NORTHWEST AIRLINES CORP
10-Q, 2000-05-12
AIR TRANSPORTATION, SCHEDULED
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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2000

Commission File Number 0-23642


NORTHWEST AIRLINES CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE   41-1905580
(State or other jurisdiction of
incorporation or organization)		   (I.R.S. Employer
Identification No.)

2700 Lone Oak Parkway, Eagan, Minnesota 55121
(Address of principal executive offices)
(Zip Code)

(612) 726-2111
(Registrant's telephone number, including area code)


    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes /x/  No / /

    At March 31, 2000, there were 84,654,922 shares of the registrant's Common Stock outstanding.


Northwest Airlines Corporation

 
  
    
   Page No.
PART I. FINANCIAL INFORMATION    
 
 		  
Item 1.		  
 		  
Financial Statements		  
 		  
 
 
 		  
 		  
 		  
Condensed Consolidated Statements of Operations—Three months ended March 31, 2000 and 1999.		  
 		  
3
 
 		  
 		  
 		  
Condensed Consolidated Balance Sheets—March 31, 2000 and December 31, 1999		  
 		  
4
 
 		  
 		  
 		  
Condensed Consolidated Statements of Cash Flows—Three months ended March 31, 2000 and 1999.		  
 		  
5
 
 		  
 		  
 		  
Notes to Condensed Consolidated Financial Statements		  
 		  
6
 
 		  
The Computations of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed Charges and Preferred Stock Requirements are attached hereto and filed as Exhibits 12.1 and 12.2.		  
 		  
 
 
 		  
Item 2.		  
 		  
Management's Discussion and Analysis of Financial Condition and Results of Operations		  
 		  
9
 
 		  
Item 3.		  
 		  
Quantitative and Qualitative Disclosures About Market Risk		  
 		  
12
 
 PART II. OTHER INFORMATION		  
 		  
 
 
 		  
Item 1.		  
 		  
Legal Proceedings		  
 		  
13
 
 		  
Item 6.		  
 		  
Exhibits		  
 		  
13
 
SIGNATURE		  
 		  
14
 
EXHIBIT INDEX		  
 		  
15

2


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Northwest Airlines Corporation

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 
   Three Months Ended March 31,
  
(Unaudited, in millions except per share amounts)
  
  2000
   1999
  
Operating Revenues              
Passenger   $ 2,132   $ 1,883  
Cargo     177     154  
Other     261     244  
   
 
 
Total operating revenues     2,570     2,281  
 
 Operating Expenses		  
 		  
 		  
 		  
 		  
 		  
 		  
 
Salaries, wages and benefits     852     817  
Aircraft fuel and taxes     419     229  
Aircraft maintenance materials and repairs     172     178  
Commissions     160     171  
Other rentals and landing fees     124     115  
Depreciation and amortization     121     114  
Aircraft rentals     100     84  
Other     625     587  
   
 
 
Total operating expenses     2,573     2,295  
   
 
 
 
 Operating Loss		  
 		  
 		  
(3		  
)		  
 		  
(14		  
)
 
 Other Income (Expense)		  
 		  
 		  
 		  
 		  
 		  
 		  
 
Interest expense, net     (87 )   (92 )
Interest of mandatorily redeemable preferred security holder     (7 )   (7 )
Investment income     12     10  
Foreign currency gain     3     8  
Other     86     47  
   
 
 
Total other income (expense)     7     (34 )
   
 
 
 
 Income (Loss) Before Income Taxes		  
 		  
 		  
4		  
 		  
 		  
(48		  
)
Income tax expense (benefit)     1     (19 )
   
 
 
 
 Net Income (Loss)		  
 		  
$		  
3		  
 		  
$		  
(29		  
)
   
 
 
Earnings (loss) per common share:              
Basic   $ .03   $ (.36 )
   
 
 
Diluted   $ .03   $ (.36 )
   
 
 

See accompanying notes.

3

Northwest Airlines Corporation

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in millions)
   March 31
2000
   December 31
1999
  
Assets              
 
Current Assets		  
 		  
 		  
 		  
 		  
 		  
 		  
 
Cash and cash equivalents   $ 872   $ 749  
Restricted short-term investments     46     41  
Accounts receivable, net     558     521  
Flight equipment spare parts, net     347     348  
Prepaid expenses and other     458     404  
   
 
 
Total current assets     2,281     2,063  
 
 Property and Equipment		  
 		  
 		  
 		  
 		  
 		  
 		  
 
Flight equipment, net     4,568     4,730  
Other property and equipment, net     1,023     1,018  
   
 
 
Total property and equipment     5,591     5,748  
 
 Flight Equipment Under Capital Leases, net		  
 		  
 		  
582		  
 		  
 		  
588		  
 
 
 Other Assets		  
 		  
 		  
 		  
 		  
 		  
 		  
 
International routes, net     675     681  
Investments in affiliated companies     738     690  
Other     829     814  
   
 
 
      2,242     2,185  
   
 
 
Total Assets   $ 10,696   $ 10,584  
   
 
 
 
 Liabilities and Stockholders' Equity (Deficit)		  
 		  
 		  
 		  
 		  
 		  
 		  
 
 
 Current Liabilities		  
 		  
 		  
 		  
 		  
 		  
 		  
 
Air traffic liability   $ 1,578   $ 1,422  
Accounts payable and other liabilities     1,863     1,783  
Current maturities of long-term debt and capital lease obligations     386     372  
   
 
 
Total current liabilities     3,827     3,577  
 
 Long-Term Debt		  
 		  
 		  
3,201		  
 		  
 		  
3,354		  
 
 
 Long-Term Obligations Under Capital Leases		  
 		  
 		  
524		  
 		  
 		  
537		  
 
 
 Deferred Credits and Other Liabilities		  
 		  
 		  
 		  
 		  
 		  
 		  
 
Deferred income taxes     1,216     1,222  
Pension and postretirement benefits     563     542  
Other     560     535  
   
 
 
      2,339     2,299  
 
 Mandatorily Redeemable Preferred Security of Subsidiary Which Holds Solely Non-Recourse Obligation of Company		  
 		  
 		  
613		  
 		  
 		  
626		  
 
 
 Redeemable Preferred Stock		  
 		  
 		  
240		  
 		  
 		  
243		  
 
 
 Common Stockholders' Equity (Deficit)		  
 		  
 		  
 		  
 		  
 		  
 		  
 
Common stock     1     1  
Additional paid-in capital     1,457     1,454  
Accumulated deficit     (347 )   (349 )
Accumulated other comprehensive loss     (10 )   (9 )
Treasury stock     (1,149 )   (1,149 )
   
 
 
      (48 )   (52 )
   
 
 
Total Liabilities and Stockholders' Equity (Deficit)   $ 10,696   $ 10,584  
   
 
 

See accompanying notes.

4

Northwest Airlines Corporation

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 
   Three Months Ended
March 31
  
(Unaudited, in millions)
  
  2000
   1999
  
Net Cash Provided by Operating Activities   $ 139   $ 243  
 
 Cash Flows From Investing Activities		  
 		  
 		  
 		  
 		  
 		  
 		  
 
Capital expenditures     (138 )   (222 )
Net increase in short-term investments     (9 )   (25 )
Other, net     70     31  
   
 
 
Net cash used in investing activities     (77 )   (216 )
 
 Cash Flows From Financing Activities		  
 		  
 		  
 		  
 		  
 		  
 		  
 
Payments of long-term debt and capital lease obligations     (315 )   (29 )
Proceeds from sale and leaseback transactions     387     —  
Proceeds from issuance of long-term debt     8     —  
Other, net     (19 )   (27 )
   
 
 
