NWA Capacity Pulldown
#1
Gets Weekends Off
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Joined APC: Feb 2008
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NWA Capacity Pulldown
Northwest Airlines Announces Revenue Enhancements and Capacity Reductions in Response to Extraordinary Fuel Costs
Thursday, April 03, 2008; Posted: 03:42 PM
NWA today announced several actions that are in response to the high cost of fuel and current economic uncertainties.
In announcing the measures, Northwest Airlines President and CEO Doug Steenland said, "Over the past several months, the price of oil has risen dramatically to all time highs and there is no reasonable basis to conclude that oil prices will materially decline anytime soon. These increased costs are significant and call for a strong response from us."
Steenland added, "Today we are summarizing our current plan to mitigate these fuel cost increases. This plan includes revenue enhancements, capacity and fleet reductions, as well as reductions in capital and operating expenses. Let me emphasize that, while we need to reduce costs in this difficult environment, we will not be going back to our employees for pay cuts."
I. REVENUE ENHANCEMENTS
Fuel Surcharges and Fare Increases
Faced with these financial challenges, regrettably, Northwest Airlines must pass through these extraordinary fuel cost increases to its customers through fare increases and fuel surcharges.
On March 18, 2008, for international routes, Northwest increased one-way fuel surcharges from North America to Europe, India, Japan and most other destinations in Asia ranging from $115 to $155. Fuel surcharges on flights from Japan to North America are now approximately $140 one-way but will increase to $160 one-way for ticketing starting May 1, 2008.
For domestic routes, since Jan. 1, 2008 Northwest has participated in 11 attempts by various carriers to increase fares to reflect rising fuel costs, although most have been rolled back because some airlines failed to match.
Domestic Luggage Fee Increases
Also in response to record fuel costs, on March 29, 2008, Northwest matched other U.S. network carriers and for North American travel implemented a $25 charge, each way, for the customer's second checked bag and $100 each for three or more checked bags. The fee for bags greater than 50 pounds has also been raised from $25 to $50 each way.
The new policy takes effect on May 5, 2008, and is expected to generate approximately $25 million in added revenue for 2008. For 2009, the policies are expected to add between $40 and $70 million in revenue on an annual basis.
The airlines' full fare customers, WorldPerks elite customers and U.S. military remain exempt from the new luggage policies.
II. CAPACITY REDUCTIONS
Schedule Reductions
In September, after peak summer travel concludes, Northwest will reduce its scheduled domestic system capacity by approximately five percent versus the 2008 business plan. Full-year domestic available seat miles (ASMs) are expected to be flat to down slightly versus 2007.
Northwest is continuing to expand its international service with the addition of new flights between Detroit and London Heathrow; Minneapolis/St. Paul and London Heathrow; Seattle and London Heathrow; Minneapolis/St. Paul and Paris; Portland, Ore. and Amsterdam; and Dallas/Ft. Worth and Amsterdam, which will be operated by Northwest's joint venture partner, KLM Royal Dutch Airlines. Northwest will review whether any changes to the international schedule are needed after the peak summer travel season.
Fleet Reductions
As a result of the five percent domestic capacity reduction from planned levels, Northwest will remove an additional 15 to 20 aircraft from service. Two DC-9s will be removed in June and the remainder in the fall to coincide with the planned schedule reductions. These fleet reductions will include approximately 10 DC-9s and the balance being a mix of Boeing 757s and Airbus A320s and A319s.
III. LIQUIDITY ENHANCEMENTS
Northwest Airlines currently has the strongest liquidity position among U.S. network carriers and is committed to maintaining its industry-leading cash position. As of Dec. 31, 2007, Northwest's unrestricted cash on hand was $3 billion which equaled 24 percent of revenues for the full year.
"Challenging economic times require smart, but difficult, decisions by the management team," said Steenland. "We are pro-actively making those decisions now to maximize our liquidity position."
