Northwest Airlines Will Reduce Flying, Close Facilities To Realize Cost Savings

Airline's Plans For New Aircraft And Hub Improvements Remain Unchanged


Northwest Airlines Corporation (NASDAQ: NWAC) announced today that due to continued soft business travel, caused by weakness in the U.S. economy, as well as persistently high fuel costs, it is taking actions that will result in a $135 million incremental improvement in 2001 financial results.

Northwest also will implement measures to defer discretionary and other non-operationally critical spending.

The company said it expects to reduce its 2001 third and fourth quarter system available seat miles (ASM) growth by approximately one percentage point and five percentage points, respectively, from earlier spring projections, as it continues to match growth to business traffic demand.

Among the reductions are flights between Osaka, Japan and the following: Seattle, Kuala Lumpur, Los Angeles and Manila. Non-stop flights between Detroit and Rome will also be suspended over the winter.

In addition to flight schedule reductions, cost savings will be realized in other areas. Plans call for the closure of three facilities: reservations centers in New York State and Hawaii and a flight attendant base in Chicago. The Honolulu
DC-10 pilot base was closed earlier this year.

As a result of the reduced flying schedule and other cost containment measures, Northwest expects to decrease its management and contract payrolls by about 1,500 positions. This will be achieved through attrition, voluntary leaves, leaving open positions unfilled, and layoffs. Of this total, the estimated number of layoffs will be approximately 500, including 130 management positions.

Today’s cost reductions are in addition to a $209 million cost containment program announced earlier this year.

“While Northwest is taking these cost containment actions to address near term revenue declines, we remain firmly committed to our strategic plan to position Northwest for future growth,” said Richard Anderson, chief executive officer. “We will continue our aggressive plans to acquire new aircraft, modernize our hub airport facilities, especially the new $1.2 billion Detroit Midfield complex, and enhance our premium World Business Class and first class products.”

Commenting on the reductions, he said, “The decision to reduce staff is a difficult one for us, but Northwest, like the rest of the airline industry, continues to experience the impact of a weak U.S. economy that has resulted in reduced business travel. In addition, high fuel prices are affecting the cost of flying. We must be fiscally prudent to ensure our costs going forward are in line with our expected revenues.”