<PAGE>

                          SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C. 20549
                                           
                                           
                                       FORM 8-K
                                           
                              CURRENT REPORT PURSUANT TO
                              SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934
                                           
                            DATE OF REPORT:  MARCH 6, 1997
                                           
                                           
                            NORTHWEST AIRLINES CORPORATION
                ------------------------------------------------------
                (Exact name of registrant as specified in its charter)
                                           
                                       DELAWARE
                                      ----------
                    (State or other jurisdiction of incorporation)
                                           
                                           

         0-23642                                      95-4205287
         -------                                      ----------
  (Commission File Number)             (I.R.S. Employer Identification Number)



                           Northwest Airlines Corporation
                                2700 Lone Oak Parkway
                                Eagan, Minnesota 55121
                                    (612)726-2111
                 (Address, including Zip Code, and Telephone Number,
           Including Area Code, of Registrant's Principal Executive Office)
                                           
                                           
                                           
                                  Page 1 of _ Pages
                         The Exhibit Index Appears on Page _


<PAGE>

ITEM 5:  OTHER EVENTS


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Northwest Airlines Corporation ("NWAC" or the "Company") reported net income of
$536.1 million, the largest annual net income in the Company's history, and
operating income of $1.05 billion for the year ended December 31, 1996. Primary
earnings per share were $5.67 ($5.15 fully diluted) compared with $4.17 per
primary share ($3.92 fully diluted) in 1995. Income before extraordinary item
and operating income increased by $194.0 million and $140.4 million,
respectively, compared with 1995. Excluding the impacts of preferred stock
transactions in both periods and a 1995 extraordinary item, primary earnings per
share were $4.93 ($4.48 fully diluted) compared with $3.02 ($2.85 fully diluted)
in 1995. The improved profitability was primarily the result of increased
passenger revenue and decreased interest expense.

Northwest Airlines, Inc. ("Northwest") is the principal indirect operating
subsidiary of NWAC, accounting for more than 97% of the Company's 1996
consolidated operating revenues and expenses. The Company's operating results
are significantly impacted by both general and industry economic environments.
Small fluctuations in revenue per available seat mile ("RASM") and cost per
available seat mile can have significant impacts on profitability.

RESULTS OF OPERATIONS - 1996 COMPARED TO 1995
OPERATING REVENUES. Operating revenues were $9.88 billion, an improvement of
$795.6 million (8.8%). Revenue per total service available seat mile ("ASM")
increased 2.8%. System passenger revenue (which represented 87% of total
operating revenue) increased 10.8%. The increase was due to a 7.4% increase in
scheduled service ASMs and a 3.3% increase in passenger RASM which was
attributable to a .9% increase in system yield and a 2.2% (1.6 points) increase
in passenger load factor.

The composition of the Company's operating revenues in each of the past three
years is summarized below:

----------------------------------------------------------------
                            1996           1995           1994
----------------------------------------------------------------
PASSENGER REVENUE
  Domestic                  57.9%          56.1%          56.8%
  Pacific                   22.8           23.8           22.0
  Atlantic                   6.4            5.5            5.4
CARGO REVENUE                7.5            8.3            9.1
OTHER REVENUE                5.4            6.3            6.7
----------------------------------------------------------------
  Total operating
  revenues                 100.0%         100.0%         100.0%
----------------------------------------------------------------

Domestic passenger revenue of $5.72 billion increased $618.1 million (12.1%). A
6.3% increase in scheduled service ASMs and a 5.4% increase in RASM resulted in
the improved performance. The increase in scheduled service ASMs resulted
primarily from the addition of 19 aircraft, which allowed the Company to
increase frequencies to 23 cities and enter seven new markets. The increase in
RASM was largely driven by a 4.6% increase in yield which was favorably 
impacted by the lapsed federal taxes on airline tickets. See "Other 
Information - U.S. Transportation Taxes". Pacific passenger revenue increased 
$92.4 million (4.3%) to $2.25 billion due to an 8.3% increase in scheduled 
service ASMs resulting primarily from new service to Beijing, China and 
additional frequencies due to higher utilization of existing aircraft. 
However, RASM decreased by 3.8% because of a 7.5% decrease in yield which was 
somewhat mitigated by a 4.1% (3.1 points) increase in passenger load factor. 
The Pacific yield decreased primarily because of a weaker Japanese yen.  The 
average yen per U.S. dollar exchange rate for the years ended December 31, 
1996 and 1995 was 108 and 94, respectively, a weakening of the yen of 14.9%. 
Atlantic passenger revenue increased $125.9 million (24.9%) to $630.5 million 
due to a 12.0% increase in scheduled service ASMs and an 11.5% increase in 
RASM which was largely yield related.

Cargo revenue decreased $5.4 million (.7%) due to 1.4% fewer cargo ton miles.
Cargo capacity was reduced because of increased passenger loads. Other revenue
decreased $35.3 million (6.2%) due primarily to decreased charter activity.

OPERATING EXPENSES. Operating expenses increased $655.2 million (8.0%). While
operating capacity increased 7.3% to 94.0 billion total service ASMs, operating
expense per total service ASM increased 1.4%. Operating expense per total
service ASM excluding stock-based compensation increased 5.1% to 8.52 cents
largely related to higher fuel prices and increased maintenance costs. Salaries,
wages and benefits increased $297.3 million (12.3%) due primarily to an increase
in average full-time equivalent employees of 4.7% and the end of the Wage
Savings Period as discussed under "Labor Agreements". The increase in full-time
equivalent employees was attributable to the increased flying of 7.3% and
increased traffic of 6.8%. Additionally, included in the increased salaries,
wages and benefits expense was a $73.8 million unfavorable impact


<PAGE>

of pension expense due to a lower pension discount rate in 1996 compared to
1995. Non-cash stock-based employee compensation expense is a function of shares
earned by employees and the period-ending common stock price. The 1996 stock-
based compensation expense decreased to $242.8 million from $478.0 million for
1995 because fewer shares were earned by employees in 1996 (7.2 million common
equivalent shares compared with 9.4 million common equivalent shares earned in
1995) and the common stock price used to measure expense decreased to a weighted
average of $33.77 per share for 1996 from $51.00 per share for 1995. Aircraft
fuel and related taxes increased 28.9% from $1.08 billion to $1.40 billion. A
20.8% increase in average fuel cost per gallon and an excise tax increase which
was effective October 1995 caused $256.6 million of the increase with the
balance attributable to increased flying. Commissions increased $27.9 million
(3.3%) as a result of a 10.8% increase in passenger revenue somewhat offset by
the impact of a decrease in the effective domestic commission rate. Aircraft
maintenance materials and repairs increased $160.8 million (40.7%) due to a
number of factors including the timing of maintenance activities, increased
flying, higher engine overhaul costs and the impact of favorable vendor
settlements in 1995. Other rentals and landing fees decreased $22.2 million
(4.7%) due primarily to the weakening of the Japanese yen. Other expenses (the
principal components of which include outside services, selling and marketing
expenses, passenger food, personnel, advertising and promotional expenses,
communication expenses and supplies) increased $86.5 million (4.8%) due
primarily to increased volume and rates for outside services, promotional and
personnel expenses.

OTHER INCOME AND EXPENSE. Interest expense-net decreased $124.8 million (32.2%)
primarily due to the retirement of debt prior to scheduled maturity and the
October 1995 restructuring of the Company's financing arrangement related to
certain property in Japan. The foreign currency gain of $19.1 million was
attributable to balance sheet remeasurement of foreign currency-denominated
assets and liabilities. The $18.0 million benefit in other-net was largely due
to a $25.5 million increase in income related to an equity investment in an
affiliate offset by the payment of $10.9 million made related to the travel
agency litigation settlement.

RESULTS OF OPERATIONS - 1995 COMPARED TO 1994

OPERATING REVENUES. Operating revenues were $9.08 billion, an improvement of
$760.0 million (9.1%). Revenue per total service ASM increased 7.3%. System
passenger revenue increased 10.7%. The increase was due to a 2.9% increase in
scheduled service ASMs and a 7.5% increase in RASM which was attributable to a
2.6% increase in system yield and a 5.0% (3.4 points) increase in passenger load
factor.

Domestic passenger revenue of $5.10 billion increased $369.7 million (7.8%).
RASM increased 5.6% and scheduled service ASMs increased 2.1%. The increase in
RASM resulted primarily from an increase in passenger load factor of 5.4% (3.5
points). Pacific passenger revenue increased $325.9 million (17.8%) to $2.16
billion. RASM increased 12.2% and scheduled service ASMs increased 5.1%. The
increase in RASM resulted from a 5.0% (3.6 points) increase in passenger load
factor and a 6.8% increase in yield (largely due to changes in the yen to dollar
rate of exchange). Atlantic passenger revenue increased $56.3 million (12.6%) to
$504.6 million due to an 11.6% increase in RASM which was largely due to a 9.8%
increase in yield.

Cargo revenue decreased $4.6 million (.6%) due to 3.3% fewer cargo ton miles.
Cargo capacity was reduced because of increased passenger loads. Other revenue
increased $12.7 million (2.3%) due primarily to ticket exchange fee revenue and
other incidental services provided to third parties, offset by decreased charter
activity.

