Gain Lifts Northwest's Profit

Quarterly revenue declines 3.3% to $3.18 billion.
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Updated from 12:16 p.m. EDT

Northwest Airlines

(NWA)

reported a second-quarter profit, but it said operational disruptions caused by crew shortages cut revenue and pretax earnings by $25 million.

The carrier, which emerged from bankruptcy May 31, said second-quarter earnings totaled $2.15 billion, or 78 cents a share. That includes reorganization-related gains of $1.94 billion and two months of results from when Northwest was still in Chapter 11.

Analysts polled by Thomson Financial had estimated 79 cents for the latest quarter. Revenue declined 3.3% to $3.18 billion and fell short of the consensus expectation of $3.31 billion.

Pretax earnings, excluding reorganization items, were $273 million.

On a conference call, CEO Doug Steenland said 20 months in bankruptcy "put the airline on a sound foundation," but noted that "part of what we're going through now is adaptation to that change."

Crew shortages caused 1,000 cancellations in the last 10 days of June, and several hundred more in the last week of July. Northwest and its pilots union disagree on the reason for the shortages. However, the carrier has cut its August schedule by 4% and the two sides are discussing additional remedies.

Although Northwest has cited increased sick calls by pilots, Steenland declined to say whether the calls were legitimate. "The facts speak for themselves," he said. "We don't think it's productive to engage in a debate

about the appropriateness of it."

During the quarter, consolidated revenue per available seat mile, excluding special items, fell by 0.8%. Causes included cancellations and excess capacity on several routes due to fleet transitions, said CFO Dave Davis. Consolidated capacity rose 0.9%.

On the cost side, mainline cost per available seat mile, stripping out fuel, fell 5.2%, which Davis said was "the best performance in the industry." Looking forward, Davis said CASM will decline by 1.5% to 2.5% in the third quarter, while the company expects RASM growth of 1% to 2% for the year.