Net cash provided by (used in) financing activities     61     (56 )
 
 Increase (Decrease) in Cash and Cash Equivalents		  
 		  
 		  
123		  
 		  
 		  
(29		  
)
Cash and cash equivalents at beginning of period     749     480  
   
 
 
Cash and cash equivalents at end of period   $ 872   $ 451  
   
 
 
 
Cash and cash equivalents and unrestricted short-term investments at end of period		  
 		  
$		  
872		  
 		  
$		  
451		  
 
   
 
 
Available to be borrowed under credit facilities   $ 1,325   $ 754  
   
 
 
 
Noncash Transactions:		  
 		  
 		  
 		  
 		  
 		  
 		  
 
Manufacturer financing obtained in connection with the acquisition of aircraft   $ 156   $ 265  

See accompanying notes.

5

Northwest Airlines Corporation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.
The condensed consolidated financial statements of Northwest Airlines Corporation (the "Company") included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as permitted by such rules and regulations. These financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in the Company's audited consolidated financial statements for the year ended December 31, 1999 contained in the Company's Annual Report on Form 10-K for 1999. The Company's accounting and reporting policies are summarized in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.
2.
The income tax expense (benefit) is based on estimated annual effective tax rates, which differ from the federal statutory rate of 35% primarily due to state income taxes and nondeductible expenses.

3.
At March 31, 2000, maturities of long-term debt were $300 million for the remainder of 2000, $210 million in 2001, $265 million in 2002, $135 million in 2003 and $480 million in 2004.
4.
The Company is managed as one cohesive business unit, of which revenues are derived primarily from the commercial transportation of passengers and cargo. Operating revenues from flight segments serving a foreign destination are classified into the Pacific or Atlantic regions, as appropriate. The following table shows the operating revenues for each region for the three months ended March 31 (in millions):


 
   2000
   1999
Domestic   $ 1,811   $ 1,607
Pacific, principally Japan     561     476
Atlantic     198     198
   
 
Total operating revenues   $ 2,570   $ 2,281
   
 
5.
As of March 31, 2000, the Company had firm orders for 107 new aircraft including 12 Airbus A320 aircraft, 54 Airbus A319 aircraft, 25 Boeing 757-200 aircraft and 16 Airbus A330 aircraft. The Company also has firm orders for aircraft that will be operated by and leased to Northwest Airlink regional carriers. As of March 31, 2000, the Company had firm orders for three AVRO RJ85 aircraft and 54 Bombardier CRJ200 aircraft. Committed expenditures for these aircraft and related equipment, including estimated amounts for contractual price escalations and predelivery deposits, will be approximately $405 million for the remainder of 2000, $740 million in 2001, $1.09 billion in 2002, $1.09 billion in 2003, $1.27 billion in 2004, $1.42 billion in 2005 and $570 million in 2006.

6

6.
The following table sets forth the computation of basic and diluted earnings (loss) per common share for the three months ended March 31 (in millions, except share data):


 
   2000
   1999
  
Numerator:              
Net income (loss)   $ 3   $ (29 )
   
 
 
Denominator:              
Weighted-average shares outstanding for basic earnings (loss) per share     82,128,420     80,046,801  
 
Effect of dilutive securities:		  
 		  
 		  
 		  
 		  
 		  
 		  
 
Series C Preferred Stock     7,071,110     —  
Shares held in non-qualified rabbi trusts     2,495,756     —  
Employee stock options     301,994     —  
   
 
 
Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings (loss) per share     91,997,280     80,046,801  
   
 
 
7.
Comprehensive income (loss) was $2 million and ($12) million for the three months ended March 31, 2000 and 1999, respectively. Comprehensive income (loss) consists of net income (loss) plus other comprehensive income (loss).

