big plans

Northwest has big plans

for the Pacific

By Ian Williams

NORTHWEST Airlines still has big plans for the South Pacific.

Speaking to Pacific Islands Monthly at the company’s Minneapolis

headquarters, in Minnesota, Joseph

Francht, the Senior vice-president fi nance and treasurer said that Northwest was still interested in a deal with Continental: “It has Air Micronesia, which would be a very good fit for our route map. We would still like to talk to them if they came back. We will be moving into the South Pacific, either with Air Micronesia, or by building our own network whichever is the most effective.”

Since Northwest was taken private by a consortium including the Australian Elders group, the company has persued a mixture of deals to expand its network.

But the emphasis has clearly been on moving Southwards from its strong North Pacific position. Francht com ments: “Last year we entered a market ing agreement with America West and we are strong in the North Pacific.”

Following an agreement with Hawaiian Air in December last year, which also gave it 25 per cent of the company, Northwest took over new route author ities. This year it opened the Hawaii- Australia route, and Japan to Saipan and Guam.

One of the airlines’ biggest assets is its “fifth freedom” rights. By US/Japanese treaty since the early fifties, Northwest can function as a domestic Japanese airline. It has a major hub in Tokyo, allowing it to tap into the fastest growing segment of Pacific air travel.

“The trearty gives us flexible authori ties, and we have unused authorities in the Pacific which we think will become profitable when we get delivery of the Airbus 340 from 1993 onwards,” said Francht. Those routes include Portland, Cleveland and Washington to Tokyo.

Indeed, Northwest has its eyes even further South on Qantas. Francht says: “We have applications in with the Australian government we would consider part ownership and we

would consider a deal to manage its operations as well.”

So confident is the airline that Francht was even prepared to consider a deal that swallowed Qantas and Continental together. “It’s a function of how the deal was structured,” he said, when aslced if this would tax the company’s resources. He pointed proudly to the company’s growing strength in comparison with other US airlines. The first half of 1991 saw it with the second rank for operating margin in the US.

Indeed, Francht told PIM that the airline might be floated again a surprisingly bold thought bearing in mind the current parlous state of the industry.

A steady stream of new aircraft, financed on advantageous terms, has allowed it to consider expansion of its route network taking advantage of weaker competitors. “We have no major outflows for the next sixteen months,”

Francht points out.

But the expansion is not aimless. Said Francht: “The destiny of the company lies in the Pacific. Currently 31 per cent of our revenue is from the Pacific, and 64.3 per cent domestic and a mere 4.3 per cent Atlantic. We look at ourselves as a Pacific Region carrier. With 3.1 per cent share of the market Northwest was the biggest US Pacific carrier in 1990, before we added our South Pacific routes.

“We still have to play in the US market to ensure that we get the economies of scale of the other US airlines.” But Francht felt that the recent through ticketing deal with Dutch airline KLM and their joint route from Minneapolis to Europe had given enough access to transatlantic passenger routes.

In the meantime route expansion preceeds space. In October Northwest started its Los Angeles to Sydney flights, and has plans to go from New York to Sydney soon after. Between Japan, Australia, and the Pacific states of the USA, Northwest should be able to fill the gaps. □