Personnel Reductions and Added Fees to Help Northwest Airlines Offset Record Fuel Costs

Northwest Airlines is to reduce its frontline and management employees by 2,500 as a result of capacity reductions taken to address the unprecedented run-up in oil prices. In addition, NWA has said it will match its competitors and charge fees for the first checked bag and for frequent flier award tickets, and increase the fees for ticket changes.

“Our fuel costs have more than doubled in the past year,” said Doug Steenland, President and CEO of Northwest Airlines. “In order to manage through this unprecedented fuel challenge, we have to take action to both control costs and increase our revenue.”

The employee reductions will be first achieved through a variety of voluntary programs including early-out programs, voluntary leaves, work rule modifications and attrition. The airline has said that furloughs will be employed only if voluntary means fail to achieve the targeted reductions.

NWA also plans to charge $15 for the customer’s first checked bag. The new policy applies to tickets sold on or after July 10, for travel starting August 28, throughout the United States as well as travel between the U.S. and Canada.

NWA also charges $25 for a second checked bag and $100 for three or more checked bags. Frequent flier elites are exempt from the policy, along with full-fare coach passengers.

Northwest is also implementing a service fee for award tickets. For WorldPerks Award tickets issued in North America on or after September 15, 2008, NWA will charge $25 for domestic tickets, $50 for Trans-Atlantic tickets, and $100 for Trans-Pacific travel.

Steenland noted, “This is a temporary service fee to partially offset our fuel costs. As fuel comes down, we will re-visit this decision.”

In addition, starting July 9, the fee for domestic non-refundable ticket changes will increase from $100 to $150. International ticket change fees will increase by an additional $50 to $150 per ticket, depending on class of service and other restrictions.

Steenland said, “In addition to helping offset our extraordinary fuel prices, these fee increases also better align our costs with providing these services.”

“We expect these three incremental revenue enhancing measures to generate $250 million to $300 million a year, which will help ease the burden of these record high oil prices,” he added.

In the past few weeks, Austrian Airlines, Cathay Pacific, United Airlines, Air New Zealand, Qantas, Continental Airlines, American Airlines and Air Canada have announced significant reductions to their international operations.

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