8.
During the three months ended March 31, 2000, the Company sold another portion of its investment in  priceline.com  and recorded a gain of $58 million ($37 million after tax or $.45 per basic share and $.40 per diluted share). In February 1999, the Company sold a portion of its interest in Equant N.V. and recorded a gain of $28 million ($18 million after tax or $.22 per share). The gains are recorded in other non-operating other income in the accompanying consolidated statements of operations.

7

9.
The following summary data is presented for Northwest Airlines, Inc., the principal indirect operating subsidiary of the Company (in millions):


 
   Three Months
Ended March 31
  
 
   2000
   1999
  
Operating revenues   $ 2,395   $ 2,128  
Operating expenses     2,398     2,153  
   
 
 
Operating loss     (3 )   (25 )
Other income (expense)     (22 )   (47 )
   
 
 
Loss before income taxes     (25 )   (72 )
Income tax benefit     (6 )   (24 )
   
 
 
Net loss   $ (19 ) $ (48 )
   
 
 
 
   March 31
2000
   December 31
1999
Current assets   $ 2,069   $ 1,866
Noncurrent assets     7,221     7,360
Current liabilities     3,670     3,459
Long-term debt and obligations under capital leases     3,428     3,585
Deferred credits and other liabilities     1,064     1,023
Mandatorily redeemable preferred security of subsidiary     613     626

8


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

    For the quarter ended March 31, 2000, the Company reported net income of $3 million and an operating loss of $3 million. Diluted earnings per common share were $.03 in the first quarter of 2000 compared with diluted loss per common share of $.36 in the first quarter of 1999. The three months ended March 31, 2000 and March 31, 1999 included non-recurring net gains of $44 million and $18 million, respectively, predominantly from the sales of another portion of the Company's investments in priceline.com and Equant N.V. High fuel prices negatively impacted the quarter ended March 31, 2000 by approximately $174 million on a pre-tax basis compared to last year.

    Substantially all of the Company's results of operations are attributable to Northwest Airlines, Inc. ("Northwest") and the following discussion pertains primarily to Northwest. The Company's results of operations for interim periods are not necessarily indicative of such results for an entire year due to seasonal factors as well as competitive and general economic conditions. The Company's second and third quarter operating results have historically been more favorable due to increased leisure travel on domestic and international routes during the spring and summer months.

    Information with respect to the Company's operating statistics follows(1):

 
   Three months ended
March 31
    
  
 
   %
Chg.
  
 
   2000
   1999
  
Scheduled service:              
Available seat miles (ASM) (millions)   24,530   23,017   6.6  
Revenue passenger miles (millions)   17,777   16,325   8.9  
Passenger load factor (percent)   72.5   70.9   1.6  pts.
Revenue passengers (thousands)   13,406   12,416   8.0  
Revenue yield per passenger mile (cents)   11.85   11.38   4.1  
Passenger revenue per scheduled ASM (cents)   8.59   8.07   6.4  
 
Operating revenue per total ASM (cents)(2)		  
 		  
9.32		  
 		  
8.88		  
 		  
5.0		  
 
Operating expense per total ASM (cents)(2)   9.27   8.95   3.6  
 
Cargo ton miles (millions)		  
 		  
565		  
 		  
497		  
 		  
13.6		  
 
Cargo revenue yield per ton mile (cents)   31.27   31.00   .9  
 
Fuel gallons consumed (millions)		  
 		  
493		  
 		  
469		  
 		  
5.1		  
 
Average fuel cost per gallon (cents)   79.15   43.91   80.3  
Number of operating aircraft at end of period   416   408   2.0  
Full-time equivalent employees at end of period   52,175   51,278   1.7  
(1)
All statistics exclude Express Airlines I, Inc., a wholly-owned Northwest Airlink regional carrier.

(2)
Excludes the estimated revenues and expenses associated with the operation of Northwest's fleet of 747 freighter aircraft and MLT Inc.

