MINNEAPOLIS — Northwest Airlines Corp. shares fell more than 11 percent on Monday as investors in the nation’s fourth-largest carrier were buffeted by several pieces of bad news.
A $50 each-way fare increase aimed at business travelers failed when other carriers failed to match it. Regulatory filings show that Northwest chairman Gary L. Wilson has now sold nearly 60 percent of his stake in the company. And the Wall Street Journal highlighted Northwest’s labor troubles in Monday’s editions and reported the airline could be close to bankruptcy.
Northwest shares fell 75 cents, or 11.9 percent, to close at $5.58 in Monday trading on the Nasdaq Stock Market, after falling as low as $5.05 earlier in the day. The shares are off from a high of $11.83 in December.
Wilson has sold about 2.5 million shares since mid-May, according to filings with the Securities and Exchange Commission. The company has said Wilson remains the airline’s largest single private investor.
The attempted fare increase was the largest of several attempts by a number of carriers to raise fares this year.
Making it stick would have demonstrated that Northwest has some pricing power.
Things began well for Northwest on Friday, as United Air Lines, Continental, and US Airways all matched its fare increase. But American Airlines and Delta Air Lines never did, and other airlines began backing down over the weekend. By Sunday night, Northwest dropped it.
Northwest also rescinded a $5 to $10 fare increase on tickets that compete with discount carriers, and a two-night stay requirement for some fares.
The fare increases were dropped “because our fares were no longer competitive,” Northwest spokesman Kurt Ebenhoch said on Monday.
Northwest’s increase was the first effort to push above the $499 cap for one-way tickets Delta instituted in January. Other carriers matched Delta’s cap, at least in markets where they compete. Northwest has complained that the cap is arbitrary and hurts the industry.
The Wall Street Journal report pointed out that Northwest is behind on its pension obligations, and that the company has failed to cut labor costs as much as other older carriers.
The mediated talks with mechanics have been especially contentious, and both Northwest and the mechanic’s union have made strike preparations.
However, last week Northwest failed in its attempt to get the National Mediation Board to declare the talks at an impasse, and more negotiations are scheduled to begin June 20.
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