Northwest's CEO Deplanes


By Michael Arndt And then there was one. Northwest Airlines (NWAC) reported Oct. 1 that its CEO, Richard H. Anderson, is quitting to take a job in the health-care industry. He'll be succeeded Nov. 1 by his longtime colleague, President Douglas M. Steenland. With Anderson's departure, Gordon M. Bethune, chairman and CEO of Continental Airlines (CAL), is now the only chief at the nation's top seven carriers who was in that job before 2001's terrorist attacks.

The change in command at Northwest is nowhere near as dramatic as the recent ousters at AMR (AMR

, parent of American Airlines), UAL (UALAQ), or Delta Air Lines (DAL), where directors ushered their CEOs to the door and into unemployment. And Northwest's financial straits certainly aren't as tight as those of its larger competitors. The No. 4 carrier is sitting on $2.6 billion in unrestricted cash. Still, Anderson's resignation may signal that something isn't quite right at Northwest.

SETTING THE PATTERN. Take Anderson's new position at managed-care giant UnitedHealth Group (UNH). He was unavailable for comment, but Steenland says Anderson had been looking for new work for some time and couldn't pass up what Steenland calls an "attractive opportunity." UnitedHealth is clearly much bigger than Northwest, with revenues on track to top $30 billion in 2004. Northwest, on the other hand, is only now crawling back toward its $11.2 billion revenue peak set in 2000. Yet Anderson, 49, a former prosecutor who joined Northwest in 1990, is stepping down to executive vice-president, a third-tier slot.

The move's timing also raises questions. Northwest is in contract negotiations with the Air Line Pilots Assn. on givebacks that could total $300 million. The carrier needs the money -- and fast. Industry analysts expect the Eagan (Minn.)-based airline will lose $575 million this year, which would be its third annual loss in the last four years. The pilots' contract will set the pattern for those with Northwest's other unions, and Anderson is leaving before a deal is reached.

Investors took the news in stride. Northwest shares rose 34 cents, to $8.55, on Oct. 1, a 4% gain. Still, that's down from its 52-week high of $15.21, which was set last October.

BUSY YEAR. Steenland, 53, insists that nothing is amiss. "There was no precipitating event," he told reporters in a teleconference. He says he and Anderson more or less functioned as co-CEOs since they were promoted to their respective jobs in early 2001. Because of that, the airline will move ahead "without missing a beat," he says. "We have the luxury of not having to redo or rethink our overall strategic plan."

Still, much is left to do at the airline. Since 2001, Northwest has chopped its annual expenses by $1.6 billion, with such moves as cutting 14,500 employees and closing reservations offices and maintenance facilities. But it must find $950 million more in annual savings from labor, Steenland admits. Talks with its mechanics and flight attendants about pay cuts will commence in earnest in 2005. Another issue for next year: Northwest has $1.5 billion in long-term debt due in 2005.

Anderson's leaving nearly completes a changeover of CEOs in the nation's major airlines since September 11. Over the last three years, chief execs have resigned from American, United, Delta, and Southwest Airlines (LUV). US Airways Group (UAIRQ), meantime, has seen two CEOs come and go in that time. And Continental's Bethune has announced that he'll turn over the job to Chief Operating Officer Lawrence W. Kellner on Dec. 31. By yearend, the sweep will be complete. Arndt is a senior correspondent in BusinessWeek's Chicago bureau


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