agreements, Northwest will distribute approximately $44 million through its profit sharing and performance incentive payments as well as through special holiday payments.
* Delivering efficient service to its customers as evidenced by the U.S. Department of Transportation statistics for the first eleven months of 2006. Northwest ranked first in fewest mishandled bags and fewest customer complaints, second in on-time arrivals and third in completion factor among its peer group of the six network airlines.
* Expanding international service to meet the needs of customers. In 2006, Northwest re-established its daily nonstop Minneapolis/St. Paul - London and WorldGateway at Detroit - Paris service and increased service during the summer from Seattle to its Tokyo hub. In addition, Northwest and joint venture partner KLM KLM Kaiserliche Marine (Enigma: Rising Tide game)
KLM Koninklijke Luchtvaart Maatschappij (Royal Dutch Airlines)
KLM Klub Langer Menschen (German: Tall Person Club) announced several new routes, scheduled to begin in 2007. The new routes Northwest will operate include Hartford-Amsterdam, Detroit-Brussels, and Detroit-Dusseldorf. Northwest will also expand Detroit-Amsterdam, Boston-Amsterdam and Detroit-Frankfurt service.
* Making the travel experience smoother for customers. Northwest introduced an "open boarding" process to reduce the amount of time customers spend boarding their flights. The airline also implemented food enhancements during the year including the reintroduction Noun 1. reintroduction - an act of renewed introduction
intro, introduction, presentation - formally making a person known to another or to the public of meal choices in domestic first class, providing customers with healthier meal options.
* Responding to customers' desire for efficient flight check-in. To better serve customers traveling throughout its global network, Northwest expanded its Internet check-in options on nwa.com by adding a "fax my boarding pass" feature for trans-Atlantic and trans-Pacific customers. In 2006, 81 percent of Northwest's customers checked in for their flights over the Internet or at one of 1,100 self-service check-in kiosks worldwide. Northwest continues to offer check-in kiosks in more locations than any other airline.
Certain of the statements made in this news release are forward-looking and are based upon information available to the Company on the date hereof. The Company, through its management, may also from time to time make oral forward-looking statements. In connection with the "safe harbor Safe Harbor
1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated.
2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, the Company is hereby identifying important factors that could cause actual results to differ materially from those contained in any forward-looking statement made by or on behalf of the Company. Any such statement is qualified by reference to the following cautionary statements. The Company believes that the material risks and uncertainties that could affect the outlook of an airline operating under Chapter 11 and in a global economy include, among others, the ability of the Company to continue as a going concern, the ability of the Company to obtain and maintain any necessary financing for operations and other purposes, the ability of the Company to maintain adequate liquidity, the ability of the Company to absorb escalating fuel costs, the Company's ability to obtain court approval with respect to motions in the Chapter 11 proceedings Chapter 11 Proceedings
Provisions of the Bankruptcy Reform Act under which the debtor firm is reorganized by a court because the estimated value of the reorganized firm exceeds the expected proceeds from its liquidation. prosecuted by it from time to time, the ability of the Company to develop, confirm and consummate a plan of reorganization with respect to its Chapter 11 proceedings, risks associated with third parties seeking and obtaining court approval to terminate or shorten the exclusivity period for the Company to propose and confirm a plan of reorganization, to appoint a Chapter 11 trustee or to convert the cases to Chapter 7 cases, the ability of the Company to obtain and maintain normal terms with vendors and service providers, the Company's ability to maintain contracts that are critical to its operations, the ability of the Company to realize assets and satisfy liabilities without substantial adjustments and/or changes in ownership, the potential adverse impact of the Chapter 11 proceedings on the Company's liquidity or results of operations, the ability of the Company to operate pursuant to the terms of its financing facilities (particularly the related financial covenants), the ability of the Company to attract, motivate and/or retain key executives and associates, the future level of air travel demand, the Company's future passenger traffic and yields, the airline industry pricing environment, increased costs for security, the cost and availability of aviation insurance coverage and war risk coverage, the general economic condition of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and other regions of the world, the price and availability of jet fuel, the war in Iraq, the possibility of additional terrorist attacks or the fear of such attacks, concerns about SARS, Avian flu avian flu: see influenza. or other influenza or contagious illnesses, labor strikes, work disruptions, labor negotiations both at other carriers and the Company, low cost carrier expansion, capacity decisions of other carriers, actions of the U.S. and foreign governments, foreign currency exchange rate fluctuations, inflation and other factors discussed herein. Additional information with respect to these factors and other events that could cause differences between forward-looking statements and future actual results is contained in "Item 2. Management's Discussion and Analysis Management's discussion and analysis (MD&A)
A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Financial Condition and Results of Operations" of Form 10-Q Form 10-Q
See 10-Q. for the quarter ended September 30, 2006 and "Item 1. Business - Risk Factors Related to Northwest and the Airline Industry" in the Company's Annual Report on Form 10-K Form 10-K
A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information.
See 10-K. for 2005.
Developments in any of these areas, as well as other risks and uncertainties detailed from time to time in the Company's Securities and Exchange Commission filings, could cause the Company's results to differ from results that have been or may be projected by or on behalf of the Company. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These statements deal with the Company's expectations about the future and are subject to a number of factors that could cause actual results to differ materially from the Company's expectations. All subsequent written or oral forward-looking statements attributable to the Company, or persons acting on behalf of the Company, are expressly qualified in their entirety by the factors described above.
Northwest Airlines is one of the world's largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 900 cities in excess of 160 countries on six continents Six Continents is a large retail PLC in UK which split into Six Continents Retail known as Mitchells and Butlers plc. The hotels and soft drinks business of Six Continents PLC is now known as InterContinental Hotels Group PLC. .
[TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED]