Northwest Airlines ( NWACQ), one of three large U.S. carriers operating in bankruptcy, said its third-quarter loss widened as a result of its higher fuel bill and Chapter 11 expenses. Management at the Eagan, Minn.-based airline, which filed for Chapter 11 bankruptcy protection last month, said the results bolster the case for a dramatic restructuring aimed at restoring Northwest's competitiveness in an era of expensive fuel and low-cost rivals. Northwest, the nation's fourth-biggest carrier by passenger traffic, said late Thursday it lost $475 million, or $5.45 a share in the latest quarter, vs. $46 million, or 54 cents a share, a year before. Results included $82 million in pension curtailment charges and $159 million in reorganization items related to the bankruptcy. Without those items, Northwest lost $234 million, or $2.69 a share. Revenue rose 10.7% year over year to $3.38 billion from $3.05 billion. "Our third quarter results clearly demonstrate the need for Northwest to restructure expeditiously," said Doug Steenland, the company's CEO. "We now are focusing on achieving a competitive labor and nonlabor cost structure, strengthening our balance sheet, achieving market-level lease rates on our aircraft, developing a more efficient business model and returning to profitability." Northwest's labor costs are high relative to competitors, some of whom have already used the bankruptcy process to slash wages and benefits and terminate pension obligations. Northwest wants the court overseeing its bankruptcy to terminate its union contracts if employees don't agree to significant concessions. The airline's fuel expense rose 47.6% to $893 million in the latest quarter from a year before. Hurricane Katrina knocked out refineries around the Gulf Coast, causing prices for highly refined jet kerosene to soar in the last month of the quarter from already high levels.
In the latest quarter, Northwest's fuel expense came close to matching the $918 million it paid for salaries, wages and benefits. Rival Continental Airlines ( CAL - Get Report) said last week it paid more for fuel last quarter than for labor. Northwest's high fuel expense obscured improving revenue trends in its mainline operations, which exclude small regional feeder flights. Passenger traffic grew 3.5% year over year, while Northwest kept capacity growth to 1.5%. That combination enabled the airline to fill an average of 84.6% of its seats, up from 82.9% a year before. Meanwhile, the airline's yield, which essentially measures average fares, rose 4.4%. The combination of higher yield and fuller planes boosted unit revenue, measured in revenue per available seat mile, by 6.5%. Northwest shares fell a penny to 58 cents Friday. The stock continues to trade, but it will likely be rendered worthless if and when Northwest emerges from bankruptcy. In almost all cases, bankrupt airlines cancel existing shares when they exit Chapter 11 and issue new stock to pay unsecured creditors and other stakeholders.