Results of Operations—Three months ended March 31, 2000 and 1999

    Operating loss was $3 million in 2000 compared to $14 million in 1999. Increased passenger revenue of $249 million was offset by increased operating expenses of $278 million, due primarily to increased aircraft fuel costs.

    Operating Revenues.  Operating revenues increased 12.7% ($289 million). System passenger revenues (which represented 83.0% of total operating revenues) increased 13.2% ($249 million). The increase in system passenger revenue was primarily attributable to a 6.6% increase in Northwest's

9

scheduled service ASMs and a 1.6 point increase in passenger load factor, resulting in an 6.4% increase in Northwest's passenger revenue per scheduled ASM ("RASM"). The improved operating statistics result from improved operational performance in 2000. The effects of the 1998 strike and labor disruptions negatively impacted the quarter ended March 31, 1999. Passenger revenue included $25 million and $26 million of Express revenues for the three months ended March 31, 2000 and 1999, respectively.

    The following analysis by market is based on information reported to the Department of Transportation and excludes Express:

 
   System
   Domestic
   Pacific
   Atlantic
  
2000                          
Passenger revenue (in millions)   $ 2,107   $ 1,493   $ 447   $ 167  
 
 Increase/(Decrease) from 1999:		  
 		  
 		  
 		  
 		  
 		  
 		  
 		  
 		  
 		  
 		  
 		  
 		  
 
Passenger revenue (in millions)   $ 250   $ 167   $ 73   $ 10  
Percent     13.4 %   12.6 %   19.2 %   6.4 %
Scheduled service ASMs (capacity)     6.6 %   7.9 %   5.0 %   2.8 %
Passenger load factor     1.6  pts.   1.8  pts   .8  pts.   2.1  pts.
Yield     4.1 %   1.5 %   12.4 %   .6 %
Passenger RASM     6.4 %   4.3 %   13.4 %   3.5 %

    Domestic passenger revenue increased due to more capacity, higher passenger load factor and higher yields. Capacity increased as a result of additional aircraft, better aircraft utilization and improved operational performance.

    Pacific passenger revenue was higher due to increased yields and traffic caused by Asia's recovering economic environment. The average yen per U.S. dollar exchange rates for the three months ended March 31, 2000 and 1999 were 107 and 118, respectively, a 10.3% strengthening of the yen. Passenger load factor increased .8 points to a record 78.3% as the Company continued to experience increased demand.

    Atlantic passenger revenue increased due to an increase in capacity, which resulted primarily from a 1.3 point improvement in completion factor, additional flying, which included increases in Minneapolis/St. Paul-Amsterdam service and improved operational performance.

    Cargo revenue increased 14.9% ($23 million) to $177 million due to 13.6% more cargo ton miles resulting primarily from additional aircraft and a .9% increase in cargo revenue yield per ton mile. Other revenue increased 7.0% ($17 million) due primarily to increased revenue from MLT Inc.

    Operating Expenses.  Operating expenses increased 12.1 ($278 million). Operating capacity increased 6.6% to 24.58 billion total service ASMs due to planned capacity increases of 5.5% and less weather-related cancellations in 2000. Salaries, wages and benefits increased 4.3% ($35 million) due to wage and benefit increases and an increase in average full-time equivalent employees of 1.7%.

    Aircraft fuel and taxes increased 83.0% ($190 million) due primarily to an 80.3% increase in average fuel cost per gallon, net of hedging transactions. Commissions decreased by 6.4% ($11 million) primarily due to changes in the Company's commission structure which were effective in October 1999. Depreciation and amortization increased 6.1% ($7 million) due to additional owned aircraft and aircraft modifications. Aircraft rentals increased 19.0% ($16 million) due to additional leased aircraft. Other expenses grew 6.5% ($38 million) largely due to higher volume of business for MLT Inc., increased personnel, outside services and passenger food costs.