OPERATING EXPENSES. Operating expenses increased $686.2 million (9.2%). While
operating capacity increased 2.1% to 87.6 billion total service ASMs, operating
expense per total service ASM increased 7.2%. Excluding stock-based compensation
in both periods, operating expense per total service ASM increased 2.0% largely
related to increased load factor and strengthening of the Japanese yen.
Salaries, wages and benefits increased $86.5 million (3.7%) due to an increase
in average full-time equivalent employees of 2.4% and overtime, which were
largely needed to handle the increased flying of 2.1% and increased traffic, and
was partially offset by decreased pension expense. Non-cash stock-based employee
compensation expense was $478.0 million and $107.2 million during 1995 and 1994,
respectively. The stock-based compensation expense is a function of shares


<PAGE>

earned by employees during the period and the period-ending common stock price,
which increased to $51.00 per share at December 29, 1995 from $15.75 per share
at December 30, 1994. Commissions increased $70.3 million (9.1%) as a result of
a 10.7% increase in passenger revenue and a higher Pacific effective commission
rate, offset by the favorable impact of the new domestic commission structure
implemented by Northwest in February 1995. Aircraft fuel and taxes increased
$31.0 million (2.9%) due primarily to a 3.0% increase in gallons consumed. In
October 1995, the United States increased taxes on aircraft fuel by 4.3 cents
per gallon increasing expense for the fourth quarter of 1995 by $12.1 million.
Other rentals and landing fees increased $40.2 million (9.2%) due largely to
changes in foreign currency exchange rates and increased volume and rates for
landing fees. Other expenses increased $86.2 million (5.1%) due primarily to
increased volume and rates for selling and marketing fees and outside services.

OTHER INCOME AND EXPENSE. Investment income increased by $30.5 million (72.3%)
due to increased invested cash. The foreign currency loss of $36.9 million was
attributable to a $27.6 million loss on the balance sheet remeasurement of
foreign currency-denominated assets and liabilities and a $9.3 million charge
for Japanese yen collar option contracts. The $31.7 million unfavorable change
in other-net for 1995 was largely due to miscellaneous licensing revenues
received in 1994 and losses related to an equity investment in an affiliate in
1995.

Net income for 1995 included a $49.9 million net extraordinary gain which
relates primarily to the restructuring of the Company's financing arrangement
with respect to certain property owned in Japan. See Note E to Consolidated
Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

During the past three years, the Company has substantially improved its
financial position while also acquiring aircraft and commencing a program to
upgrade existing aircraft. Cash flows provided by operating activities together
with financing transactions have enabled the Company to reduce aggregate long-
term debt and capital lease obligations, including current maturities, from
$5.37 billion at December 31, 1993 to $2.83 billion at December 31, 1996, a
reduction of 47.3%. In addition, the Company's common stockholders' equity
became positive at December 31, 1996.

At December 31, 1996, the Company had cash and cash equivalents of $559.4
million, unrestricted short-term investments of $192.7 million and borrowing
capacity of $486.8 million under its revolving credit facility, providing total
available liquidity of $1.24 billion. In addition, the Company has the ability
under another facility to borrow up to $240 million using existing aircraft as
collateral. Cash flow from operating activities was $1.37 billion for 1996,
$1.46 billion for 1995 and $1.38 billion for 1994. Net cash used in investing
and financing activities during 1996, 1995 and 1994 was $1.66 billion, $1.08
billion and $1.05 billion, respectively.

INVESTING ACTIVITIES. Investing activities in 1996 pertained primarily to
aircraft additions. The acquisition of 13 Boeing 757 aircraft, seven DC9-30
aircraft, three DC10-30 aircraft and two 747-200 aircraft; the purchase off
lease of 13 DC-9 aircraft, seven 727 aircraft and two MD-80 aircraft; and the
refurbishment of DC-9 aircraft account for most of the $1.21 billion of capital
expenditures in 1996. Capital expenditures for 1995 pertain primarily to
aircraft modifications, the acquisition of two Boeing 757 aircraft for sale-
leaseback, the acquisition of 14 DC-9 aircraft and deposits on ordered aircraft.
Capital expenditures for 1994 pertain primarily to aircraft modifications and
the acquisition of 22 DC-9 aircraft.

FINANCING ACTIVITIES. Financing activities in 1996 pertained primarily to the
sale and leaseback of seven Boeing 757 aircraft and the payment of debt and
capital lease obligations, including the prepayments of $150 million of the term
loan and $30 million of the term certificates. In October 1996, the Credit
Agreement was amended to increase the term loan to $150 million and extend the
final maturity to 2002. The revolving credit facility was increased to $500
million and the availability period was extended to 2001. In July 1996, the
Company acquired from KLM 3,691.2 shares of NWAC Series A Preferred Stock and
2,962.8 shares of NWAC Series B Preferred Stock in exchange for $379 million of
unsecured promissory notes which were repaid December 1996.

In October 1995 the Company completed a restructuring of its financing
arrangement related to certain property the Company owns in Japan. As a result,
long-term debt decreased by $695.9 million and was replaced by a $622.0 million
non-recourse obligation with longer maturities which is reflected in the
Company's balance sheet as a Mandatorily Redeemable Preferred Security of

<PAGE>
Subsidiary which holds a solely non-recourse obligation of Company. In December
1995 the Company also retired the 1989 acquisition loan by prepaying the
remaining $837 million loan outstanding using proceeds from a new credit
facility and available funds. Also during 1995, Bankers Trust New York
Corporation exchanged 1,727 shares of NWAC's Series B Preferred Stock for
2,050,000 shares of the Company's common stock. During 1994 the Company
completed more than $1.78 billion in capital market transactions, including an
initial public offering of common stock and refinancing of existing
indebtedness, and substantially rescheduled its debt maturities.

See Note C to Consolidated Financial Statements for maturities of long-term debt
for the five years subsequent to December 31, 1996, which do not exceed $225
million for any year.

CAPITAL COMMITMENTS. The current aircraft delivery schedule provides for the
acquisition of 68 aircraft. See Notes I and M to Consolidated Financial
Statements for additional discussion of aircraft capital commitments. Other
capital expenditures and costs to commission presently owned aircraft that have
not yet entered revenue service are projected for 1997 to be approximately $240
million and $130 million, respectively, which the Company anticipates funding
primarily with cash from operations.

In addition, the Company has adopted programs to hushkit and modify 173 DC-9
aircraft to meet noise and aging aircraft requirements. As of December 31, 1996,
the Company had hushkitted 79 of these 173 DC-9 aircraft. Capital expenditures
for engine hushkits and aging aircraft modifications were $75 million in 1996
and are expected to aggregate $510 million during the next five years for these
aircraft. The Company has also elected to upgrade aircraft systems and refurbish
interiors for the 173 DC-9 aircraft. Capital expenditures associated with
upgrading systems and interior refurbishment were $107 million in 1996 and are
expected to aggregate $190 million during the next five years. In addition, the
Company has adopted a program to hushkit and modify 29 727 aircraft, estimated
to cost approximately $85 million over the next five years. The Company has
arranged supplier financing of up to approximately $170 million for DC-9 and 727
engine hushkit shipsets.

The Company has also adopted a program to refurbish the interiors in 35 of its
747 aircraft and 26 of its DC-10 aircraft, estimated to aggregate $120 million
over the next five years.

LABOR AGREEMENTS. The labor cost savings discussed in Note B to Consolidated
Financial Statements, which improved the Company's 1993 to 1996 cash flow from
operating activities, ended on July 31, 1996 for flight attendants, September
30, 1996 for mechanics, ground personnel and management and October 30, 1996 for
pilots. The Company's agreements with the employee unions provide that wage
scales at the end of the Wage Savings Period snapback to August 1, 1993 levels
and potentially snap-up pursuant to formulae based in part on wage rates and
wage rate increases at other large U.S. airlines. Consequently, at the end of
the Wage Savings Period, salaries and wages increased by approximately $310
million on an annualized basis for both the snapbacks and snap-ups and financial
reporting recognition of stock-based employee compensation expense ceased. Each
of the unions representing the pilots and flight attendants has challenged the
Company's calculation of the snap-up and these issues are now subject to
arbitration.

The Company's labor contract with each of its unions became amendable as each
labor cost savings agreement ended. Consequently, future labor wage rates and
costs are subject to collective bargaining. While the Company cannot predict the
wage rates that will ultimately be in effect (since such rates will be
determined by collective bargaining), management believes that its labor costs
will remain competitive in comparison to the largest carriers. The Company has
identified and continues to identify various work rule changes and productivity
improvements which, if incorporated into new labor agreements and work
processes, would mitigate the effect of wage rate increases.

WORKING CAPITAL. The Company operates, like its competitors, with a working
capital deficit which aggregated $793.3 million at December 31, 1996. The
working capital deficit is attributable primarily to the $1.01 billion air
traffic liability for advance ticket sales.

OTHER INFORMATION

INCOME TAXES. Sections 382 and 383 of the Internal Revenue Code of 1986 (the
"Code") and the regulations thereunder impose limitations on the carryforward
amounts of net operating losses ("NOLs"), alternative minimum tax net operating
losses ("AMTNOLs") and credits that can be used to offset taxable income (or
used as a credit) in any single year if the corporation experiences more than a
50% ownership change, as

<PAGE>

defined therein, over a three-year testing period ending on any testing date.
See Note H to Consolidated Financial Statements for information regarding income
taxes and NOLs, AMTNOLs and credits.

