Air Transport World

'Scrambling well'; Northwest Airlines' management is determined to survive and make a better airline despite debt load. (company profile)

Northwest Airlines' management is determined to survive and make a better airline despite debt load.

It is jarring to watch Northwest, an airline that once paid cash for aircraft and had no debt, traverse the country, hat in hand, seeking funds But times change. In 1989, Northwest experienced a structural makeover: From a conservatively managed public company of undervalued assets to a privately held, deeply indebted organization pulling rabbits out of the financing hat. Still, the new owners made their way through the recession, Gulf War and fuel hikes. An investment analyst says: "They had a slightly lower financial position" as a result of these factors but for an LBO, they scrambled pretty well." A group hired by Northwest's pilots fast winter was very impressed with their finesse at making the types of arrangements that are unheard-of in this industry," ATW was told.

For the long-term, most expect Northwest to earn tens of millions for its owners, survive and return to public hands. Whether the airline emerges the better for their stewardship remains to be seen.

The old Northwest was far from perfect. Service was pedestrian, Flights were late. Employee relations, while slightly improved just prior to the LBO, ranged from crummy to not so crummy.

But Northwest had strengths, too. It was technically reliable, even out front of some developments. it had an almost unblemished safety record. It made money by keeping costs-particularly capital costs-low. It went about its business quietly, without pretense.

Today, Northwest differs in some important ways. Owners Alfred Checchi, Gary Wilson and Frid Malek are determined to improve customer service. They are placing inventory around the world to improve reliability and are initiating marketing moves such as lowering fares. Northwest is having to work hard to restore a safe reputation that may have suffered from merger-related after-effects.

And, while close-mouthed about its now-private finances, Northwest has joined the airline and political establishments. Checchi gladly testifies in Washington. He actually spearheaded a silly, failed attempt to "borrow" aviation trust funds. He is involved in good works that draw attention.

Malek, a Republican Party insider who works out of his own Washington office, has used his connections quite successfully on Northwest's behalf. Former U.S. Vice President Walter Mondale is on the board.

Checchi already had left Marriott, where he was treasurer and VP-corporate development, when he and his partners bought Northwest. Wilson, Checchi's cochairman, was CFO and executive VP at Marriott before moving to California to work for Disney. He still lives in California and advises Disney. Vice Chairman Malek once presided over Marriott's hotels. Apparently, the group's investment in an airline was no spur-of-the-moment notion. Wilson served for a time on Northwest's board after moving to Disney. Marriott itself once studied an airline purchase.

According to Malek, the group in 1988 accumulated stock worth $80 million-"most of it [the money] not ours"-with the goal of learning about the business and perhaps eventually of making a friendly offer that would include management. in fact, the group approached management in early 1989 but was rebuffed. it began to sell stock, because of the rejection and "values weren't being realized. …

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