MINNEAPOLIS (AP) -- Northwest Airlines is out of bankruptcy and making money, but it's already running into those familiar airline headaches: Fuel costs and staffing issues.þþThe nation's fifth-largest airline canceled 73 of 1,417 flights scheduled Tuesday, according to FlightStats.com, as its struggle to find enough pilots continued. Oil futures, which set a record high of more than $78 a barrel, were another headwind.þþNorthwest Airlines Corp., which emerged from bankruptcy protection May 31, earned $273 million during its second quarter before accounting boosts related to its reorganization.þþFinancially, Northwest is as robust as an airline can. It reduced its labor costs in bankruptcy -- at least through 2011 -- and restructured its debt. It has about $3.3 billion in unrestricted cash. Even its tax bill went away, for a while. Because of deductions for years of losses, ''we expect to pay minimal cash taxes for the foreseeable future,'' Chief Financial Officer Dave Davis said on a conference call.þþ''If you're not making money now, you're in deep trouble,'' said Rich Gritta, an aviation economist, at the University of Portland in Oregon.þþNorthwest shares took off and then landed again on Tuesday, with shares rising more than 4 percent on the earnings report before sinking 52 cents, or 2.9 percent, to close at $17.43 after oil prices rose in the afternoon. Northwest shares have generally been drifting lower since peaking at $26.50 in June after Northwest emerged from bankruptcy.þþNorthwest said overall capacity would be flat to down 1 percent in the third quarter, with domestic capacity down 4 percent to 5 percent and international flying increasing at least 6 percent. It said it believes it has already adjusted its schedule to account for oil in the $75 range, but believes other carriers may have to cut capacity if oil remains at this level.þþ''The number of passengers that are likely to be able to pay those fare levels on an ongoing basis is going to be fewer, and that would suggest you need less seats,'' said Doug Steenland, Northwest's president and chief executive officer.þþAlready Northwest has reduced its August schedule by 4 percent to combat the wave of cancellations it dealt with at the end of June and July. It canceled about 8 percent of its schedule from Friday through Monday, compared to the 1 percent to 2 percent more normal for Northwest and other airlines. The problems reduced revenue by $25 million.þþNorthwest has singled out pilot absenteeism as the reason for the most recent cancellations. Pilots have said they warned the airline for months that it was short-staffed.þþSteenland called Northwest's performance in June and July ''unacceptable.''þþ''We sincerely apologize for the inconvenience these cancellations have caused our customers,'' he said. ''We are confident that the measures we are taking will result in materially better operational performance during the coming months.''þþThose measures include capping flying by pilots of narrowbody aircraft at 86 hours per month, down from 88 to 90. Additionally, it will reduce the number of long trips on some planes and change the way it schedules flights from East Coast cities to minimize the impact of weather and congestion on the rest of the system.þþNorthwest has also been recalling furloughed pilots and said it will begin hiring new pilots soon. It said it has already gotten ''several hundred expressions of interest from pilots wishing to work for Northwest.''þþIncluding reorganization items, Northwest earned $2.15 billion, or $8.20 per share, during the quarter that ended June 30. Northwest's finances benefited from $1.94 billion in reorganization items during the quarter, which included two months operating under bankruptcy protection and one month after it emerged.þþRevenue for the quarter declined 3 percent, to $3.18 billion, from $3.29 billion a year ago.þþNorthwest earned 78 cents per share not counting reorganization items. On that basis, analysts surveyed by Thomson Financial were expecting a profit of 79 cents per share on revenue of $3.31 billion.þþNorthwest said it paid $2.04 per gallon for fuel before taxes and some hedging costs, down 2.7 percent from a year ago. It said it expects to pay $2.19 per gallon before taxes during the third quarter and $2.08 for the full year. It said about 35 percent of its fuel needs for the second half of the year are hedged.þþNorthwest said it ended the quarter with $4 billion in cash, including $706 million set aside to pay certain obligations.þþ
Source: NY Times