Management believes that an offering of outstanding common stock by existing
stockholders in November 1995 triggered an ownership change, but that no
ownership change occurred prior to such offering. If such an ownership change in
fact occurred as a result of the November 1995 offering, management believes
that even as limited by Sections 382 and 383 of the Code, the NOLs, AMTNOLs and
credits would be used significantly earlier than their expiration, and the
annual limitations would not have a material adverse impact on the Company.
However, if the Internal Revenue Service (the "IRS") were to successfully assert
that an ownership change had occurred on any prior date, including August 1,
1993 (the date of the labor cost savings agreements), the impairment of the
Company's ability to use its NOLs, AMTNOLs and credit carryforwards would be
significant because the value of the Company's stock on certain prior testing
dates (which adversely affects the annual limitations described above) was
relatively low, and such low value would be used in computing the annual
limitations with respect to losses incurred prior to the testing date.

FOREIGN CURRENCY. In general, each time the yen strengthens (weakens), the
Company's on-going operating income is favorably (unfavorably) impacted and a
nonoperating foreign currency loss (gain) is recognized due to the remeasurement
of net yen-denominated liabilities. The Company's 1996 yen-denominated revenues
exceeded its yen-denominated expenses by approximately 70 billion yen
(approximately $650 million) and its yen-denominated liabilities exceeded its
yen-denominated assets by an average of 14.6 billion yen during 1996. The
Company's operating income was negatively impacted by approximately $120 million
due to a weaker yen in 1996 than in 1995. The yen to U.S. dollar exchange rate
at December 31, 1996, 1995 and 1994 was 116 yen to $1, 103 yen to $1 and 100 yen
to $1, respectively.

USE OF FINANCIAL INSTRUMENTS. From time to time, the Company uses a collar 
option strategy to hedge its anticipated yen-denominated net cash flows. 
There was no material impact on 1996 earnings associated with the Japanese 
yen collar option contracts. As of December 31, 1996, the Company had entered 
into collar option contracts to hedge approximately 85% of its first quarter 
1997 yen net cash flows. See Note N to Consolidated Financial Statements. In 
the ordinary course of business, the Company manages the price risk of fuel 
costs utilizing both regulated exchange traded futures contracts and fuel 
swap agreements. Gains or losses on hedge contracts are deferred until the 
related fuel inventory is expensed. As of December 31, 1996, the Company had 
no material hedges for future fuel requirements.

U.S. TRANSPORTATION TAXES. The United States 10% passenger ticket tax applicable
to domestic travel, the 6.25% domestic cargo waybill tax and the $6 per
passenger international departure tax expired on December 31, 1995.
Consequently, the Company ceased collecting these taxes (which aggregated $505
million in 1995) on January 1, 1996. These taxes were reinstated for tickets
sold subsequent to August 27, 1996 for travel through December 31, 1996. The
Company collected $146 million of such taxes during 1996. The taxes lapsed again
on January 1, 1997 and Congress passed legislation which reauthorized these
taxes for tickets sold from March 7, 1997 to September 30, 1997. The impact on
future operating income of such reinstatement is uncertain.

STOCK REPURCHASE AUTHORIZATION. In December 1996, the Company's Board of
Directors approved a stock repurchase program authorizing the Company to
repurchase during the next two years up to five million shares of its Class A
Common Stock. As of February 1997, the Company had not made any stock
repurchases.

DETROIT MIDFIELD TERMINAL. In October 1996, the Company and Wayne County,
Michigan (the "County") entered into an agreement pursuant to which, subject to
the satisfaction of certain conditions set forth in the agreement, the Company
will manage and supervise the design and construction of a $700 million terminal
at Detroit Metropolitan Wayne County Airport. The new terminal is scheduled to
be completed in 2001 and is anticipated to be funded from federal and State of
Michigan grants, passenger facility charges and the County's issuance of airport
bonds payable primarily from future passenger facility charges. The Company and
the County have entered into agreements pursuant to which the Company will lease
space in the new terminal for a term of 30 years from the date the terminal
opens.

<PAGE>


REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

To the Stockholders and Board of Directors Northwest Airlines Corporation

We have audited the accompanying consolidated balance sheets of Northwest
Airlines Corporation as of December 31, 1996 and 1995, and the related
consolidated statements of income, common stockholders' equity (deficit), and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also 
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Northwest Airlines
Corporation at December 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.



/s/Ernst & Young LLP
Minneapolis, Minnesota
January 21, 1997

<PAGE>


<TABLE>
<CAPTION>

CONSOLIDATED BALANCE SHEETS

Northwest Airlines Corporation                                                  December 31
--------------------------------------------------------------------------------------------------
(In millions)                                                               1996           1995
--------------------------------------------------------------------------------------------------
<S>                                                                      <C>            <C>
ASSETS

CURRENT ASSETS
  Cash and cash equivalents                                              $   559.4      $   850.9
  Short-term investments                                                     253.1          260.7
  Accounts receivable, less allowance
    (1996-$19.7; 1995-$21.5)                                                 656.1          700.3
  Flight equipment spare parts, less allowance
    (1996-$127.3; 1995-$111.8)                                               262.2          268.0
  Deferred income taxes                                                       95.5           82.8
  Prepaid expenses and other                                                 263.6          175.5
--------------------------------------------------------------------------------------------------
                                                                           2,089.9        2,338.2
--------------------------------------------------------------------------------------------------


PROPERTY AND EQUIPMENT
  Flight equipment                                                         4,724.0        4,050.7
  Less accumulated depreciation                                            1,107.6          953.5
--------------------------------------------------------------------------------------------------
                                                                           3,616.4        3,097.2
--------------------------------------------------------------------------------------------------


  Other property and equipment                                             1,484.2        1,487.4
  Less accumulated depreciation                                              560.1          505.2
--------------------------------------------------------------------------------------------------
                                                                             924.1          982.2
--------------------------------------------------------------------------------------------------
                                                                           4,540.5        4,079.4
--------------------------------------------------------------------------------------------------


FLIGHT EQUIPMENT UNDER CAPITAL LEASES
  Flight equipment                                                           927.4          940.9
  Less accumulated amortization                                              255.9          230.8
--------------------------------------------------------------------------------------------------
                                                                             671.5          710.1
--------------------------------------------------------------------------------------------------


OTHER ASSETS
  Investments in affiliated companies                                        164.4          154.1
  International routes, less accumulated
    amortization (1996-$216.3; 1995-$192.0)                                  751.4          775.7
  Other                                                                      294.0          354.8
--------------------------------------------------------------------------------------------------


                                                                           1,209.8        1,284.6
--------------------------------------------------------------------------------------------------
                                                                         $ 8,511.7      $ 8,412.3
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these consolidated financial 
statements.


<PAGE>

<TABLE>
<CAPTION>

                                                                               December 31
--------------------------------------------------------------------------------------------------
(In millions, except share data)                                            1996           1995
--------------------------------------------------------------------------------------------------

<S>                                                                      <C>             <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
  Air traffic liability                                                  $ 1,010.7       $  888.4
  Accounts payable and other liabilities                                     796.7          790.8
  Accrued compensation and benefits                                          456.8          361.6
  Accrued commissions                                                        177.4          214.7
  Accrued aircraft rent                                                      196.7          173.2
  Current maturities of long-term debt                                       144.4          329.7
  Current obligations under capital leases                                    61.7           62.1
  Short-term borrowings                                                       38.8           20.1
--------------------------------------------------------------------------------------------------
                                                                           2,883.2        2,840.6
--------------------------------------------------------------------------------------------------


LONG-TERM DEBT                                                             1,916.0        2,137.4
--------------------------------------------------------------------------------------------------


LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES                                   710.5          779.1
--------------------------------------------------------------------------------------------------


DEFERRED CREDITS AND OTHER LIABILITIES
  Deferred income taxes                                                      947.2          772.5
  Long-term pension and postretirement health care benefits                  461.2          831.1
  Other                                                                      348.9          306.5
--------------------------------------------------------------------------------------------------
                                                                           1,757.3        1,910.1
--------------------------------------------------------------------------------------------------


MANDATORILY REDEEMABLE PREFERRED SECURITY OF SUBSIDIARY WHICH
  HOLDS SOLELY NON-RECOURSE OBLIGATION OF COMPANY - NOTE E
  (Redemption value 1996-$628.8; 1995-$715.4)                                549.2          618.4
--------------------------------------------------------------------------------------------------


REDEEMABLE PREFERRED STOCK
  Series A and B                                                             239.8          656.9
  Series C, liquidation value (1996-$371.0; 1995-$322.4)                     362.8          288.6
--------------------------------------------------------------------------------------------------
                                                                             602.6          945.5
--------------------------------------------------------------------------------------------------


COMMON STOCKHOLDERS' EQUITY (DEFICIT)
  Common stock, $.01 par value; shares authorized-315,000,000;
    shares issued and outstanding (1996-97,604,056; 1995-91,345,808)           1.0             .9
  Additional paid-in capital                                               1,151.1          970.7
  Accumulated deficit                                                       (945.2)      (1,517.8)
  Other                                                                     (114.0)        (272.6)
--------------------------------------------------------------------------------------------------
                                                                              92.9         (818.8)
--------------------------------------------------------------------------------------------------
                                                                         $ 8,511.7      $ 8,412.3
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME

Northwest Airlines Corporation                                                   Year Ended December 31
------------------------------------------------------------------------------------------------------------------
(In millions, except per share amounts)                                     1996           1995           1994
------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>            <C>            <C>
OPERATING REVENUES
  Passenger                                                              $ 8,598.3      $ 7,762.0      $ 7,010.1
  Cargo                                                                      745.8          751.2          755.8
  Other                                                                      536.4          571.7          559.0
------------------------------------------------------------------------------------------------------------------
                                                                           9,880.5        9,084.9        8,324.9
------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
  Salaries, wages and benefits                                             2,709.4        2,412.1        2,325.6
  Stock-based employee compensation                                          242.8          478.0          107.2
  Aircraft fuel and taxes                                                  1,396.9        1,083.8        1,052.8
  Commissions                                                                868.4          840.5          770.2
  Aircraft maintenance materials and repairs                                 556.2          395.4          396.0
  Other rentals and landing fees                                             454.0          476.2          436.0
  Aircraft rentals                                                           346.3          338.9          337.8
  Depreciation and amortization                                              377.7          358.1          357.4
  Other                                                                    1,875.0        1,788.5        1,702.3
------------------------------------------------------------------------------------------------------------------
                                                                           8,826.7        8,171.5        7,485.3
------------------------------------------------------------------------------------------------------------------
OPERATING INCOME                                                           1,053.8          913.4          839.6
OTHER INCOME (EXPENSE)
  Interest expense                                                          (269.8)        (401.2)        (387.2)
  Interest capitalized                                                         7.3           13.9            3.5
  Interest of mandatorily redeemable preferred security holder               (27.2)          (7.1)           -
  Investment income                                                           71.2           72.7           42.2
  Foreign currency gain (loss)                                                19.1          (36.9)         (20.2)
  Other - net                                                                 18.0          (11.3)          20.4
------------------------------------------------------------------------------------------------------------------
                                                                            (181.4)        (369.9)        (341.3)
------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM                            872.4          543.5          498.3
  Income tax expense                                                         336.3          201.4          202.8
------------------------------------------------------------------------------------------------------------------
INCOME BEFORE EXTRAORDINARY ITEM                                             536.1          342.1          295.5
  Net gain on extinguishment of debt (less applicable
   income taxes of $29.4)                                                      -             49.9            -
------------------------------------------------------------------------------------------------------------------
NET INCOME                                                                   536.1          392.0          295.5
  Preferred stock requirements                                               (37.5)         (57.8)         (59.3)
  Preferred stock transactions                                                74.5           58.9            -
------------------------------------------------------------------------------------------------------------------
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS                             $   573.1      $   393.1      $   236.2
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE:
  PRIMARY
     Before effects of extraordinary item and preferred
       stock transactions                                                $    4.93      $    3.02      $    2.92
     Net gain on extinguishment of debt                                        -              .53            -
     Preferred stock transactions                                              .74            .62            -
------------------------------------------------------------------------------------------------------------------
     Earnings per common share                                           $    5.67      $    4.17      $    2.92
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
  FULLY DILUTED
     Before effects of extraordinary item and preferred
       stock transactions                                                $    4.48      $    2.85      $    2.87
     Net gain on extinguishment of debt                                        -              .49            -
     Preferred stock transactions                                              .67            .58            -
------------------------------------------------------------------------------------------------------------------
     Earnings per common share                                           $    5.15      $    3.92      $    2.87
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these consolidated financial 
statements.

<PAGE>

<TABLE>
<CAPTION>


CONSOLIDATED STATEMENTS OF CASH FLOWS


Northwest Airlines Corporation                                                   Year Ended December 31
------------------------------------------------------------------------------------------------------------------
(In millions)                                                               1996           1995           1994
------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                                              $  536.1       $  392.0       $  295.5
  Adjustments to reconcile net income to net cash provided
   by operating activities:
    Depreciation and amortization                                            377.7          358.1          357.4
    Income tax expense                                                       336.3          201.4          202.8
    Payment of income taxes                                                 (256.6)        (116.9)         (22.2)
    Stock-based employee compensation                                        242.8          478.0          107.2
    Pension and other postretirement benefit contributions
      (in excess of) less than expense                                        14.7          (97.6)          33.2
    Other - net                                                              (40.2)         (59.4)          18.8
    Changes in certain assets and liabilities:
      Decrease (increase) in accounts receivable                              18.6          (56.0)          89.8
      Decrease (increase) in flight equipment spare parts                     12.2          (59.7)         (45.2)
      Decrease (increase) in prepaid expenses and other                       (6.6)          28.3          233.9
      Increase (decrease) in air traffic liability                           122.3          127.3          (35.2)
      Increase (decrease) in accounts payable and other liabilities          (60.7)         243.3          149.7
      Increase (decrease) in accrued compensation and benefits                75.7           21.8           (6.5)
------------------------------------------------------------------------------------------------------------------
        Net cash provided by operating activities                          1,372.3        1,460.6        1,379.2
------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Capital expenditures                                                    (1,205.3)        (569.5)        (156.1)
  Purchases of short-term investments                                       (501.2)        (659.3)        (992.1)
  Proceeds from maturities of short-term investments                         511.2          991.4          452.2
  Other - net                                                                (46.6)          (8.3)           1.3
------------------------------------------------------------------------------------------------------------------
        Net cash used in investing activities                             (1,241.9)        (245.7)        (694.7)
------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Payment of long-term debt and capital lease obligations                   (550.4)      (1,279.3)      (1,493.7)
  Payment of short-term notes payable                                       (379.2)           -              -
  Proceeds from long-term debt                                               184.8          352.1        1,182.0
  Proceeds from sale and leaseback transactions                              350.0          100.0           10.9
  Issuance of common stock                                                     -              -            249.1
  Decrease in borrowings under revolving credit facility                       -              -           (272.2)
  Other - net                                                                (27.1)          (4.8)         (32.2)
------------------------------------------------------------------------------------------------------------------
        Net cash used in financing activities                               (421.9)        (832.0)        (356.1)
------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                            (291.5)         382.9          328.4
Cash and cash equivalents at beginning of period                             850.9          468.0          139.6
------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                                $  559.4       $  850.9       $  468.0
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents and unrestricted short-term
  investments at end of period                                            $  752.1       $  970.9       $  968.3
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
Available to be borrowed under revolving credit facility                  $  486.8       $  187.6       $  290.8
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY (DEFICIT)


Northwest Airlines Corporation
----------------------------------------------------------------------------------------------------------------------------------
                                                                           ADDITIONAL
                                                    COMMON STOCK             PAID-IN      ACCUMULATED
                                               SHARES          AMOUNT        CAPITAL        DEFICIT         OTHER          TOTAL
----------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>             <C>         <C>            <C>            <C>           <C>
BALANCE JANUARY 1, 1994                         58.0           $  .6       $ 253.2        $ (2,147.1)    $  (137.2)    $ (2,030.5)

Net income                                                                                     295.5                        295.5
Issuance of common stock                        20.4              .2         248.9                                          249.1
Shares earned by employees including
  shares issued to employee benefit plans        5.8                         121.4                                          121.4
Accrued cumulative dividends
  on Series A and B Preferred Stock                                                            (54.5)                       (54.5)
Accretion of Series C Preferred Stock                                                           (4.8)                        (4.8)
Tax benefit related to stock issued
  to employees                                                                10.0                                           10.0
Translation adjustments, net of
  income taxes                                                                                               (14.1)         (14.1)
Pension liability adjustment,
  net of income taxes                                                                                         53.9           53.9
Other                                             .1                           3.1                              .2            3.3
---------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1994                       84.3             .8          636.6          (1,910.9)        (97.2)      (1,370.7)

Net income                                                                                     392.0                        392.0
Exchange of preferred stock for
  common stock                                   2.0                          37.9              58.9                         96.8
Shares earned by employees including
  shares issued to employee benefit plans        3.4                         280.3                                          280.3
Accrued cumulative dividends
  on Series A and B Preferred Stock                                                            (50.3)                       (50.3)
Accretion of Series C Preferred Stock                                                           (7.7)                        (7.7)
Tax benefit related to stock issued
  to employees                                                                 2.1                                            2.1
Translation adjustments, net of
  income taxes                                                                                                 1.7            1.7
Pension liability adjustment,
  net of income taxes                                                                                       (179.1)        (179.1)
Series C Preferred Stock
  converted to common stock                       .5                           8.1                                            8.1
Other                                            1.1             .1            5.7                .2           2.0            8.0
---------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1995                       91.3             .9          970.7          (1,517.8)       (272.6)        (818.8)

Net income                                                                                     536.1                        536.1
Acquisition of preferred stock                                                                  74.5                         74.5
Shares earned by employees including
  shares issued to employee benefit plans        4.8                         137.5                                          137.5
Accrued cumulative dividends
  on Series A and B Preferred Stock                                                            (36.6)                       (36.6)
Accretion of Series C Preferred Stock                                                            (.9)                         (.9)
Tax benefit related to stock issued
  to employees                                                                 7.0                                            7.0
Translation adjustments, net of
  income taxes                                                                                                 (.1)           (.1)
Pension liability adjustment,
  net of income taxes                                                                                        157.5          157.5
Series C Preferred Stock
  converted to common stock                      1.0                          32.0                                           32.0
Other                                             .5             .1            3.9               (.5)          1.2            4.7
--------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1996                       97.6           $1.0      $ 1,151.1        $   (945.2)    $  (114.0)    $     92.9
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these consolidated financial 
statements.


