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Northwest reverses plan for 2005 growth

High fuel prices and abundant airline capacity are forcing Northwest Airlines Corp. to scale back its expansion plans for 2005.
/ Source: The Associated Press

High fuel prices combined with abundant airline capacity are forcing Northwest Airlines Corp. to scale back its expansion plans, while other carriers are standing by plans for modest growth.

As recently as January, Northwest said it would increase domestic capacity by 2 percent to 3 percent. But by last month, Chief Executive Doug Steenland said the company was reconsidering, and by Monday the airline was saying domestic growth would be zero. It's still projecting 3 percent to 4 percent growth on its Pacific routes and 10 percent to 11 percent growth on Atlantic routes.

Several other carriers said Tuesday they are sticking with their already-modest projections.

"The flights are full, and they're losing money," said airline consultant Michael Boyd. "Why fly more?"

"What's changed in the last six weeks is the stark realization that fuel prices are going to remain high indefinitely," said Boyd, who runs the Boyd Group in Evergreen, Colo. "That's changing everything. A lot of plans that were in the works three months ago are in the shredder."

Like Northwest, Continental Airlines Inc. is projecting flat domestic capacity for the year, though it says overall flights will increase 5 percent. Delta Air Lines Inc. is projecting 6 percent to 8 percent growth for the year, mostly on international routes. American Airlines, owned by AMR Corp., is projecting a 1 percent decline in domestic capacity and 11 percent growth in international capacity for the year.

UAL Corp.'s United Airlines, which is operating under bankruptcy protection, stood by its October plan to cut overall capacity by 3 percent by March, versus 2004 levels.

Spokesman Jeff Green said international capacity would increase by 14 percent and domestic capacity would drop by 12 percent in an effort to fit flights to market conditions.

Northwest's new projection comes at a time when fuel prices are near all-time highs. Each $1 increase to a barrel of fuel costs Eagan-based Northwest $50 million a year, Steenland told employees in a message recorded Friday. He said Northwest has appointed a task force to explore ways to save money on fuel.

"They're working hard, but unfortunately they're only going to be able to make a small dent in this massive cost increase," Steenland said.