Low Oil Prices Translate Into Slumping Fortunes For
Northwest Airlines -- biding time until its planned acquisition
by Delta Air Lines comes to fruition -- announced Wednesday it
posted a $317 million loss in the third quarter of 2008, with that
entire loss tied to fuel hedges that lost much of their value as
oil prices plummeted over the past two months.
The Associated Press reports the nation's fifth-largest carrier
lost $1.20 per share for the period, compared with a profit of $244
million -- or 93 cents per share -- in the same quarter of
There were some bright signs, however. Without the $410 million
in losses Northwest incurred as it saw its fuel hedges fly south
for the winter, the airline would have made a profit of $93
million... beating analysts' estimates and putting the carrier in
rarefied company, compared to some of its competitors. (Also on
United Airlines reported a staggering $779 million loss
for the quarter. Without fuel hedge losses,
that carrier still lost $260 million --
Northwest also managed a 12.4 percent increase in revenue, to
almost $3.8 billion. And Tim Griffin, Northwest's executive VP of
marketing, noted the airline hasn't seen a steep dropoff in
bookings from companies, despite warnings those companies planned
to cut back employee travel in the slumping economy.
"I think bookings have surprised us a bit on the upside, being a
little more resilient than you might expect given the general
economic news," he said.
Despite the generally gloomy news for the quarter, Northwest CEO
Doug Steenland expects fortunes for most airlines to turn around in
the coming months... noting recent capacity cuts implemented over
the summer have left airlines "well-suited to deal with potential
future demand softness."
Indeed, those cuts mean that while a threatened downturn in the
industry would translate to an estimated $150 million cut in
revenue for Northwest... the airline would still save $1 billion in
fuel costs, should oil average around $78 per barrel through
"The airline industry in general and Northwest in particular are
well positioned to prosper despite the current economic
uncertainties," Steenland added.
"The industry's very lucky," noted Avondale Partners airline
analyst Bob McAdoo. "It's fortunate that everybody made cuts, and
then the economy seems to be heading south a bit and it's working
out for people."
Northwest and Delta received
shareholder approval for the planned merger in
September. All that remains is anti-trust approval from the
Department of Transportation, which is expected before the end of