<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: Northwest Airlines Corporation ("NWAC") is a holding
company whose principal indirect operating subsidiary is Northwest Airlines,
Inc. ("Northwest"). The consolidated financial statements include the accounts
of NWA Corp. and all subsidiaries (collectively, the "Company"). All significant
intercompany transactions have been eliminated. Investments in 20% to 50% owned
companies are accounted for by the equity method. Other investments are
accounted for by the cost method.

Certain amounts for 1995 and 1994 have been reclassified to conform with the
1996 financial statement presentation.

BUSINESS: Northwest's operations comprise more than 97% of the Company's
consolidated operating revenues and expenses. Northwest is a major air carrier
engaged principally in the commercial transportation of passengers and cargo,
directly serving more than 150 cities in 18 countries in North America, Asia and
Europe. Northwest's global airline network includes domestic hubs at Detroit,
Minneapolis/St. Paul and Memphis, an extensive Pacific route system with hubs at
Tokyo and Osaka, and a transatlantic alliance with KLM Royal Dutch Airlines
("KLM") which operates through a hub in Amsterdam.

FLIGHT EQUIPMENT SPARE PARTS: Flight equipment spare parts are carried at
average cost. An allowance for depreciation is provided at rates which
depreciate cost, less residual value, over the estimated useful lives of the
related aircraft.

PROPERTY, EQUIPMENT AND DEPRECIATION: Owned property and equipment are stated at
cost. Property and equipment acquired under capital leases are stated at the
lower of the present value of minimum lease payments or fair market value at the
inception of the lease. Property and equipment are depreciated to residual
values using the straight-line method over the estimated useful lives of the
assets. Commencing with the acquisition of the parent of Northwest in 1989,
estimated useful lives generally range from 4 to 25 years for flight equipment
and 3 to 32 years for other property and equipment. Leasehold improvements are
generally amortized over the remaining period of the lease or the estimated
service life of the related asset, whichever is less. Property and equipment
under capital leases are amortized over the lease terms or the estimated useful
lives of the assets.

Effective January 1, 1996, the Company reports gains (losses) relating to the
disposition of assets as part of operating expenses instead of other income
(expense). Reclassifications increased operating income $11.2 million and $9.2
million for 1995 and 1994, respectively.

AIRFRAME AND ENGINE MAINTENANCE: Routine maintenance and airframe and engine
overhauls are charged to expense as incurred. Modifications that enhance the
operating performance or extend the useful lives of airframes or engines are
capitalized and amortized over the remaining useful life of the asset.

FREQUENT FLYER PROGRAM: The estimated incremental cost of providing travel
awards earned under Northwest's WorldPerks frequent flyer program is accrued.
The Company sells mileage credits to participating companies in its frequent
flyer program. A portion of such revenue is deferred and amortized as
transportation is provided.

POSTRETIREMENT HEALTH CARE BENEFITS: The Company provides medical, dental and
life insurance benefits to certain eligible retirees and their dependents. The
expected future cost of providing such postretirement benefits is accrued over
the service life of active employees.

<PAGE>

OPERATING REVENUES: Passenger and cargo revenues are recognized when the
transportation is provided. The air traffic liability represents the estimated
value of sold but unused tickets and is regularly evaluated by the Company.

ADVERTISING: Advertising costs, included in other operating expenses, are
expensed as incurred and were $120.4 million, $119.4 million and $120.4 million
in 1996, 1995 and 1994, respectively.

EMPLOYEE STOCK OPTIONS: The Company uses the intrinsic value method prescribed
by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations in accounting for employee stock options.
Under the intrinsic value method, compensation expense is recognized to the
extent the market price of the common stock exceeds the option price at the date
of the grant.

FOREIGN OPERATIONS: Operating revenues from foreign operations, primarily in the
Pacific region, totaled approximately $3.39 billion, $3.17 billion and $2.83
billion in 1996, 1995 and 1994, respectively. International routes are amortized
on a straight-line basis, generally over 40 years. International operating route
authorities are regulated by governmental policy and bilateral agreements
between nations. Changes in such policies or agreements could favorably or
adversely impact Northwest.

Assets and liabilities denominated in foreign currency are remeasured at current
exchange rates with resulting gains and losses generally included in net income.

The Preferred Security (see Note E) and other assets and liabilities of certain
properties located outside of the United States whose cash flows are primarily
in the local functional currency are translated at current exchange rates, with
translation gains and losses recorded directly to common stockholders' equity.
The cumulative foreign translation loss, net of tax, was $39.4 million as of
December 31, 1996.

INCOME TAXES: The Company accounts for income taxes utilizing the liability
method. Deferred income taxes are primarily recorded to reflect the tax
consequences of differences between the tax and financial reporting bases of
assets and liabilities.

EARNINGS PER SHARE: Primary earnings per share is based on the weighted average
number of common and common stock equivalent shares outstanding and includes the
common stock shares earned by employees. Common stock equivalents include the
dilutive effect of the assumed exercise of stock options using the treasury
stock method. Primary earnings per share in 1996, 1995 and 1994 are based on
101,087,315 shares, 94,302,528 shares and 80,888,543 shares, respectively. For
fully diluted earnings per share, both net income applicable to common
stockholders and weighted average shares outstanding are adjusted as if the
Series C Preferred Stock earned by employees was converted to common stock.
Fully diluted earnings per share in 1996, 1995 and 1994 are based on 111,358,902
shares, 102,241,106 shares and 84,492,067 shares, respectively.

USE OF ESTIMATES: The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in its
consolidated financial statements and accompanying notes. Actual results could
differ from those estimates.


<PAGE>

NOTE B - LABOR AGREEMENTS
The Company's labor agreements provided for wage and other compensation savings
(the "Actual Savings") by domestic employees, including management, and other
cost reductions which aggregated $897 million over a 36 to 39 month period
(depending on the labor group) (the "Wage Savings Period") which ended between
August and November 1996. As part of an overall revised compensation plan
provided by the labor agreements, the Company agreed, among other things, to
issue to trusts for the benefit of participating employees 18,214,419 shares of
a new class of Series C cumulative, voting, convertible, redeemable preferred
stock (the "Series C Preferred Stock") and provided the union groups with three
positions on the Board of Directors. The Company has authorized 25,000,000
shares of Series C Preferred Stock, par value $.01 per share.

Pursuant to a one-time special conversion right exercised in February 1994, the
Company is issuing to certain of such trusts approximately 17.5 million shares
of common stock (in lieu of approximately 9.1 million of the shares of Series C
Preferred Stock that would have otherwise been issued). Information with respect
to the shares issued to trusts for the benefit of employees is as follows (in
millions):
 
<TABLE>
<CAPTION>


-----------------------------------------------------------------------------------------------------------------------------------
                                                 SERIES C PREFERRED STOCK                            COMMON STOCK
-----------------------------------------------------------------------------------------------------------------------------------
                                            SHARES            SHARES    FINANCIAL      SHARES                SHARES      FINANCIAL
                                            TO BE     SHARES  HELD BY   STATEMENT      TO BE       SHARES    HELD BY     STATEMENT
                                            ISSUED    EARNED  TRUSTS     AMOUNT        ISSUED      EARNED    TRUSTS       AMOUNT
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>       <C>     <C>       <C>            <C>         <C>       <C>         <C>
BALANCE JANUARY 1, 1994                      18.2       2.5        -   $    99.3           -           -           -       $   -
 Exercise of special conversion option       (9.3)     (1.4)       -       (62.7)       17.8         2.8           -        62.7
 Shares earned by employees                     -       2.9        -        48.5           -         5.0           -        58.7
 Shares issued to trusts                     (3.0)        -      3.0           -        (5.8)          -         5.8           -
 Accretion and other                            -         -        -         6.2           -           -           -           -
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1994                     5.9       4.0      3.0        91.3        12.0         7.8         5.8       121.4
 Shares earned by employees                     -       2.9        -       197.7           -         5.5           -       280.3
 Shares issued to trusts                     (1.8)        -      1.8           -        (3.4)          -         3.4           -

 Series C Preferred Stock
   converted to common stock                    -         -      (.4)       (8.1)          -           -          .5         8.1
 Withdrawals from trusts                        -         -        -           -           -           -        (2.0)          -
 Accretion                                      -         -        -         7.7           -           -           -           -
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1995                     4.1       6.9      4.4       288.6         8.6        13.3         7.7       409.8
 Shares earned by employees                     -       2.2        -       105.3           -         4.2           -       137.5
 Shares issued to trusts                     (2.6)        -      2.6           -        (4.8)          -         4.8           -
 Series C Preferred Stock
   converted to common stock                    -         -      (.8)      (32.0)          -           -         1.0        32.0
 Withdrawals from trusts                        -         -        -           -           -           -        (2.3)          -
 Accretion and other                           .2         -        -          .9         (.3)          -           -           -
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1996                     1.7       9.1      6.2     $ 362.8         3.5        17.5        11.2     $ 579.3
-----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

The final contribution of the Series C Preferred Stock and common stock to the
trusts is scheduled for March 1997. The Series C Preferred Stock ranks junior to
Series A and B Preferred Stock and senior to common stock with respect to
liquidation and certain dividend rights. As long as the Class A Common Stock is
publicly traded, no dividends accrue on the Series C Preferred Stock. Each share
of the Series C Preferred Stock is convertible at any time into 1.364 shares of
common stock. Consequently, at December 31, 1996 the aggregate 7.9 million
shares of Series C Preferred Stock held by trusts and to be issued are
convertible into approximately 10.8 million shares of common stock.

