ST. PAUL, Minn., Feb. 5 (UPI) -- Northwest Airlines head Richard Anderson predicts there will be fewer major airlines three years from now but "Northwest will be one of the ones that survives."
The chief executive officer of the nation's fourth-largest air carrier said Northwest must cut annual operating costs by $1 billion to $1.5 billion to reach profitability.
The St. Paul Pioneer Press said Wednesday Northwest spent around 9.5 cents to fly a seat one mile in 2002 and a 10 percent to 15 percent cut in annual expenses would save more than $1 billion annually.
"There will be fewer major airlines three years from now," Anderson said. "Northwest will be one of the ones that survives ..."
The airline currently operates 1,500 daily departures from nearly 120 countries and had a January load factor of 71.7 percent, 0.7 percent higher than a year earlier.
Like most major U.S. airlines, Eagan, Minn.-based carrier has been losing money since the Sept. 11, 2001, terrorist attacks. Northwest lost $798 million last year and has eliminated 12,000 jobs. The airline reportedly plans to present a labor cost restructuring plan to the pilots' union asking employees to make more sacrifices to cut operating costs by 1 cent to 1.5 cents per mile.
"That's really the direction of CASM (cost per available seat mile) needs to go in order to have a cost base that fits the revenue-generating capacity of the airline," Anderson told transportation industry experts Tuesday at a New York conference sponsored by Goldman Sachs.
American Airlines, the world's largest carrier, Tuesday asked its employees to accept $1.8 billion in wage and benefit concessions to allow it to compete against bankrupt United Airlines and U.S. Airways.
Low-cost, profitable carriers like Southwest Airlines and JetBlue have changed the economics of the industry, which once depended on full-fare business travelers to provide big profits.
"Just as they demand the lowest prices at Wal-Mart, consumers are demanding ever-increasing value for air transportation," Anderson said. "Legacy carriers like Northwest must adapt and have costs in line with the revenue generating capability of the airline."
Northwest announced two new daily flights between Minneapolis/St. Paul and Portland, Maine, using 50-passenger Canadair Regional Jet aircraft. The service will operate from June 21 until Oct. 18.