    Other Income and Expense.  The foreign currency gains for the three months ended March 31, 2000 and 1999 were attributable to balance sheet remeasurement of foreign currency-denominated

10

assets and liabilities. Other income increased 83.0% ($39 million) primarily due to a $58 million gain from the sale of another portion of the Company's investment in priceline.com and increased earnings from other investments, partially offset by a $28 million gain from the sale of a portion of the Company's investment in Equant N.V. in the quarter ended March 31, 1999.

Liquidity and Capital Resources

    At March 31, 2000, the Company had cash and cash equivalents of $872 million and borrowing capacity of $1.32 billion under its revolving credit facilities, providing total available liquidity of $2.19 billion.

    Net cash provided by operating activities for the three months ended March 31, 2000 was $139 million, a $104 million decrease compared with the three months ended March 31, 1999 due primarily to higher than normal sale proceeds of frequent flyer miles in excess of revenues in 1999. Investing activities in the first quarter of 2000 consisted primarily of the purchase of four AVRO RJ85 aircraft and four Airbus A319 aircraft, costs to commission aircraft before entering revenue service, aircraft modifications and aircraft deposits partially offset by the sale of a portion of the Company's investment in priceline.com. Investing activities in 1999 consisted primarily of the purchase of four AVRO RJ85 aircraft and two Airbus A320 aircraft, the purchase off lease of four DC9-50 aircraft, costs to commission aircraft before entering revenue service, engine hushkitting, aircraft modifications and aircraft deposits. Financing activities for the three months ended March 31, 2000 consisted primarily of the sale and leaseback of ten Airbus A319 aircraft and three AVRO RJ85 and payment of debt and capital lease obligations. Financing activities in 1999 consisted primarily of the payment of debt and capital lease obligations.

    The current aircraft delivery schedule provides for the acquisition of 107 aircraft over the next seven years. See Note 5 to the Condensed Consolidated Financial Statements for additional discussion of aircraft capital commitments.

Other Information

    Labor Agreements.  On April 20, 2000, the Company and the International Brotherhood of Teamsters, which represents its flight attendants, reached a new five-year tentative agreement. The agreement, which is subject to ratification by the flight attendants, provides for lump sum retroactive payments equal to 3.5% of salaries since August 2, 1996, increased wages and pension benefits and various work rule modifications. The results of the ratification vote will be available on May 31, 2000.

    The Company is presently in mediated negotiations with the Aircraft Mechanics Fraternal Association, which represents the Company's mechanics. The Company believes that a mutually acceptable agreement can be reached with this labor group, but because the terms of the agreement will be determined by collective bargaining, the Company cannot predict the outcome of the negotiations at this time.

    Foreign Currency.  The Company is exposed to the effect of foreign currency exchange rate fluctuations on the U.S. dollar value of foreign currency-denominated operating revenues and expenses. The Company's largest exposure comes from the Japanese yen. The yen to U.S. dollar exchange rate has changed from 119 yen to $1 at March 31, 1999 to 102 yen to $1 at December 31, 1999 to 103 yen to $1 at March 31, 2000. From time to time the Company uses financial instruments to hedge its exposure to the Japanese yen. At March 31, 2000, the Company recorded $20 million of unrealized losses in accumulated other comprehensive loss associated with the forward contracts purchased to hedge a portion of its 2000 and 2001 yen-denominated sales. Hedging gains or losses are recorded in revenue when transportation is provided. Presently, the Company has hedged approximately 40% of the Company's anticipated yen-denominated sales for the remainder of 2000 and 38% of 2001 anticipated yen-denominated sales.

11

    Aircraft Fuel.  In the ordinary course of business, the Company manages the price risk of fuel primarily utilizing futures contracts traded on regulated exchanges and fuel swap agreements. At March 31, 2000, the Company recorded $34 million of unrealized gains in accumulated other comprehensive loss as a result of the hedge contracts, which if realized, will be recorded as a reduction to fuel expense when the related fuel inventory is utilized. Presently, the Company has hedged approximately 29% of its estimated fuel requirements for the remainder of 2000.

