Northwest Airlines reports Fourth Quarter 2002 and full year results

Northwest Airlines Corporation, the parent of Northwest Airlines, today reported a fourth quarter net loss of $488 million or $5.68 per common share. This compares to a fourth quarter 2001 net loss of $216 million or $2.55 per common share.

Excluding unusual items, Northwest reported a fourth quarter 2002 net loss of $178 million or $2.08 per common share, compared to a fourth quarter 2001 net loss of $256 million or $3.02 per common share. These results were in-line with consensus estimates of a $2.14 loss per share.

Fourth quarter 2002 results included $464 million in unusual pre-tax charges, principally attributable to the accelerated retirement of certain Boeing 747-200 and DC10-30 aircraft, costs associated with the closure of several facilities, and a partial write-down of the receivable related to the grant under the Airline  Stabilization Act. In addition, the fourth quarter tax rate reflected a provision of $15 million for tax credits that are expected to expire unused.

"Although Northwest Airlines outperformed most of its network carrier competitors in 2002 across relevant financial measures, our absolute performance was disappointing. While the impact of a slow economy remains a serious issue for the entire industry, the industry's revenue environment has permanently changed and we must, and will, operate our airline accordingly," said Richard Anderson, chief executive officer.

Anderson continued, "While Northwest has been aggressively managing its costs since early 2001, we must work even harder with our employees, suppliers, and other partners to bring our costs in line with expected revenues. We must be able to compete more effectively with airlines that are dramatically reducing their operating costs through bankruptcy, as well as the  rapidly growing low cost airlines."

Looking ahead, Anderson added, " There are several uncertainties including a possible conflict in Iraq, further fuel price increases, and a soft global economy that make it difficult to forecast when the airline will report a quarterly profit. However, our management team is convinced that working together with our employees, labor leaders and suppliers, Northwest will make the adjustments necessary to be competitive in a permanently changed environment."

For the full year, Northwest reported a net loss of $798 million, inclusive of unusual items, or $9.32 per common share, which compares to a full year 2001 reported net loss of $423 million, or $5.03 per common share. Excluding unusual items, the net loss for the full year 2002 of $488 million represented a  modest improvement versus last year's $536 million net loss.

While not impacting its income statement, Northwest also recorded a $1.0 billion after-tax reduction to stockholders' equity to reflect the funding status of its pension plans at year-end.

Operating Results

Fourth quarter 2002 operating revenues of $2.3 billion were up 17.8%, while operating expenses, excluding unusual items, increased 9.4% as compared to  he fourth quarter of last year. This resulted in a 7.6% fourth quarter 2002 negative operating margin, which was 8.3 points better than the same measure from a year ago.

For the quarter, Northwest continued to report the highest load factors among its peer group of major airlines with a system load factor of 74.4%, up 4.9 points on a 9.2% increase in capacity year-over-year. Northwest ended the full year 2002 with a system load factor of 77.1%, which was 5.5 points better than the collective average of the other major airlines.

Northwest's fourth quarter system unit passenger revenue (RASM) improved 7.5% from the same period last year, as the airline continued to outperform the domestic industry average in absolute RASM with both higher yields and load factors.

Fourth quarter operating cost per seat mile (CASM), excluding fuel and unusual items, decreased 2.6% year-over-year, benefiting from previously implemented and ongoing cost reduction programs.

In late 2002, Northwest deferred the delivery of 13 new Airbus aircraft, previously scheduled for delivery in 2003 through 2005, by an average of more than 2 years per aircraft. In recent weeks, Northwest completed its fifth round of cost reductions since early 2001, which included ideas from more than 4,000 employees for cost reduction and revenue enhancements. The permanent benefit from all rounds of cost cutting now total more than $1.2 billion.

Northwest had $2.2 billion in total cash at quarter-end, including $100 million in restricted cash.

Other Activity

In December, Northwest completed the expansion of its e-service center check-in kiosks at nearly 100 new locations. The convenient airport check-in tools are now at 143 locations, making Northwest the airline with service kiosks at more airports than any other airline in the world. In November, Northwest became the first airline to launch a self-service check-in option to most of its e-ticket eligible destinations in Asia and Europe.

Doug Steenland, president, said, "With our commitment to making the travel experience more efficient, we are pleased that more than one million customers took advantage of Northwest's Internet and e-service center  check-in options during both November and December."

During 2002, independent parties and publications, reflecting the choices of business and leisure travelers from throughout the world, recognized Northwest's efforts to make travel more convenient through its world-class hub airport facilities, customer service technology, and growing global network. A 2002 J.D. Power and Associates study ranked airports at Detroit and Minneapolis/St. Paul, home to Northwest's two largest hubs, tied for  second place among large domestic airports in overall customer satisfaction.

Business travelers who subscribe to the OAG print and electronic flight guides rated nwa.com as the best airline Web site. Readers of TTG Asia and TTG China named Northwest "Best North American airline."