Airline Ills Outlast Last Resort

Northwest Airlines, the fifth-largest carrier, reported Thursday that its first-quarter loss, after one-time costs, was $129 million, compared with a $450 million loss in the same quarter a year. Northwest said its fuel costs rose by $114 million, despite fleet reductions, while labor costs fell 30%.

"This year's net loss 'compared favorably' to last year's," writes Standard & Poor's analyst Philip Baggaley in a recent report. "Revenue gains (despite shrinking capacity vs. last year) -- due to an improving pricing environment industry-wide and reductions in labor and aircraft-ownership costs -- more than offset the negative effect from much higher fuel prices," he says.

Baggaley notes that "relative to its closest peer, UAL Corp., Northwest managed a narrower operating loss, reported comparable revenue statistics and had somewhat lower (better) operating-cost measures."

Meanwhile, Linenberg notes that Northwest's March-quarter operating margin of negative 0.5% was superior to Delta's negative 9.6%. "The gap is even more pronounced considering Northwest is seasonally challenged for the quarter, relative to Delta," he says.

Both Delta's and Northwest's bankruptcies are benefiting the industry because the carriers are shedding capacity. Northwest said it cut capacity by 10% from the same quarter a year earlier, as its fleet size decreased to 367 planes from 432 planes. Delta, meanwhile, cut capacity by 24%, from 841 planes to 638 planes.