Northwest announces more capacity cuts

Airline expects to trim total capacity by as much as 10% below last year's levels; also says that layoffs are possible.
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Last Updated: June 17, 2008: 6:32 PM EDT

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MINNEAPOLIS (AP) -- Northwest Airlines said on Tuesday it will cut its capacity later this year by 3% to 4% because of high fuel prices. The reductions were deeper than those announced in April, though they're smaller than cuts announced by many other airlines.

The airline said it will try to shrink its staff through voluntary means, but layoffs are possible, too. Northwest said it has not yet finalized the number of positions it wants to eliminate.

"In response to these extraordinary fuel costs, we are taking prudent actions to reduce our capacity and right-size the airline," Chief Executive Doug Steenland said in a prepared statement. "This will allow us to better match our capacity to customer demand as airfares, by necessity, must increase."

Northwest Airlines Corp. (NWA, Fortune 500) said it expects to reduce its mainline flying by as much as 9.5% compared with a year ago. Domestic flying, including regional carriers, is now slated to go down by 7% to 8%. The cuts are expected to take effect in the fourth quarter, which begins in October.

The major airlines have been announcing capacity reductions because of sharp rises in fuel prices. On Tuesday, Air Canada said it will cut up to 2,000 jobs and cut capacity 7%. In May, American Airlines, the largest U.S. carrier, said it would eliminate an unspecified number of jobs and cut capacity up to 12% after the busy summer travel season. Delta Air Lines Inc. (DAL, Fortune 500) said in March it would cut U.S. capacity about 10% in the second half of 2008.

Delta plans to acquire Northwest in a deal it hopes will close around the end of this year. Oil was headed toward $100 a barrel when the deal was announced. It's above $130 now, prompting Northwest to call the prices a "fuel crisis."

On Tuesday, Steenland said the case for the Delta-Northwest deal is stronger than before because eliminating corporate overlap between the two carriers will make their finances stronger. 
First Published: June 17, 2008: 6:11 PM EDT

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