Capital Expenditures
Northwest is reducing non-aircraft capital expenditures for 2008 by approximately $100 million. The airline now intends to invest approximately $150 million in non-aircraft capital expenditures in 2008.
Improved Profit and Loss Statement
The airline will also seek to realize profit improvements of $100 million on an annual basis through cost reductions, productivity improvements and revenue enhancements. To the extent that the schedule changes will result in the need for fewer employees, every effort will be made to achieve these reductions through attrition.
With the reduced flying, Northwest has suspended its plans to hire additional pilots and flight attendants. The last training classes for both groups conclude in June.
Northwest Airlines is one of the world's largest airlines 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 1,000 cities in excess of 160 countries on six continents.
SOURCE: Northwest Airlines
Thursday, April 03, 2008; Posted: 03:42 PM
NWA today announced several actions that are in response to the high cost of fuel and current economic uncertainties.
In announcing the measures, Northwest Airlines President and CEO Doug Steenland said, "Over the past several months, the price of oil has risen dramatically to all time highs and there is no reasonable basis to conclude that oil prices will materially decline anytime soon. These increased costs are significant and call for a strong response from us."
Steenland added, "Today we are summarizing our current plan to mitigate these fuel cost increases. This plan includes revenue enhancements, capacity and fleet reductions, as well as reductions in capital and operating expenses. Let me emphasize that, while we need to reduce costs in this difficult environment, we will not be going back to our employees for pay cuts."
I. REVENUE ENHANCEMENTS
Fuel Surcharges and Fare Increases
Faced with these financial challenges, regrettably, Northwest Airlines must pass through these extraordinary fuel cost increases to its customers through fare increases and fuel surcharges.
On March 18, 2008, for international routes, Northwest increased one-way fuel surcharges from North America to Europe, India, Japan and most other destinations in Asia ranging from $115 to $155. Fuel surcharges on flights from Japan to North America are now approximately $140 one-way but will increase to $160 one-way for ticketing starting May 1, 2008.
For domestic routes, since Jan. 1, 2008 Northwest has participated in 11 attempts by various carriers to increase fares to reflect rising fuel costs, although most have been rolled back because some airlines failed to match.
Domestic Luggage Fee Increases
Also in response to record fuel costs, on March 29, 2008, Northwest matched other U.S. network carriers and for North American travel implemented a $25 charge, each way, for the customer's second checked bag and $100 each for three or more checked bags. The fee for bags greater than 50 pounds has also been raised from $25 to $50 each way.
The new policy takes effect on May 5, 2008, and is expected to generate approximately $25 million in added revenue for 2008. For 2009, the policies are expected to add between $40 and $70 million in revenue on an annual basis.
The airlines' full fare customers, WorldPerks elite customers and U.S. military remain exempt from the new luggage policies.
II. CAPACITY REDUCTIONS
Schedule Reductions
In September, after peak summer travel concludes, Northwest will reduce its scheduled domestic system capacity by approximately five percent versus the 2008 business plan. Full-year domestic available seat miles (ASMs) are expected to be flat to down slightly versus 2007.
Northwest is continuing to expand its international service with the addition of new flights between Detroit and London Heathrow; Minneapolis/St. Paul and London Heathrow; Seattle and London Heathrow; Minneapolis/St. Paul and Paris; Portland, Ore. and Amsterdam; and Dallas/Ft. Worth and Amsterdam, which will be operated by Northwest's joint venture partner, KLM Royal Dutch Airlines. Northwest will review whether any changes to the international schedule are needed after the peak summer travel season.
Fleet Reductions
As a result of the five percent domestic capacity reduction from planned levels, Northwest will remove an additional 15 to 20 aircraft from service. Two DC-9s will be removed in June and the remainder in the fall to coincide with the planned schedule reductions. These fleet reductions will include approximately 10 DC-9s and the balance being a mix of Boeing 757s and Airbus A320s and A319s.
