http://online.wsj.com/article/SB121562661826339787.html?mod=googlenews_wsj
July 9, 2008 2:32 p.m.
Facing fuel costs that have more than doubled in the past year, Northwest Airlines Corp. announced plans to cut its work force by 8.3%, charge fees for the first checked bag and frequent-flier award tickets, and raise fees for ticket changes.
The moves — which follows plans announced by Northwest last month to cut capacity late this year by 8.5% to 9.5% — mark the latest step by an airline to cut costs and pass some on to customers as fuel costs continue to rise.
The precipitous and seemingly unwavering climb in the costs of jet fuel has prompted carriers to pull flights off schedules and to scale back hiring and expansion plans while coming up with new ways to raise revenue.
Meanwhile, consumers can plan on shelling out considerably more money to fly, and they’ll have fewer choices when doing so. At the same time, they will be asked to pony up for services that once were part of the cost of a ticket.
“In order to manage through this unprecedented fuel challenge, we have to take action to both control costs and increase our revenue,” Chief Executive Doug Steenland said Wednesday.
Northwest said the capacity reductions announced in June would results in the elimination of 2,500 frontline and management jobs, with all employee groups being affected. Mr. Steenland called the reductions “the necessary actions we must take to right-size our airline and eliminate unprofitable flying.”
He added that the fee additions and revisions are expected to generate $250 million to $300 million a year.
AMR Corp.’s American Airlines, UAL Corp.’s United Airlines and US Airways Group Inc. have already begun charging $15 for each customer’s first checked bag. Northwest said it will begin charging the same fee, effective with tickets sold on or after July 10, for travel starting Aug. 28, throughout the U.S. as well as for travel between the U.S. and Canada.
Northwest will also charge $25 for a second checked bag and $100 for three or more checked bags. Frequent flier elites and full-fare coach passengers will be exempt.
The company is also matching competitors such as merger partner Delta Air Lines Inc. with a fee for award tickets. For award tickets issued in North America on or after Sept. 15, Northwest will charge $25 for domestic tickets, $50 for trans-Atlantic tickets and $100 for trans-Pacific tickets.
Mr. Steenland, as Delta had, called the move temporary. “As fuel comes down, we will revisit this decision,” he said.
The move to raise fees for ticket changes follows similar moves by American, United, Continental Airlines Inc. and US Airways. Effective Wednesday, nonrefundable ticket changes will have a fee of $150, up 50%. International ticket change fees will increase another $50 to $150 per ticket.
Shares of Northwest, which like other airlines surged Tuesday amid a drop in crude-oil futures, were recently down 11% to $6.65.
Write to Donna Kardos at donna.kardos@dowjones.com
