Steenland: Northwest will focus on service

Northwest Airlines CEO Doug Steenland said Thursday that the carrier will soon embark on its "largest training initiative in over a decade" to help employees improve customer service after years of cost-cutting.

Speaking to an industry audience in New York, Steenland said that Northwest is committed to "a laser-like focus on customers in order to meet their needs."

With oil hovering above $80 a barrel, Steenland also warned that passengers could see fares rise across the industry.

Steenland, who led Northwest through a 20-month bankruptcy that ended in May, said the airline now has a "competitive cost structure," but that it is merely "the opening ante" of what's needed to succeed.

"Customer focus is going to continue to define the winners," he said.

In his address at the Wings Club, Steenland said that Northwest is about to launch a training program for flight attendants, airport employees and reservation agents "that makes sure that they see the travel experience through the eyes of our customer."

In addition, he said, Northwest will reinstitute a "captain leadership program" for pilots to help them communicate more effectively with customers and fellow employees.

"When we were going through survival mode, that was a program that hit the cutting-room floor," Steenland said. "In hindsight, that was probably a mistake."

Northwest started cutting costs in 2001 to try to stave off bankruptcy. The airline entered Chapter 11 in September 2005.

Excluding fuel, Northwest now has the lowest cost per seat mile flown, at 7.4 cents, among the six major network carriers.

But Steenland said the "Darwinian forces of competition" remain at work and Northwest must offer customers a modern fleet, a broad route network and "dedicated and committed employees with pride in the airline for which they work."

Seven Northwest pilot leaders traveled to New York to hear Steenland's message.

"One of the pieces of the customer service puzzle is meeting the needs of your employees, and they, in turn, will meet the needs of customers," said Monty Montgomery, a Northwest pilot and spokesman for the Air Line Pilots Association.

He said that the pilot leadership program is "a good step" in that direction.

Steenland said the airline continues to talk with its labor unions about finding "cost-neutral" approaches to improve the contracts that were negotiated in bankruptcy.

Historically, labor and fuel have been the two biggest costs for airlines. With oil in the low $80-a-barrel range, Steenland was asked whether it was still economical to keep flying old DC-9 aircraft.

"We are as well-situated as any airline out there to manage through a very high-cost fuel environment," Steenland said.

He explained that the airline's ongoing $6 billion fleet modernization has allowed Northwest to reduce fuel consumption by more than 20 percent.

If high fuel prices linger, Steenland said carriers at the "bottom end of the fare ladder" may decide to pass along higher costs to consumers.

"As our input costs go up, customers should have to pay more," Steenland said.

He did not estimate how much higher fares could cut demand. On Wednesday, Northwest said that its overall capacity for this year will grow no more than 1 percent. In an earlier business plan, the carrier had forecast 4 percent growth. Northwest reduced its domestic flight capacity in August in response to a pilot staffing shortage this summer, which was a major cause of flight cancellations.

On the fuel front, Northwest has hedged about 50 percent of its price exposure for the September to December period. "Forty percent of the exposure is hedged using collars with a floor of approximately $56 per barrel and a ceiling of approximately $75 per barrel," Northwest said Thursday.

The remaining 10 percent is hedged using swaps priced at $62 to $65 per barrel.

Julius Maldutis, president of New York-based Aviation Dynamics, said he was impressed with Steenland's presentation. He noted that a key problem for the industry -- congestion in the air traffic control system -- is not as great a problem for Northwest.

Steenland said Northwest's hub airports in the Twin Cities and Detroit have fewer delays than many airports on the East Coast.

"As customers continue to experience congestion, being able to connect and pass through airports where that is not an issue is going to become an increasingly valuable opportunity," he said.

Liz Fedor • 612-673-7709

Liz Fedor • lfedor@startribune.com