Northwest cancels Airbus

From:         hoyme@src.honeywell.com (Ken Hoyme)
Date:         08 Dec 92 15:51:20 PST
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In article mumble mumble Pete Mellor <pm@cs.city.ac.uk> writes:

> BBC Radio 4 news, 0700 GMT today:- 

> Northwest Airlines has cancelled orders for 50 A320s and 14 A340s in 
> a cost-cutting exercise. This was described as a serious blow to the 
> European aircraft industry. 

According to this mornings Minneapolis Star-Tribune (the home paper of
NWA), that was 24 A340's canceled - 74 plane cancellations worth $3.4B.
According to what I can find, they had 24 firm and 6 options for the
A340.  The 50 canceled A320s were the options, I believe.  (Their
original order was 50 firm and 50 options, if I recall correctly.)

Their 16 A330s were not affected, but they aren't scheduled to receive
any of those until 1997, so they felt no need to address that plane in
this agreement.  An additional 16 A320s will be delivered in 1993 (they
currently have 34) along with two more B747-400s.  With these
cancellations and the delay of additional 747 and 757 deliveries, NWA
currently is not scheduled to receive any new planes in 1994.  (It is
interesting to note that no Boeing planes were cancelled, but were
slipped out instead.)

Along with the cancellations, NWA announced $250M in new financing --
including financing from Airbus for the additional A320s!  The analysts
considered it quite remarkable that Airbus offered financing while at
the same time getting a $3.4B cancellation.  (But then, NWA is already
deeply in debt to Airbus, since they decided to buy A320s based on a
dynamite financing package that Boeing could not match.)  This, combined
with $900M worth of labor concessions (over three years) makes it
unlikely that NWA will declare Chapter 11 in 1993.

One local note of interest.  The big buzz in Minnesota is whether this
dooms the Airbus maintenance bases planned for the northern part of the
state.  About 18 months ago, NWA drove a deal with the state for an
operating loan plus financing for the building of two maintenance bases
- one for engines, the other for the larger structural checks (C/D).
The construction of the bases has been held up in legal wrangling (over
whether it is constitutional to use taxpayer money for such a purpose).
With these cancellations, it is suspected that the bases will not be
built, and NWA will fly their planes to Europe for C/D checks.  Of
course, they already have received and spent the operating loan....

Ken

Ken Hoyme                    Honeywell Systems and Research Center
(612)951-7354                3660 Technology Dr., Minneapolis, MN 55418
Internet: hoyme@src.honeywell.com