The company's airline labor woes were until recently perhaps the most brutal out there, and the labor problems are not yet over. The airline will need to be careful now that it is outside of Chapter 11 bankruptcy protection because it won't have the 'we are broke and trying to stay afloat' argument any longer.
By some accounts, the top brass and managers will receive 5% of the new company and that is going to be a blow to the airline employees who are still fighting for higher wages and better benefits. Northwest no longer has the highest cost structure in the industry but it is still a higher structure than some legacy carriers and above that of most discount and regional carriers. The company is still gambling on a robust airline travel industry and a too-slow economy could begin to pinch the company again.
As of last quarter the company carried roughly $3.6 billion in cash, short term investments and receivables. The new airline has trimmed more than $4 billion in debt, trimmed its airline fleet, and has been cutting down on unprofitable routes. Its older fleet is also going to need some fresh planes, which will potentially require the company to add on to its $9 billion in debt from now to 2009.
The new "NWA" ticker will trade on NYSE and will open around $25.00. The company is re-emerging and that is good news, but the flip side is that they are re-emerging as an airline that is not totally fixed and one that still has a lot of work to do.
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
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