Series C Preferred Stock is required to be redeemed in 2003 for a pro rata share
of Actual Savings ($371 million for the Series C Preferred Stock outstanding as
of December 31, 1996 and to be issued). The Company has the option to redeem in
cash, issue additional common stock, or use a combination thereof, to satisfy
the redemption requirements. A decision to issue only additional common stock
must be approved by a majority of the three directors elected by the holders of
the Series C Preferred Stock. If the Company fails to redeem the Series C
Preferred Stock, dividends accrue at the higher of (i) 12% or (ii) the highest
penalty rate on any then outstanding series of preferred stock, and the employee
unions receive three additional Board of Directors positions. The financial
statement carrying value of the Series C Preferred Stock is being accreted over
ten years commencing August 1993 to the ultimate redemption amount. Prior to
2003, the Company at its option may redeem in whole or in part the Series C
Preferred Stock. The consent of the holders of the Series A and B Preferred
Stock must be received in order to redeem or repurchase the Series C Preferred
Stock.

Because of applicable accounting requirements, the Company recognized
compensation expense for each year based on the values at the measurement date
of the Series C Preferred Stock and the common stock earned by employees. Such
non-cash stock-based compensation expense was calculated each month by (1)
determining the aggregate current value of all Series C Preferred Stock and
common stock earned by employees since the previous January 1 using current per
share values as of the balance sheet date and then (2) subtracting the non-cash
compensation previously recognized since January 1. The final measurement dates
for 1996 coincided with the end of the Wage Savings Period for each of the labor
groups and the final measurement date for 1995 and 1994 was December 31, 1995
and 1994, respectively. Any increase (decrease) in share value increased
(decreased) non-cash compensation expense and the recorded effect in any month
of a change in share prices was a function of all shares earned since the
previous January 1.

Approximately ninety percent of the Company's employees are members of
collective bargaining units. All of the labor agreements became amendable in
1996 at the end of the Wage Savings Period and hence future labor costs are
subject to collective bargaining.


<PAGE>

NOTE C - LONG-TERM DEBT AND SHORT-TERM BORROWINGS
Long-term debt consisted of the following (in millions, with interest rates as
of December 31, 1996):

 
<TABLE>
<CAPTION>

                                                                                                 December 31
-------------------------------------------------------------------------------------------------------------------
                                                                                             1996           1995
-------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>            <C>
Secured notes due through 2009, 7.0% weighted average rate (a)                            $   348.9      $   348.9
NWA Trust No. 2 aircraft notes due through 2012, 10.6% weighted average rate (b)              337.9          345.0
Equipment pledge notes due through 2013, 7.7% weighted average rate                           286.8          307.9
Sale-leaseback financing obligations due through 2020, 9.9% imputed rate (c)                  262.5          263.0
NWA Trust No. 1 aircraft notes due through 2006, 8.6% weighted average rate (d)               220.4          230.4
Senior unsecured floating rate notes due through 1998, 6.4% weighted average rate (e)         152.0              -
Term loan due through 2002, 6.5% (f)                                                          150.0          300.0
Term certificates due 1999, 6.6% (g)                                                          145.0          175.0
8.625% unsecured notes due 1996, net of discount (1995--$3.8)                                     -          196.2
Unsecured notes due through 1999, 12.1%                                                        79.0           89.0
Hushkit financing due through 2002, 7.6% (h)                                                   12.3           12.3
Other                                                                                          65.6          199.4
-------------------------------------------------------------------------------------------------------------------
Total long-term debt                                                                        2,060.4        2,467.1
  Less current maturities                                                                     144.4          329.7
-------------------------------------------------------------------------------------------------------------------
                                                                                          $ 1,916.0     $  2,137.4
-------------------------------------------------------------------------------------------------------------------

</TABLE>
 
(a) In April 1996, the Company restructured floating rate notes with certain
manufacturers. Principal repayments are due semi-annually beginning 2001.

(b) In December 1994, the Company completed a structured aircraft financing
transaction in which 13 Airbus A320 aircraft were transferred from Northwest
(subject to existing indebtedness) to an owner trust (NWA Trust No. 2). A
limited partnership, of which Northwest is the limited partner and Norbus, Inc.
(an affiliate of Airbus Industrie A.I.E.) is the general partner, is the sole
equity participant in the owner trust. All proceeds from the transaction were
used to repay equipment pledge notes which had previously been issued to finance
the acquisition of these aircraft by Northwest. The aircraft were simultaneously
leased back to Northwest.

Financing of $352 million was obtained through the issuance of $176 million of
9.25% Class A Senior Aircraft Notes, $66 million of 10.23% Class B Mezzanine
Aircraft Notes, $44 million of 11.30% Class C Mezzanine Aircraft Notes and $66
million of 13.875% Class D Subordinated Aircraft Notes. The notes are payable
semiannually from rental payments made by Northwest under the lease and are
secured by the aircraft subject to the lease as well as the lease itself.

(c) In March 1992, the Company completed agreements with the Minneapolis-St.
Paul Metropolitan Airports Commission ("MAC") for the sale and leaseback of
various corporate assets. The sale-leaseback agreements, which are accounted for
as debt, call for increasing quarterly payments over a 30-year term and include
a provision which gives the Company the option to repurchase the assets. The
agreements with the MAC are part of a group of financing arrangements with the
State of Minnesota and other government agencies.

(d) In March 1994, Northwest consummated a financing transaction in which six
Boeing 747-200 and four Boeing 757-200 aircraft were sold to an owner trust (NWA
Trust No. 1) of which NWA Aircraft Finance, Inc., an indirect subsidiary of the
Company, is the sole equity participant. A portion of the purchase price was
financed through the issuance of $177 million of 8.26% Class A Senior Aircraft
Notes and $66 million of 9.36% Class B Subordinated Aircraft Notes. The aircraft
were simultaneously leased back to Northwest. The notes are payable semiannually
from rental payments made by Northwest under the lease and are secured by the
aircraft subject to the lease as well as the lease itself.

(e) In December 1996, the Company issued $152 million of Senior Unsecured
Floating Rate Notes, due in two installments of $76 million each in July 1997
and January 1998.

<PAGE>

(f) During 1996, the Company prepaid $150 million of its $300 million term loan.
In October 1996, the Company amended its credit agreement (the "Credit
Agreement") to extend the final maturity of the term loan to 2002. The floating
rate term loan is payable in three equal annual installments beginning 2000.

The amended Credit Agreement also provides an unsecured $500 million revolving
credit facility scheduled to expire in October 2001. A commitment fee (.225% at
December 31, 1996) is payable by the Company on the unused portion of the
revolving credit facility at a floating rate per annum determined by reference
to the Company's unsecured debt rating. At December 31, 1996, $486.8 million
remained available to be borrowed as a result of the issuance on behalf of the
Company of $13.2 million of letters of credit.

(g) In March 1994, Northwest agreed to sell certain receivables on an ongoing
basis to Northwest Capital Funding Corp., an indirect subsidiary of the Company,
which has issued through a master trust floating rate Term Certificates. These
privately placed certificates require payment of interest only during their term
with the principal due in 1999 and are secured by the purchased receivables and
restricted cash.

(h) The Company has arranged supplier financing of engine hushkit shipsets for
DC-9 and 727 aircraft. The credit facilities allow for borrowings up to
approximately $170 million prior to December 1999. Generally, amounts borrowed
under the facilities are payable in quarterly installments over six years
commencing not later than one year from the date of such borrowing.

Maturities of long-term debt for the five years subsequent to December 31, 1996
are as follows (in millions):

    1997                $  144.4
    1998                   165.3
    1999                   220.2
    2000                   110.5
    2001                   127.9

The debt and lease agreements of the Company contain certain restrictive
covenants, including limitations on indebtedness, equity redemptions and the
declaration of dividends, as well as requirements to maintain certain financial
ratios, including collateral coverage ratios. At December 31, 1996, the Company
was in compliance with the covenants of all of its debt and lease agreements.
Various assets, principally aircraft, having an aggregate book value of $2.2
billion at December 31, 1996, were pledged under various loan agreements.

Cash payments of interest, net of capitalized interest, aggregated $263.3
million in 1996, $365.6 million in 1995, and $332.7 million in 1994.

