Annual Report 2000
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Northwest Northwest Annual Report Airlines Corporation Corporation Annual Report 2000 Northwest Airlines Corporation 5101 Northwest Drive St. Paul, MN 55000-3034 www.nwa.com ©2000 Northwest Airlines Corporation 2000 Northwest Airlines Annual Report 2000 CONDENSED FINANCIAL HIGHLIGHTS Northwest Airlines Corporation Year Ended December 31 Percent (Dollars in millions, except per share data) 2000 1999 Change FINANCIALS Operating Revenues $ 11,415 $ 10,276 11.1 Operating Expenses 10,846 9,562 13.4 Operating Income $ 569 $ 714 Operating Margin 5.0% 6.9% (1.9)pts. Net Income $ 256 $ 300 Our cover depicts the new Detroit terminal, Earnings Per Common Share: due to open in 2001. Basic $ 3.09 $ 3.69 Diluted $ 2.77 $ 3.26 Number of Common Shares Outstanding (millions) 85.1 84.6 NORTHWEST AIRLINES is the world’s fourth largest airline with domestic hubs in OPERATING STATISTICS Detroit, Minneapolis/St. Paul and Memphis, Asian hubs in Tokyo and Osaka, and a Scheduled Service: European hub in Amsterdam. Northwest Airlines and its alliance partners, including Available Seat Miles (ASM) (millions) 103,356 99,446 3.9 Continental Airlines and KLM Royal Dutch Airlines, offer customers a global airline Revenue Passenger Miles (RPM) (millions) 79,128 74,168 6.7 network serving more than 785 cities in 120 countries on six continents. Passenger Load Factor 76.6% 74.6% 2.0 pts. Revenue Passengers (millions) 58.7 56.1 4.6 Table of Contents Revenue Yield Per Passenger Mile 12.04¢ 11.58¢ 4.0 Passenger Revenue Per Scheduled ASM 9.21¢ 8.64¢ 6.6 To Our Shareholders . pages 2–5 Cargo Ton Miles (millions) 2,501 2,336 7.1 Operational Excellence . pages 6–7 Operating Revenue Per Total ASM (RASM) 10.01¢ 9.44¢ 6.0 Investment for the Future. pages 8–15 Operating Expense Per Total ASM (CASM) 9.33¢ 8.71¢ 7.1 Alliance Development . pages 16–17 NWA Cargo. page 18 Operating Income (Loss) Cash Flows from Operations Long-Term Debt MLT Vacations . page 19 millions millions millions Focus on People . pages 20–23 Board of Directors . pages 24–25 Senior Officers . page 25 Vision and Mission . page 26 Financial Report . page 27 THE NEW DETROIT TERMINAL (PAGE 8) will feature many new conveniences, among them Stockholders’ Information . page 70 elevated tram cars to transport passengers between gates. Route Maps. back cover Financial Highlights 2 Northwest Airlines Annual Report 2000 A MESSAGE FROM THE CHAIRMAN TO OUR SHAREHOLDERS A new team has assumed the top leadership positions at Northwest Airlines. The Northwest Board of Directors In the year 2000, rising fuel prices, record air traffic levels and renewed attempts at industry consolidation defined elected Richard Anderson chief executive officer and Doug Steenland president. the competitive landscape for our company. Against this backdrop, Northwest Airlines delivered strong operating and financial performance. We carried more passengers, flew more miles and generated more revenue than at any John Dasburg was president and chief executive officer since 1990. We thank John for his leadership in building a point in our history. Our operating margin, excluding fuel expense and non-recurring items, was the best of the U.S. global network and guiding Northwest through the decade of the 1990s. network carriers. We ranked first in on-time performance through most of the year and improved our rankings on all Planning for a change in leadership has been a priority for the Northwest board. We have long recognized that the customer satisfaction measures tracked by the U.S. Department of Transportation (DOT). developing a sound succession strategy and implementing it at the right time is among our most important duties. The mission of Northwest Airlines is to provide reliable, convenient and consistent air transportation that exceeds Accordingly, we previously identified Richard and Doug as talented, seasoned leaders ready to assume critical roles at customer expectations and earns a substantial profit. To fulfill this mission, we have designated five areas for Northwest. Together, they offer complementary skills that make them an outstanding team. Having worked with emphasis — our Checklist for the Future — that reflect continued and consistent implementation of our core them both over the past decade, I am confident we have in place strategic, decisive and highly energetic leaders who strategies. These five focus areas and our key achievements in each of them are described below. will serve the company extremely well for the long term. As a Northwest executive vice president and our chief operating officer, Richard has been responsible for our RUN A GREAT AIRLINE — We will provide safe, clean, on-time air transportation with dependable operations since 1998. Doug, also formerly a Northwest executive vice president and our chief corporate officer since luggage service, coupled with friendly, professional, consistent and caring treatment. Our promise of reliability includes 1999, has led our corporate staff and guided the formation and implementation of our alliances with KLM Royal prompt, appropriate