III. LIQUIDITY ENHANCEMENTS
Northwest Airlines currently has the strongest liquidity position among U.S. network carriers and is committed to maintaining its industry-leading cash position. As of Dec. 31, 2007, Northwest's unrestricted cash on hand was $3 billion which equaled 24 percent of revenues for the full year.
"Challenging economic times require smart, but difficult, decisions by the management team," said Steenland. "We are pro-actively making those decisions now to maximize our liquidity position."
Capital Expenditures
Northwest is reducing non-aircraft capital expenditures for 2008 by approximately $100 million. The airline now intends to invest approximately $150 million in non-aircraft capital expenditures in 2008.
Improved Profit and Loss Statement
The airline will also seek to realize profit improvements of $100 million on an annual basis through cost reductions, productivity improvements and revenue enhancements. To the extent that the schedule changes will result in the need for fewer employees, every effort will be made to achieve these reductions through attrition.
With the reduced flying, Northwest has suspended its plans to hire additional pilots and flight attendants. The last training classes for both groups conclude in June.
Northwest Airlines is one of the world's largest airlines 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 1,000 cities in excess of 160 countries on six continents.
SOURCE: Northwest Airlines
#2
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Joined APC: Feb 2008
Posts: 2,539
II. CAPACITY REDUCTIONS
Schedule Reductions
In September, after peak summer travel concludes, Northwest will reduce its scheduled domestic system capacity by approximately five percent versus the 2008 business plan. Full-year domestic available seat miles (ASMs) are expected to be flat to down slightly versus 2007.
Fleet Reductions
As a result of the five percent domestic capacity reduction from planned levels, Northwest will remove an additional 15 to 20 aircraft from service. Two DC-9s will be removed in June and the remainder in the fall to coincide with the planned schedule reductions. These fleet reductions will include approximately 10 DC-9s and the balance being a mix of Boeing 757s and Airbus A320s and A319s.
Schedule Reductions
In September, after peak summer travel concludes, Northwest will reduce its scheduled domestic system capacity by approximately five percent versus the 2008 business plan. Full-year domestic available seat miles (ASMs) are expected to be flat to down slightly versus 2007.
Fleet Reductions
As a result of the five percent domestic capacity reduction from planned levels, Northwest will remove an additional 15 to 20 aircraft from service. Two DC-9s will be removed in June and the remainder in the fall to coincide with the planned schedule reductions. These fleet reductions will include approximately 10 DC-9s and the balance being a mix of Boeing 757s and Airbus A320s and A319s.
To the extent that the schedule changes will result in the need for fewer employees, every effort will be made to achieve these reductions through attrition.
With the reduced flying, Northwest has suspended its plans to hire additional pilots and flight attendants. The last training classes for both groups conclude in June.
With the reduced flying, Northwest has suspended its plans to hire additional pilots and flight attendants. The last training classes for both groups conclude in June.
Ain't life grand as an airline pilot?
#3
NWA and DAL are and have been playing out of the same playbook for a while. This is all an orchestrated dance to align everything prior to doing the deed. I am going to grab some popcorn and a beer anyone need anything while i am up?
#5
Exactly. This is something that probably had to be done to satisfy ALPA. Now we are evening the playing field. There may be more 9 cuts in the future, and I am sure that both sides know about that as well. It will all be agreed to in the joint PWA.
The board should wrap up their meeting tomorrow. Look for something one way or another in the next few weeks.
Out manager were in a two day meeting at HQ today and tomorrow. Lots is going on and the lid is shut tighter than a submarine hatch this time. That is a good thing. Progress may happen.
The board should wrap up their meeting tomorrow. Look for something one way or another in the next few weeks.
Out manager were in a two day meeting at HQ today and tomorrow. Lots is going on and the lid is shut tighter than a submarine hatch this time. That is a good thing. Progress may happen.
