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Aviation History
1978
1978 - 0302.PDF
518 FLIGHT International, 25 February 1978 Northwest Airlines: 20 years in profit By JOAN FELDMAN FOR Northwest Airlines 1977 was a year to remember. The US regional carrier celebrated its 50th anniver sary six weeks after the festivities marking Lindbergh's transatlantic crossing. It topped the $1,000 million mark for the first time. And it was awarded and began serving Chicago-New Orleans, its first new route in seven years. NWA also made money in 1977, though in that respect last year was no different from the last 20-plus. For the Minneapolis-based carrier is the most profitable airline in the US despite the fact that it is only the seventh largest. Credit for Northwest's remarkable financial performance —which tends to make a mockery of most of its brethren's results—goes to one man: Donald W. Nyrop, now chairman of the company and nearing retirement. It is Nyrop who brought together a band of hard-nosed managers to forge an airline known worldwide not only for its belt-tightening and profits but also for its technical and operational wizardry. Nyrop had no easy chore on his hands when he joined Northwest in 1954 after serving as Civil Aeronautics Board chairman and as administrator of the Federal Aviation Administration's predecessor. In fact, one airline official recalls, "Northwest was in as bad financial shape as TWA in 1977." But, undeterred, Nyrop voluntarily removed Northwest from the subsidy ranks in 1955 and has made a profit every year since he took over. Many years it was also the most profitable, as it was in 1976, when 5-4 per cent was earned on revenues of $963-8 million. Debt-equity ratio is 18-8 per cent, again the best in the US. America's most modern fleet Many airline managements would be happy with that alone, but the financial results are only the beginning for Northwest. It also has the most modern aircraft fleet in the US, and comes closer to meeting the 1985 noise deadlines than any other carrier. Its 22 DC-10^40s and 21 747s (including four freighters) give it a wide-body fleet second only in size to that of United. Northwest also has some 707-320s, which it is selling, and 62 727s, some of them -100s which also are on the block. By the end of this year it will have acquired another 13 Boeing 727-200s. All the aircraft are owned by the company. An assessment of the fleet automatically brings out two of the four factors which Nyrop lists as contributing to his airline's financial performance: fleet planning and standard isation. (The others are capital utilisation and centralisa tion.) He points proudly to the fact that he's "bought and sold 364 aircraft" since 1954. Purchase, as opposed to leasing, has enabled Northwest to retain the advantages of depreciation and investment tax credits. The company's most recent large-scale example of standardisation was the decision to equip its DC-lOs with Pratt & Whitney JT9D-20s, as installed on its 747s, rather than the General Electric CF6s chosen by everyone else (except, much later, Japan Air Lines). Initial costs of the two engine types were the same. But, according to maintenance official Joe Leonard, "we already had nine spare engines to support the 747s. For the price of a couple more JT9Ds, we could also support the DC-lOs, rather than buy another nine CF6s." If Nyrop had had his way, Northwest, once an all- Boeing airline, would have stayed that way and bought a Boeing wide-body. But "Seattle was busy at the time with the SST and the 747" and wasn't interested in a wide- body trijet. The decision to buy P&W engines for the DC-10 has apparently paid off. According to McDonnell Douglas dis patch reliability figures given to Northwest, the airline consistently runs at 98-8 per cent and never goes below 98 per cent. Even the other large DC-10 operators, Con tinental and National, don't do as well, Northwest claims. An in-house assessment of DG-10 maintenance costs in 1976, calculated quarterly, shows a low of $215/hr (ex cluding overheads) and a high of $315. Only National Airlines can better these figures. The company also hastens to point out that because of its route structure, its DC-lOs operate only l-6hr between landings, an hour less than United. Thus, Northwest concludes, the operators of GE- powered DC-lOs would incur aircraft-mile costs of 96-84c (compared with Northwest's 63-81c) if they operated on its stage lengths. Northwest figures also show that the engine portion of its maintenance costs is 25 per cent smaller than that of the average GE operator. In other words, according to vice-president for maintenance and engineering W. E. Huskins, "we'd make the same decision again." Standardisation saving The engine standardisation decision produced the largest saving, but it was certainly not unique in the airline's history. Northwest maintains commonality in areas as diverse as cockpit interiors, passenger seats and inertial navigation systems. Despite its penny-pinching reputation, Northwest is more than willing to invest when it looks as if the deployment of more capital will pay off. Fleet planning, specifically the carrier's approach to air freight, again provides an example. With its four pure-freighter 747Fs, Northwest has made a huge investment in cargo carriage. As a result, although Northwest is only seventh-ranked in the US in terms of passengers carried, it is eighth in the world in freight revenue tonne-kilometres, ahead of big carriers such as British Airways, Air Canada, TWA, Eastern and Delta. In fact, its RTK performance amounts to more than half the total racked up by freight specialist Flying Tiger Line. Cargo sales in 1976 were up almost 36 per cent to $119-9 million, some 10-11 per cent of gross. Those results did not occur as if by magic. They were the result of a conscientious effort to provide as much cargo-carrying capacity as possible on all aircraft, not just the 747Fs. The fact that wide-body cargo capacity is being offered on some of the most lucrative freight routes in the world, including the Orient and US mainland-Alaska, does not harm profitability. Convertible DC-10 At one time the 727QC was seen in the US as a means of switching painlessly to cargo when aircraft were not needed in passenger service. Northwest chose not to follow that route for any of its 727s. Instead, Nyrop made sure that his 727s had the big freight door and beefed-up floor. They were never used that way, but they were ready if needed. Northwest did the same thing with its DC^lOs, and was one of only two US trunk airlines to buy the trijet with the cargo door. It paid a premium, about $125,000 per aircraft, to have the centre main undercarriage leg fitted. Landing weights higher than those for which the normal domestic DG-10-10 is cleared mean that Northwest can fly the equivalent of an all-cargo 707 from Seattle to Anchorage, for example, on a regularly scheduled passenger flight. In line with its cargo effort, Northwest, ever the in dependent "spoiler" of the industry, proposed a Pacific density container rate to encourage containerisation, and still managed to get away from the unsatisfactory LD3 container. Non-Iata Northwest immediately ran into a protest from the Japanese, and the rate was not approved by the Civil Aeronautics Board in its original form. Never-
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