NWA nearly breaks even

Despite a slowing U.S. economy, Northwest Airlines posted a lower-than-expected loss for the last three months of 2007, and the airline's executives said Tuesday that bookings for leisure and business travel remain strong.

The Eagan-based carrier reported a fourth-quarter net loss of $8 million, equal to 3 cents a share. Wall Street analysts had looked for the airline to lose 8 cents a share. The results were a vast improvement over the 2006 fourth quarter, when Northwest still was in bankruptcy and lost $267 million, or $3.06 per share.

Northwest noted that it broke even for the quarter when a $14 million pretax loss, associated with selling its remaining stake in Pinnacle Airlines, was excluded.

Northwest's unit revenue -- revenue per seat mile flown -- was 11.32 cents, up 4.8 percent. Delta Air Lines, which is in merger talks with Northwest, saw its unit revenue rise by 5.6 percent to 10.87 cents. United Airlines, which also has been considered a merger target by Delta, had a 12.6 percent unit revenue boost during the quarter to 11.71 cents.

However, for all of 2007, Northwest's 6.1 percent pretax profit margin was the highest among six large U.S. airlines, said CEO Doug Steenland, who declined to address merger questions.

While many forecasters are looking to the possibility of a U.S. recession, Northwest isn't seeing the type of falloff in ticket demand that would presage a major recession.

Tim Griffin, Northwest's executive vice president of marketing and distribution, told analysts that "the world is a little better than we thought."

In a statement, he said that "bookings remain strong across the system and we have seen no evidence of slowing demand."

Northwest's chief financial officer, Dave Davis, said that high fuel costs continue to be a problem. Northwest paid $937 million for fuel in the quarter, up 16 percent over the 2006 period. About half of the airline's fuel supply was hedged during the quarter.

Bill Hochmuth, a senior research analyst for Thrivent Investment Management, said Northwest reduced some of its flight capacity in late 2007, but the airline can expect more of the cost savings connected to those decisions to be realized in the first quarter of this year.

During 2008, Northwest expects to shrink its U.S. flying by 5.5 to 6.5 percent, but it intends to increase its international business 8 to 9 percent. Other big carriers, including Delta, also are targeting growth in overseas markets.

Northwest employees will receive $125 million in profit-sharing, performance incentive and operational reliability payments based on the 2007 financial results.

Liz Fedor • 612-673-7709

4th quarter FY2007, 12/31

12 months

Figures in millions except for earnings per share.

*In 2nd quarter 2007, Northwest adopted fresh-start reporting after emerging from bankruptcy. Northwest said the fresh-start reporting makes financial statements on and after June 1 not comparable to previous statements.

**Extra are restructuring items. "Ops. Net" is pretax profit before reorganization items.