The maximum and average outstanding balances of short-term borrowings, used
primarily for financing aircraft insurance premiums, fuel hedging activities and
the acquisition of preferred stock (see Note F) were as follows (dollars in
millions):

--------------------------------------------------------------------------------
                                  1996           1995           1994
--------------------------------------------------------------------------------
Maximum amount of
  borrowings outstanding
  during period                  $418.0          $50.5          $46.4

Average daily borrowings
   during period                 $193.7          $23.1          $17.8

Weighted average interest
  rate on borrowings
  during period                   7.00%          5.81%          5.95%
--------------------------------------------------------------------------------

NOTE D - LEASES
The Company leases certain aircraft, space in airport terminals, land and
buildings at airports, ticket, sales and reservations offices, and other
property and equipment under noncancelable operating leases which expire in
various years through 2025. Portions of certain facilities are subleased under
noncancelable operating leases expiring in various years through 2020.

At December 31, 1996, the Company leased 126 of the 399 aircraft it operates. Of
these, 33 were capital leases and 93 were operating leases. Expiration dates
range from 1997 to 2009 for aircraft under capital leases, and from 1997 to 2019
for aircraft under operating leases. The Company's aircraft leases can generally
be renewed for terms ranging from one to five years at rates based on the
aircraft's fair market value at the end of the lease term. Ninety-six of the 126
aircraft lease agreements provide the Company with purchase options at the end
of the lease term which approximate fair market value.


<PAGE>

Rental expense for all operating leases consisted of (in millions):

                                          Year Ended December 31
--------------------------------------------------------------------------------
                                   1996           1995           1994
--------------------------------------------------------------------------------
Gross rental expense            $ 596.5        $ 601.9        $ 578.8
Sublease rental income            (62.2)         (57.6)         (57.2)
--------------------------------------------------------------------------------
Net rental expense              $ 534.3        $ 544.3        $ 521.6
--------------------------------------------------------------------------------

At December 31, 1996, future minimum lease payments under capital leases and
noncancelable operating leases with initial or remaining terms of more than one
year were as follows (in millions):

--------------------------------------------------------------------------------
                                               Capital      Operating
                                                Leases        Leases
--------------------------------------------------------------------------------
1997                                          $  120.2     $    452.2
1998                                             113.5          452.7
1999                                             105.4          422.4
2000                                             103.2          405.8
2001                                             104.1          394.5
Thereafter                                       583.6        4,541.8
--------------------------------------------------------------------------------
                                               1,130.0        6,669.4
Less sublease rental income                                      85.3
--------------------------------------------------------------------------------
Total minimum operating
  lease payments                                            $ 6,584.1
--------------------------------------------------------------------------------
Less amounts
  representing interest                          357.8
--------------------------------------------------------------------------------
Present value of future
  minimum capital  lease payments                772.2
Less current obligations
  under capital leases                            61.7
--------------------------------------------------------------------------------
Long-term obligations
  under capital leases                        $  710.5
--------------------------------------------------------------------------------

NOTE E - MANDATORILY REDEEMABLE PREFERRED SECURITY OF SUBSIDIARY WHICH HOLDS
SOLELY NON-RECOURSE OBLIGATION OF COMPANY
In October 1995, the Company completed a restructuring of its yen-denominated
non-recourse obligation secured by land and buildings the Company owns in Tokyo.
A newly formed consolidated subsidiary of the Company (the "Subsidiary") entered
into a Japanese business arrangement designated under Japanese law as a tokumei
kumiai ("TK"). Pursuant to the TK arrangement, the holder of the non-recourse
obligation restructured such obligation and then assigned title to and ownership
of such obligation to the Subsidiary as operator under the TK arrangement in
exchange for a preferred interest in the profits and returns of capital from the
business of the Subsidiary (the "Preferred Security"). The restructured
non-recourse obligation is the sole asset of the Subsidiary. As a result of this
restructuring, the original holder of such non-recourse obligation is no longer
a direct creditor of the Company and the Company's obligation is reflected in
the Company's Consolidated Balance Sheet as "Mandatorily Redeemable Preferred
Security of Subsidiary which holds solely non-recourse obligation of Company".
NWAC has guaranteed the obligation of the Subsidiary to distribute payments on
the Preferred Security pursuant to the TK arrangement if and to the extent
payments are received by the Subsidiary.

The restructured obligation matures in three approximately equal annual
installments due in 2005, 2006 and 2007. In addition to these installments, cash
payments on the restructured obligation will be payable semiannually at the rate
of 4% per annum until March 31, 2000 and at a rate based upon a floating
long-term Japanese prime rate (capped at 6%) thereafter. During the first three
years, one-fourth of the cash payments are applied to reduce the obligation. The
obligation remains non-recourse to the Company. In addition, the Company retains
the ability (exercisable at any time after September 30, 2001) to transfer the
property in full satisfaction of all Company obligations related to the
financing.

The initial financial statement carrying value of the Preferred Security
reflected the fair value as of the closing date. The excess of the financial
statement carrying value of the original non-recourse obligation over the fair
value of the Preferred Security at the date of the restructuring resulted in a
1995 gain of $62 million, net of tax. This gain, together with losses on other
debt extinguishments, is shown as an extraordinary item.

The carrying value is being accreted over 12 years from October 1995 to the
ultimate maturity value of 72.9 billion yen ($628.8 million based on the
December 31, 1996 exchange rate). Such accretion is included as a component of
"Interest of mandatorily redeemable preferred security holder" in the
Consolidated Statements of Income.


<PAGE>

NOTE F - SERIES A AND SERIES B REDEEMABLE PREFERRED STOCK
Series A and Series B Preferred Stock issued and outstanding consisted of the
following (dollars in millions):

 
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                       SERIES A                      SERIES B              ACCRUED
                                               SHARES         AMOUNT         SHARES         AMOUNT       DIVIDENDS         TOTAL
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>           <C>             <C>           <C>           <C>             <C>
BALANCE JANUARY 1, 1994                        5,000.0       $  250.0        6,853.0       $  342.7       $   57.9       $  650.6
  Accrued dividends                                  -              -              -              -           53.1           53.1
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1994                      5,000.0          250.0        6,853.0          342.7          111.0          703.7
  Exchange of preferred stock
    for common stock                                 -              -       (1,727.0)         (86.4)         (10.7)         (97.1)
  Accrued dividends                                  -              -              -              -           50.3           50.3
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1995                      5,000.0          250.0        5,126.0          256.3          150.6          656.9
  Acquisition of preferred stock              (3,691.2)        (184.6)      (2,962.8)        (148.1)        (121.0)        (453.7)
  Accrued dividends                                  -              -              -              -           36.6           36.6
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1996                      1,308.8       $   65.4        2,163.2       $  108.2       $   66.2       $  239.8
-----------------------------------------------------------------------------------------------------------------------------------

</TABLE>
 
For each of the Series A and Series B Preferred Stock, 10,000 shares are
authorized, par value is $.01 per share and the stated value is $50,000 per
share. Both series are entitled to a preference in voluntary and involuntary
liquidation, in the amount of $50,000 per share, plus accrued and unpaid
dividends. Holders of the Series A and Series B Preferred Stock have voting
rights for the election of directors. Both series accrue dividends at 8% per
year and dividends accruing prior to August 1, 1998 are deferred until
redemption. Dividends are cumulative if unpaid and, to the extent required cash
dividends are not paid, the annual dividend rate will increase every six months
by 1/2% up to a maximum of 10%.

The Series A Preferred Stock ranks senior to the Series B and Series C Preferred
Stock and all classes of common stock with respect to liquidation and dividend
rights. The Series A Preferred Stock is redeemable at its liquidation preference
at any time, in whole but not in part, at the option of the Company, and must be
redeemed in three equal installments starting two years prior to August 1, 2002.
Beginning August 1, 1998, dividends are payable semiannually in cash.

The Series B Preferred Stock ranks senior to the Series C Preferred Stock and
all classes of common stock with respect to liquidation and dividend rights. The
Series B Preferred Stock is redeemable at its liquidation preference at any
time, in whole or in $50 million increments, at the option of the Company, and
must be redeemed in three equal installments starting two years prior to August
1, 2003. The consent of the holders of the Series A Preferred Stock must be
received in order to redeem or repurchase the Series B Preferred Stock.
Beginning August 1, 1998, dividends are payable semiannually in cash if all the
accrued dividends on the Series A Preferred Stock have been paid.

In July 1996, the Company acquired from KLM 3,691.2 shares of Series A Preferred
Stock and 2,962.8 shares of Series B Preferred Stock in exchange for two
unsecured promissory notes aggregating $379 million, both of which were repaid
December 1996. These transactions resulted in an increase to net income
applicable to common stockholders of $74.5 million. In connection with these
repurchases, KLM as a holder of Series A and Series B Preferred Stock consented
through August 15, 1998 to the Company's payment of dividends on, and its
redemptions or repurchases of, its common stock, Series C Preferred Stock and
Series B Preferred Stock.

In January 1995, the Company consumated an agreement with Bankers Trust New York
Corporation to exchange 1,727 shares of the Company's Series B Preferred Stock
for 2,050,000 shares of newly issued Class B Common Stock. This transaction
resulted in a transfer from redeemable preferred stock to common stockholders'
equity deficit of $96.8 million, net of expenses, and an increase to net income
applicable to common stockholders of $58.9 million.


