Northwest

Storm Clouds Ahead for the Stock Market!

Anyone on the stock market who has taken a Northwest flight is unlikely to be an ardent lover of the airline’s plebian service. Punctuality and safety records may match the competition, and travel agents may offer attractive deals, but the cabin crew measure up poorly against peers from Singapore, India, Malaysia, Thailand, and even the Middle East. Since personnel costs and resources are so significant in every hospitality business, the implications of a weak service culture for Northwest are serious indeed.

The fuel price issue, to be fair to Northwest has hit every airline on any stock market, and the service levels cannot be blamed for this. The stock market has to take cognizance of the depleted margins regardless of how much passengers may like any airline company. However, the freedom to realize better prices, especially in the business and first classes, is structurally related to customer satisfaction. Investors could also justifiably criticize the airline for not rationalizing its extensive route map in time.

Security concerns and requirements add to the woes of Northwest. Schedules have been disrupted on routes with heavy traffic, and some passengers may think twice about air travel in general. The short and medium term stock market potentials for any airline are not comparable with many other sectors open for investment.

Northwest is deeply committed to the airline business. It is one of the top 10 airline companies in the world. It serves six continents, and has almost a thousand cities on its map. Its specific drawbacks, and the poor prospects for the industry of which it is a part, make it a comparatively unattractive stock market choice at this time. Some of its predicament may be measured by the statistic that the company shares have traded at $0.54 towards the end of August 2006, against a 52-week high of $5.05. Perhaps the winter vacation season, and a secure Middle East scenario will translate to better volumes and margins for Northwest, giving opportunities for investors to exit with smaller losses than inevitable immediately.

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