    Alliances.  On April 28, 2000, KLM Royal Dutch Airlines ("KLM") Airlines announced that it had terminated its passenger and cargo joint ventures with Alitalia. Northwest has separate agreements with Alitalia. KLM's decision regarding Alitalia will not impact the long-term trans-Atlantic alliance between Northwest and KLM. The decision and its ultimate impact on our international global alliance cannot be predicted at this time.

    Forward-Looking Statements.  Some of the statements made in this section and elsewhere in this report are forward-looking and are based upon information available to the Company on the date hereof. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company is hereby identifying important factors that could cause actual results to differ materially from those contained in any forward-looking statement made by or on behalf of the Company. Any such statement is qualified by reference to the following cautionary statements.

    It is not reasonably possible to itemize all of the many factors and specific events that could affect the outlook of an airline operating in the global economy. Some factors that could significantly impact expected capacity, load factors, revenues, expenses and cash flows include the airline pricing environment, fuel costs, labor negotiations both at the Company and other carriers, low-fare carrier expansion, capacity decisions of other carriers, actions of the U.S. and foreign governments, foreign currency exchange rate fluctuation, inflation, the general economic environment in the U.S. and other regions of the world and other factors discussed herein. These and other factors are discussed in "Risk Factors Related to Northwest and NWA Corp." and "Risk Factors Related to the Airline Industry" in Item 1 of the Company's Annual Report on Form 10-K for 1999.

    Developments in any of these areas, as well as other risks and uncertainties detailed from time to time in the Company's Securities and Exchange Commission filings, could cause the Company's results to differ from results that have been or may be projected by or on behalf of the Company. The Company cautions that the foregoing list of important factors is not inclusive. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These statements deal with the Company's expectations about the future and are subject to a number of factors that could cause actual results to differ materially from the Company's expectations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

    Information required by this item is provided under the captions "Foreign Currency" and "Aircraft Fuel" within Management's Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report on Form 10-Q. Also, see Quantitative and Qualitative Disclosures About Market Rick, within Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K for 1999.

12


PART II. OTHER INFORMATION

Item 1. Legal Proceedings

    In April 2000, Northwest received a civil investigative demand ("CID") from the Antitrust Division of the Department of Justice related to an antitrust investigation to determine whether there are, have been or may be violations of Sections 1 and 2 of the Sherman Act related to, among other things, monopolization of hub markets. Northwest understands that this CID is part of a larger Justice Department investigation of competitive practices in the airline industry and is related to prior CIDs received in January 1998 and February 1999. Northwest has filed information with the Justice Department that it believes to be responsive to the CID. A CID is a request for information in the course of a civil antitrust investigation and does not constitute the institution of legal proceedings.

    See "Legal Proceedings," Item 3 in the Company's Annual Report on Form 10-K for 1999. In addition, in the ordinary course of its business, the Company is party to various other legal actions which the Company believes are incidental to the operation of its business. The Company believes that the outcome of the proceedings to which it is currently a party will not have a material adverse effect on the Company's consolidated financial statements taken as a whole.

Item 6. Exhibits

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SIGNATURE

    Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

    Northwest Airlines Corporation
 
 		  
 		  
 		  
 		  
 
 
Dated: May 12, 2000		  
 		  
By:		  
 		  
/s/ ROLF S. ANDRESEN   
Rolf S. Andresen
 Vice President—Finance & Chief Accounting
Officer (principal accounting officer)

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EXHIBIT INDEX

Exhibit No.
   Description
12.1   Computation of Ratio of Earnings to Fixed Charges.
 
12.2		  
 		  
Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Requirements.
 
27.1		  
 		  
Financial Data Schedule.

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QuickLinks

Northwest Airlines Corporation
PART I. FINANCIAL INFORMATION
PART II. OTHER INFORMATION
SIGNATURE
EXHIBIT INDEX


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