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CHICAGO: Northwest Airlines, the last U.S. carrier in bankruptcy, left court protection Thursday after reducing its operating costs to the point where they are now close to the lowest in the industry.

The company used its 20 months in bankruptcy to carve $2.4 billion, or 20 percent, from its annual expenses. It slashed labor spending by $1.4 billion, or 40 percent. Northwest also reorganized its regional flights, trimmed its fleet by 13 percent, and replaced older fuel-guzzling planes with newer cheap airfares models.

"They were pretty aggressive," said William Warlick, an analyst for Fitch in Chicago. "The proof is in the pudding, and they're going to come out of bankruptcy with lower costs than virtually all other legacy carriers."

The reorganization will produce a $794 million profit in 2007 after a $2.84 billion loss last year, Northwest estimates. The operating profit margin in the last quarter was 7 percent, the best among major U.S. airlines. American Airlines was second with 4.6 percent.

Northwest, based in Eagan, Minnesota, was the last of four large U.S. airlines to file for bankruptcy protection after air travel slumped in the wake of the 2001 terrorist attacks. US Airways Group filed for cheap airfares bankruptcy in August 2002 and again in September 2004; United Airlines in December 2002; and Delta Air Lines about 30 minutes before Northwest on Sept. 14, 2005.
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Northwest lost $4.62 billion from 2001 through 2005, and listed debt of $17.9 billion in its filing. "They had the benefit of being the last through," said Robert Mann of R.W. Mann, a consultant for airlines and labor groups, based in Port Washington, New York. "On that basis, they were able to work off everyone else's set of objectives."

With "relatively good" non-labor costs, Northwest focused on paring personnel expenses, said Philip Baggaley, cheap airfares and analyst with Standard & Poor's. Steenland and his lieutenants trimmed the work force by 22 percent from June 30, 2005, to 30,008 employees as of March 31. They also pushed through reductions in salary, vacation time, sick leave, health care benefits and crew meals and accommodations.

Excluding fuel, Northwest cut its cost to fly each seat one mile, to 7.7 cents last year, from 8.9 cents before it filed for bankruptcy. That compares with 7.4 cents at Delta and 9.1 cents at United, according to Northwest.

Unlike Delta, which exited cheap airfares bankruptcy after shifting jets to international routes, Northwest did not have to change strategy. It already had a larger share of higher-profit overseas flights than most of its U.S. peers. About 41 percent of Northwest's capacity last year was on international routes, second only to the 47 percent of Continental Airlines, according to Susan Donofrio, an analyst for Cathay Financial in New York cheap airfares.

The lack of an "open skies" agreement between China and the United States means Northwest and United will keep their cheap airfares edge in Pacific passenger traffic before the 2008 Beijing Olympics, said Roger King, a debt analyst for CreditSights in New York cheap airfares.