Northwest Airlines Corp., the No. 4 U.S. airline, said Wednesday it would post a substantial loss in its first quarter, worse than analysts expected as the slowing economy cuts into high-paying corporate travel.
Analysts say the slowing economy is causing corporations to look for ways to save money, including reducing travel, and that business travelers may be looking for cheaper fares rather than making last-minute bookings at or near full price.
St. Paul, Minn.-based Northwest said it expected a loss of $130 million to $150 million, or $1.55 to $1.80 a share, in the three months ending March 31.
Analysts on average had been expecting a loss of 59 cents, according to First Call/Thomson Financial.
Northwest shares fell 94 cents to close at $19.75 on Nasdaq.
Northwest, which is contending with a potential strike this spring by mechanics, did not cite labor negotiations among the reasons for its earnings shortfall.
"We are beginning to experience the impact of a slowing U.S. economy, with February revenue below plan due primarily to a decline in corporate business travel," Northwest said in a filing with the Securities and Exchange Commission.
"In the near term, we remain cautious, as we expect to see continued softness in our mix of business travelers," the carrier added. That would hurt both revenue and profitability, the airline said.
International revenue also is showing the effects of an economic slowdown, with European sales weaker than expected, Northwest said.
Sales for Northwest's significant Pacific operations are meeting expectations, the carrier said, adding, "We remain cautious based on the continued uncertainty in the Japan economy."
Last week, Japanese officials warned that their economy was near a "state of collapse." Japan's benchmark Nikkei stock index stock market recently hit a 16-year low, and the Japanese yen continues to weaken against the dollar.
Northwest's cargo business started slowing significantly in January because of a decline in shipments of high-tech goods from Asia to the U.S. Northwest said this trend would probably continue in the near term as the U.S. demand for high-tech products "remains depressed."
Northwest recently failed to reach an agreement on a new contract with its mechanics by the end of a 30-day federally mandated "cooling-off" period, at which time the mechanics would usually be allowed to strike. However, President Bush headed off a strike by convening a presidential emergency board, which delays a possible strike until at least May 12.