Northwest Airlines Announces Personnel Reductions and Added Fees to Help Offset Record Fuel Costs. NWA Matches Competitors with Fees for 1st Checked Bag, Frequent Flier Award Tickets, and Ticket Changes
EAGAN, Minn. (July 9, 2008) Northwest Airlines (NYSE: NWA) today announced it will reduce its frontline and management employees by 2,500 as a result of capacity reductions taken to address the unprecedented run-up in oil prices. In addition, NWA will match its competitors and charge fees for the first checked bag and for frequent flier award tickets, and increase the fees for ticket changes. “Our fuel costs have more than doubled in the past year,” said Doug Steenland, President and CEO of Northwest Airlines. “In order to manage through this unprecedented fuel challenge, we have to take action to both control costs and increase our revenue.”
Personnel Reductions via Voluntary Programs
In June, Northwest announced plans to reduce its system mainline capacity (domestic and international) in the fourth quarter of 2008 by 8.5% – 9.5% versus the fourth quarter of 2007.
As a result of these flight reductions, Northwest will reduce its frontline and management personnel by 2,500. All NWA employee groups will be affected by this.
The reductions will be first achieved through a variety of voluntary programs including early-out programs, voluntary leaves, work rule modifications and attrition. Furloughs will be employed only if voluntary means fail to achieve the targeted reductions. “These reductions are the direct result of our extraordinary fuel costs and the necessary actions we must take to right-size our airline and eliminate unprofitable flying,” said Steenland.
NWA will also match other competitors by adding fees to offset some of its extraordinary fuel costs.
Checked Bag Fees
NWA is matching several competitors including American Airlines, United Airlines and US Airways, with plans to charge $15 for the customer’s first checked bag. The new policy applies to tickets sold on or after July 10, for travel starting August 28, throughout the United States as well as travel between the U.S. and Canada.
NWA also charges $25 for a second checked bag and $100 for three or more checked bags. Frequent flier elites are exempt from the policy, along with full-fare coach passengers.
WorldPerks Award Tickets
NWA is also matching competitors by implementing a service fee for award tickets. For WorldPerks Award tickets issued in North America on or after September 15, 2008, NWA will charge $25 for domestic tickets, $50 for Trans-Atlantic tickets, and $100 for Trans-Pacific travel.
Steenland noted, “This is a temporary service fee to partially offset our fuel costs. As fuel comes down, we will re-visit this decision.”
Ticket Change Fees
NWA also followed moves by American, United, Continental and US Airways to increase fees for ticket changes. Starting July 9, the fee for domestic non-refundable ticket changes will increase from $100 to $150. International ticket change fees will increase by an additional $50 to $150 per ticket, depending on class of service and other restrictions.
Revenue Gains; Cost Containment
Steenland said, “In addition to helping offset our extraordinary fuel prices, these fee increases also better align our costs with providing these services.” He concluded, “We expect these three incremental revenue enhancing measures to generate $250 million to $300 million a year, which will help ease the burden of these record high oil prices.” Northwest Airlines is one of the world’s largest airlines with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam. Northwest, with its regional partners, operates approximately 2,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world’s most extensive global networks. Northwest and its travel partners serve more than 1,000 cities in excess of 160 countries on six continents.
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