Northwest Beats Expectations, Still Struggling

Northwest Airlines Corp. , the No. 4 U.S. air carrier, Wednesday posted a quarterly loss, versus a profit a year earlier, as high fuel prices and low fares weighed on the industry.

The Eagan, Minn.-based airline said its third-quarter loss amounted to $46 million, or 54 cents per share. A year earlier, it posted a profit of $42 million, or 49 cents per share.

Wall Street analysts on average expected the company to report a loss of 81 cents per share, with loss estimates ranging from 40 cents to $1.15 a share, according to Reuters Estimates.

Northwest, grappling with soaring fuel prices, said it expanded a $10 each-way fuel surcharge on Tuesday to nearly all of its domestic fares. Airlines have made repeated attempts to offset higher jet fuel prices by adding surcharges.

Last week, Northwest and its pilots union reached a tentative two-year labor contract that includes $265 million in wage, benefit and other concessions. The airline intends to save an additional $35 million by cutting the wages and benefits of salaried employees and management. Northwest has been trying to cut overall labor costs by $950 million a year.

Lehman Brothers analyst Gary Chase said in a research note that he saw "appealing upside" in a recovery scenario for Northwest, citing its relatively solid operating profile and strong cash position.

"While better than expectations, the quarter is weak when we consider that the third quarter is typically the best for the company," Chase wrote. "Any loss in this quarter is a disappointment."

Northwest said it ended the quarter with a cash balance of $2.68 billion, of which $2.54 billion was unrestricted.

The carrier said it was working with bank partners to restructure a $975 million revolving credit facility ahead of its scheduled maturity.

Chief Executive Doug Steenland said in a statement that Northwest's ability to return to profitability was hampered by government taxes it pays on passenger tickets. The carrier paid $325 million in transportation taxes and fees during the third quarter.

Steenland took over the CEO post after former Chief Executive Richard Anderson left earlier this month to become president of UnitedHealth Group (UNH).

Shares of Northwest slipped 2 cents to $7.90 in early trade on the Nasdaq.