service recovery when, despite our best efforts, we do not meet our customers’ expectations. Dutch Airlines and Continental Airlines. Their deep knowledge of the company and the industry, combined with We focus relentlessly on being the industry’s on-time-arrival leader. From 1990 through 2000, Northwest Airlines was their proven leadership skills, enabled us to make this change confident that the transition would be smooth and exactly that, based on DOT statistics for U.S. network carriers. Throughout 2000, we were one of the leading carriers in orderly. on-time performance, fewest consumer complaints, lowest levels of mishandled luggage and least involuntary denied Richard and Doug have been instrumental in designing and implementing the strategies that have served Northwest boardings. On a composite of these measures of operational integrity, we were the industry leader in 2000. well during a period of enormous change and challenging conditions in the airline industry. These core strategies remain fundamentally unchanged and are further discussed in our letter to shareholders. The board is anticipating PUT CUSTOMERS FIRST — We will maintain our industry-leading Customers First plan, delivering great benefits to all Northwest stakeholders from the vigor and enthusiasm of this new leadership. clear, concise communications about flight status. We will strive to be the first choice airline for passengers and shippers, with innovative products. Northwest has been investing millions of dollars in new technologies that help customers conveniently buy tickets, ease check-in and improve the boarding process. In 2000, we became the first major airline to introduce online check-in via our web site. Domestic customers can now obtain a boarding pass at their homes or offices, bypassing check-in lines at the airport. Northwest customers now also enjoy the convenience of electronic tickets even when their itineraries include travel on multiple carriers. We are leading the development of interline e-ticketing capabilities and, with alliance partner Continental Airlines, Gary L. Wilson operate the industry’s largest interline e-ticket network. Chairman of the Board We are also enhancing in-flight comfort for customers with the introduction of enhanced World Business ClassSM service. The centerpiece of this service is more personal space — enough to comfortably work, relax or sleep in flight. This product, which we began rolling out in 2000, also offers higher quality food service and other passenger amenities. The improvements restore World Business Class as the industry-leading product on trans-Pacific routes and a product leader in the trans-Atlantic market. 2 Letter to Shareholders 3 Northwest Airlines Annual Report 2000 FOCUS ON PEOPLE — By taking care of Northwest people — our greatest asset — we will take better Going forward, our operating reliability and efficiency, as well as our customers’ in-flight comfort, will benefit from care of our customers. We will achieve this objective through enhanced communications, fair and progressive labor planned additions to our fleet. Early in 2001, we announced orders for 52 new aircraft, including 24 comfortable and relations, state-of-the-art training and continued improvements to employee services and facilities. reliable Airbus A330-300 wide-body aircraft and 20 757-300 aircraft. Deliveries on these orders begin in 2002 and continue through 2006. Combined with other planned acquisitions, we will be taking delivery of a new aircraft During the year, we reached a new five-year agreement with our flight attendants. Seven of the eight contracts approximately every two weeks for the next five years. covering our U.S. and Canadian employees have updated agreements, and our mechanics, cleaners and custodians were in the ratification process for a new contract as we began printing this report. SECURE OUR FUTURE — We will ensure sustainable financial stability through a commitment to The quality of our service ultimately rests on the quality and enthusiasm of our people. Throughout this report we improve profitability and create shareholder value. We will execute our strategies to improve financial performance by recognize 14 employees for their outstanding efforts on behalf of our company and our customers. They are the increasing revenues in high potential areas for expansion — such as cargo — and aggressively controlling costs. recipients of the 2000 President’s Award, our highest distinction. Northwest is the only U.S airline with construction of new runway and terminal facilities at all of its hubs. To enhance customer service and operating efficiency, the largest facility expansion and renewal in Northwest’s history is BUILD OUR NETWORK — We will create robust, profitable and sustainable growth by expanding underway at our domestic hubs in Detroit, Minneapolis/St. Paul and Memphis, and in our international hubs, Tokyo service from each Northwest hub and by building our alliances with other carriers. We will aggressively develop and Amsterdam. By far the most dramatic is the construction of the new terminal in Detroit.