Air Transport World

Big Red IS BACK.

Momentum is a funny thing. When it's which you, mountains turn into molehills, mighty rivers become muddy rivulets and heavy turbulence is a little light chop. Take Northwest Airlines: By rights it should be reeling from a series of hammer blows incurred since 1997. Instead the Minneapolis-based carrier is poised this year to regain its position as an industry leader in terms of operating and financial performance.

To accomplish this it seemingly has shrugged off major disruptions that should have sent it into a tailspin, including a year-and-a-half of labor strife culminating in a pilot strike in September 1998 that cost an estimated $1 billion and closed it down for nearly three weeks, a lingering recession in its vital Japan market, and an operational fiasco that left more than 4,000 passengers stranded on the tarmac for up to 8 hr. at snowbound Detroit Metropolitan Airport over the 1991 New Year's weekend.

Nowhere is this recovery more evident than in Northwest's recent financial and operating performance. Although the pilot strike pushed it into the loss column for 1998 and the first quarter of 1999, it was solidly back in the black by June and posted a 13% operating margin for the third quarter ended Sept. 30--the highest among the six large US network carriers. And all this was achieved in the face of rapidly rising fuel prices and softening yields and only a year after its 400 jets were parked nose-to-tail while its pilots walked the picket line. Liquidly, which dropped from $2.1 billion at the end of 1997 to $1.5 billion after the strike, was back up to $2.1 billion as of Sept. 30.

The operational recovery mirrors this financial turnaround. Northwest achieved a 98.1% completion factor last September and placed second in on-time performance for September and October. Over the same two months it outperformed American, Delta, TWA, United and US Airways in baggage handling. How did it manage to recover so quickly? President and CEO John Dasburg tells ATW that after the strike, "We went back to the programs that we've always had in place that allow the airline to achieve operating excellence, and we put all our focus back on those systems."

Adds Executive VP and COO Richard Anderson: "We probably have the harshest weather of anybody, but when we manage our labor relations well, we consistently run the best airline."

One thing is certain: Northwest was riding a tailwind of strong performance that helped to carry it through the bad times. Between 1993 and 1996 it led the Big Six network carriers in terms of operating margin and routinely was one of the industry's top earners on a net margin basis as well. Despite passenger perceptions--and without excusing the monumental foulup in Detroit--NWA usually runs a pretty tight operation.

In terms of on-time performance it is second only to South-West Airlines since DOT began keeping score in 1987. It has the fewest denied boardings in the industry and ranks in the top half in terms of luggage delivery.

Executives concede Northwest still draws too many passenger complaints. This may be attributable partly to the fact that its flight attendants still are working under a concessionary contract that became amendable in 1997. Last year the union rank and file overwhelmingly rejected a proposed settlement that had been initialed by union leaders. …

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