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NWA matches competitors' rise in airfares
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Northwest Airlines has matched the fare increase announced last week by Continental and United and signaled that belt-tightening measures are on the way, too.
Oil has been selling at record highs above $100 a barrel, pushing up the cost of jet fuel, which reduces the income of airlines.
United Airlines and Continental Airlines raised some round-trip fares as much as $50 heading into the weekend.
"Airfares have to go up, and our passengers will need to pay more," Northwest CEO Doug Steenland told workers in a hotline message recorded over the weekend. "Airlines simply cannot absorb these cost increases."
Higher prices will result in fewer passengers, Steenland said, and the size of the airline will need to reflect that.
"First we have to tighten our belt," he said. "We need to find ways to preserve cash by reducing capital expenditures and operating costs. Fortunately, we have over $3 billion of cash on hand."
Steenland did not elaborate on what cost-saving measures he had in mind, and spokeswoman Tammy Lee declined to expand on Steenland's comments.
Northwest shares dropped 59 cents, or 6.2 percent, to $8.92 Monday. The shares have lost more than half their value since February.
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