NWA loses $317 million in 3Q, driven by hedging
October 22, 2008 10:00 AM ET
MINNEAPOLIS (AP) - Northwest Airlines Corp. on Wednesday posted a $317 million third-quarter loss driven by fuel hedges that are in the red because of falling oil prices, but said it would have made money otherwise.
The nation's fifth-largest carrier said it lost $1.20 per share, compared with a profit of $244 million, or 93 cents per share, during the same period last year. Revenue rose 12.4 percent to almost $3.8 billion.
Northwest says without the accounting charges for the fuel hedges it would have made a profit of $93 million, or 35 cents per share. That's well ahead of the average of analysts surveyed by Thomson Reuters, who expected a profit of 25 cents per share on revenue of $3.78 billion.
Northwest's non-cash charge for fuel hedges that are under water was $410 million.
Northwest collected 8.1 percent more in so-called unit revenue, or money collected per passenger for each available seat it flew. That happened even as Northwest, like other big carriers, shrank. Airlines began removing capacity late in the July-to-September quarter, originally as a way to fight high fuel prices. Fuel prices fell but removing flights ended up cushioning airlines from an economic slowdown.
"The fact that Northwest is able to report an adjusted quarterly net profit in a very challenging fuel environment is a testament to our strong unit revenue growth, capacity discipline and continuing focus on cost control," said Northwest President and Chief Executive Doug Steenland in a prepared statement.
Northwest said it saves $40 million per year for every $1 per barrel decline in oil prices — and oil has fallen more than $70 since its peak in July. But even though oil prices are off their peak, Northwest still paid more than $688 million more for jet fuel during the quarter than during the same period last year.
Northwest's plan to be acquired by Delta Air Lines Inc. in a stock swap still needs antitrust approval. "We anticipate regulatory approval form the Department of Justice soon," Steenland said. Northwest reiterated the expectation that the deal will close by the end of this year.
In morning trading, Northwest shares rose 54 cents, or 4.4 percent, to $12.57.
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NWA loses $317 million in 3Q, driven by hedging: Associated Press Business News: NWA - MSN Money
Proof we are run by questionables. The leanest company in the industry loses the same amount of cash as AMR, except AMR has twice the employees and most of their pre-2001 contracts. I am looking forward to a new company.