#6
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Joined APC: Jun 2007
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CHANTILLY, Va.--(BUSINESS WIRE)--Compass Airlines, a wholly-owned subsidiary of Northwest Airlines, (NYSE: NWA - News) celebrates the achievement of an operational milestone--one year of service. Compass has served nearly half a million passengers in this first year of service with 17 state-of-the-art EMB-176 regional jet aircraft. In addition, Compass was recently awarded approval from the U.S. Department of Transportation to operate daily round trip flights from Detroit to Monterey, Mexico, effective May 2, 2008.
WE MUST FIX SCOPE WHILE OUR REPS ARE AT THE TABLE
#7
The reality is that we are in a recession backed by high oil which requires us to cinch our belt and weather the storm. If we shrink a little right now to survive, that makes sense. What would be bad is if we were shrinking during growing times. Ultimately, last one on the field wins. I hope we all survive.
Last edited by capncrunch; 04-04-2008 at 09:59 AM.
#8
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Posts: 62
The reality is that we are in a recession backed by high oil which requires us to cinch our belt and weather the storm. If we shrink a little right now to survive, that makes sense. What would be bad is if we were shrinking during growing times. Ultimately, last one on the field wins. I hope we all survive.
The name of the game is survival. Who can ride out the storm the longest and be standing to monopolize the markets. The NWA/DAL deal is good as done, notwithstanding the governments intervention in stopping it due to job losses.
The only problem is too many promises were made by RA and will be broken. I expect more layoffs/ offers to leave after the merger. This deal is getting done, count on it. Air France wants it and is willing to pay money to see it happen. Right there is access to cash to weather the storm. If things are rough after the merger, and access to the markets for credit is tight, Air France will be entrenched and will provide the needed capital to sustain the downturn until the merged company can get its act together.
After the second part of the Open Skies agreement is finalized, Air France will buy into even a larger portion of DAL and may end up owning controlling interest. Thats just a guess, but probably not too far-out of one nonetheless.
The way I see this, DAL/NWA....CAL/UAL and then AA pushing for AA/BA. The industry will be in the toilet and foreign money will be needed for survival. Government will agree to some sort of subsidies that will ease the fear for continued investment by foreign money.
If the above does not happen, someone is going down and the fire sale of the remains will fit nicely into SWA's need for a turn-key int'l operation.
So that being said, I see SWA waiting in the wings for their big push to go international.
#9
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Joined APC: Feb 2008
Posts: 19,258
I don't think SWA has any desire to go international other then Central and some South America. There business model just does not support that type of operation. No quick turns and all the hassles plus costs of flying international. With their employee costs they would have a tough time competing. Having your aircraft tied up for hours awaiting customs clearances is not something they would tolerate well let alone positive bag match and the extra personal required to staff rechecking baggage and other issues in customs..
#10
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Joined APC: May 2007
Posts: 62
I don't think SWA has any desire to go international other then Central and some South America. There business model just does not support that type of operation. No quick turns and all the hassles plus costs of flying international. With their employee costs they would have a tough time competing. Having your aircraft tied up for hours awaiting customs clearances is not something they would tolerate well let alone positive bag match and the extra personal required to staff rechecking baggage and other issues in customs..
If SWA wants to relieve itself from the burdens of the boom and bust cycle of the US economy, they have to stretch their markets. This is why I believe they will need more than a S. AM and Mexico solution. Even those two destinations would require an overhaul of their reservation system and seating policy. The manifest requirements would obviously be one reason.
So, a turn-key international operation, (767's 777's on the cheap) would fit the bill. One example!!! Lets say a large carrier in a major market goes belly-up and has to file for BK. No capital to be found and the new unfriendly BK laws necessitate a liquidation of assets. Well, SWA would be a good bet for this scenario. I'm sure other airlines could take advantage too.
But I see this as a possibility. If not, I believe SWA is in for a rough ride due to their domestic exposure and weak dollar. DAL for example gets a portion of their revenue paid in Euros. It will only get better as the joint (anti-trust) venture with Air France matures. See where this is going?
Last edited by hiflyer; 04-05-2008 at 12:12 PM.
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