<PAGE>
NOTE G - COMMON STOCKHOLDERS' EQUITY (DEFICIT)
The Company's classes of common stock consisted of (shares in millions):
 
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------
                                                                Class A voting    Class B non-voting
                                                                Par value $.01      Par value $.01           TOTAL
-------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>               <C>                        <C>
BALANCE AT JANUARY 1, 1994                                            39.7                18.3                58.0
  Issuance of common stock                                            20.4                   -                20.4
  Shares issued to employee trusts                                     5.1                  .7                 5.8
  Conversion of Class B to Class A                                    11.8               (11.8)                  -
  Other                                                                 .1                   -                  .1
-------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994                                          77.1                 7.2                84.3
  Exchange of Series B Preferred Stock for common stock                  -                 2.0                 2.0
  Shares issued to employee trusts                                     3.0                  .4                 3.4
  Conversion of Class B to Class A                                     6.2                (6.2)                  -
  Conversion of Series C Preferred Stock                                .4                  .1                  .5
  Other                                                                1.1                   -                 1.1
-------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995                                          87.8                 3.5                91.3
  Shares issued to employee trusts                                     4.2                  .6                 4.8
  Conversion of Class B to Class A                                      .3                 (.3)                  -
  Conversion of Series C Preferred Stock                                .9                  .1                 1.0
  Other                                                                 .5                   -                  .5
-------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996                                          93.7                 3.9                97.6
-------------------------------------------------------------------------------------------------------------------
</TABLE>
 
Authorized shares are 250 million and 65 million of Class A and Class B Common
Stock, respectively. Shares of Class B Common Stock are convertible at any time
into an equal number of shares of Class A Common Stock and vice versa. The
Company is effectively precluded from paying dividends or repurchasing for cash
its common stock without the consent of the holders of the Series A and Series B
Preferred Stock.

Pursuant to the Stockholder Rights Plan (the "Rights Plan"), each share of
common stock has attached thereto a right and, until the rights expire or are
redeemed, each new share of common stock issued by the Company, including the
shares of common stock into which the Series C Preferred Stock is convertible,
will include one right. Upon the occurrence of certain events, each right
entitles the holder to purchase one one-hundredth of a share of Series D Junior
Participating Preferred Stock at an exercise price of $150, subject to
adjustment. The rights become exercisable only after any person or group (other
than the trusts holding common stock for the benefit of employees) acquires
beneficial ownership of 19% or more of the Company's "outstanding" common stock
(as defined in the Rights Plan) or commences a tender or exchange offer that
would result in such person or group acquiring beneficial ownership of 19% or
more of the Company's outstanding common stock. If any person or group acquires
beneficial ownership of 19% or more of the Company's outstanding common stock,
the holders of the rights (other than the acquiring person or group) will be
entitled to receive upon exercise of the rights, Class A Common Stock of the
Company having a market value of two times the exercise price of the right. In
addition, if after the rights become exercisable the Company is involved in a
merger or other business combination or sells more than 50% of its assets or
earning power, each right will entitle its holder (other than the acquiring
person or group) to receive common stock of the acquiring company having a
market value of two times the exercise price of the rights. The rights expire on
November 16, 2005 and may be redeemed by the Company at a price of $.01 per
right prior to the time they become exercisable.

In December 1996, the Company's Board of Directors approved a stock repurchase
program (to which the holders of the Series A and Series B Preferred Stock have
consented) authorizing the Company to repurchase up to five million shares of
its Class A Common Stock from time to time in open market or negotiated
transactions.

The Company has stock option plans for officers and key employees. Options
generally become exercisable in equal annual installments over four or five
years and expire 10 years from the date of the grant. The Company's policy is to
grant options with the exercise price equal to the market price of the common
stock on the date of grant.


<PAGE>

To the extent that options are granted with an exercise price less than the
market price on the date of the grant, compensation expense is recognized over
the vesting period of the grant.

Following is a summary of stock option activity (in thousands, except per share
amounts):


<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                     1996                          1995                          1994
------------------------------------------------------------------------------------------------------------------------------------
                                                           WEIGHTED-AVG.                 WEIGHTED-AVG.                 WEIGHTED-AVG.
                                               SHARES     EXERCISE PRICE     SHARES     EXERCISE PRICE     SHARES     EXERCISE PRICE
------------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>        <C>                <C>        <C>                <C>        <C>
Outstanding at beginning of year               3,509            $ 10.57      4,525            $   8.70     2,891            $  5.65
Granted                                        1,836              35.04        206               26.06     1,852              13.19
Forfeited                                      (118)              15.55      (165)               10.72      (61)               4.74
Canceled                                           -               -             -                -         (19)              24.43
Exercised                                      (453)               7.92    (1,057)                5.38     (138)               4.74
Outstanding at end of year                     4,774              20.11      3,509               10.56     4,525               8.70
Exercisable at end of year                     1,907               9.16      1,594                7.95     1,835               5.91
Class A Common Stock:
  Reserved for issuance                        7,948                         4,948                         4,948
  Available for future grants                  1,487                           205                           246

</TABLE>

AT DECEMBER 31, 1996:

<TABLE>
<CAPTION>

                                                       OPTIONS OUTSTANDING                                   OPTIONS EXERCISABLE
------------------------------------------------------------------------------------------------------------------------------------
                                                           WEIGHTED-AVG.                                      
RANGE OF                                                     REMAINING         WEIGHTED-AVG.                           WEIGHTED-AVG.
EXERCISE PRICES                                SHARES    CONTRACTUAL LIFE     EXERCISE PRICE               SHARES     EXERCISE PRICE
------------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>       <C>                  <C>                          <C>        <C>
$ 4.74  to  $13.00                             2,442          6.7  years         $  9.10                   1,665            $  7.85
  14.00 to   31.875                            1,102          8.5                  25.89                     232              17.29
  34.00 to   43.688                            1,230          9.7                  36.79                      10              38.23

</TABLE>

The weighted-average fair value of options granted during 1996 and 1995 is
$14.89 and $11.68 per option, respectively. The fair value of each option grant
is estimated as of the date of grant using the Black-Scholes single option-
pricing model assuming a weighted average risk-free interest rate of 6.4% and
6.9% for 1996 and 1995, respectively, and expected lives of six years and
volatility of 30% for 1996 and 1995. Had compensation expense for stock options
been determined based on the fair value method (instead of intrinsic value
method) at the grant dates for awards, the Company's 1996 and 1995 net income
and earnings per share would have decreased by less than 1%. The effects of
applying the fair value method of measuring compensation expense for 1996 and
1995 are likely not representative of the effects for future years in part
because the fair value method was applied only to stock options granted after
December 31, 1994.

A long term performance and retention plan was established in 1996 under which
500,000 phantom stock units were awarded at no cost. The units are payable in
cash based on the market value of the Company's common stock at the time the
units vest. Of the units granted, 100,000 of the units vested and were paid in
1996. The remaining 400,000 units can vest, subject to the satisfaction of
performance criteria, in installments over two-year performance periods, the
first of which ends in 1998 and the final of which ends in 2004. As of December
31, 1996, 400,000 units were outstanding, none of which were vested.


<PAGE>

NOTE H - INCOME TAXES
Income tax expense consisted of the following (in millions):

                                                 Year Ended December 31
-------------------------------------------------------------------------------
                                           1996           1995           1994
--------------------------------------------------------------------------------
CURRENT:
  Federal                               $ 175.0         $ 89.1         $ 11.9
  Foreign                                   4.1            3.9            5.3
  State                                    22.3           13.0            5.3
--------------------------------------------------------------------------------
                                          201.4          106.0           22.5

DEFERRED:
  Federal                                 112.1           91.4          168.1
  Foreign                                  16.6             .7           (5.3)
  State                                     6.2            3.3           17.5
--------------------------------------------------------------------------------
                                          134.9           95.4          180.3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total income tax
  expense                                $336.3        $ 201.4        $ 202.8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

Reconciliation of the statutory rate to the Company's income tax expense is as
follows (in millions):

                                                 Year Ended December 31
--------------------------------------------------------------------------------
                                           1996           1995           1994
--------------------------------------------------------------------------------
Statutory rate applied
  to income before
  income taxes and
   extraordinary item                    $305.3         $190.2         $174.4
Add (deduct):
  State income tax net 
    of federal benefit                     18.5           13.5           16.0
  Non-deductible meals
    and entertainment                       9.5            9.0            8.9
  Adjustment to valuation
    allowance and other
    income tax accruals                     6.2          (12.3)           3.0
  Other                                    (3.2)           1.0             .5
--------------------------------------------------------------------------------
Total income tax
  expense                                $336.3         $201.4        $ 202.8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

The net deferred tax liabilities listed below include a current net deferred tax
asset of $95.5 million and $82.8 million and a long-term net deferred tax
liability of $947.2 million and $772.5 million as of December 31, 1996 and 1995,
respectively.

Significant components of the Company's net deferred tax liability were as
follows (in millions):

                                                            December 31
--------------------------------------------------------------------------------
                                                        1996           1995
--------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES:
  Financial accounting basis
    of assets in excess of tax
    basis                                            $ 1,392.0      $ 1,357.5
  Expenses other than
    depreciation accelerated
    for tax purposes                                     287.9          260.1

  Other                                                    7.9           22.9
--------------------------------------------------------------------------------
    Total deferred tax liabilities                     1,687.8        1,640.5
--------------------------------------------------------------------------------

DEFERRED TAX ASSETS:
  Pension and postretirement
    benefits                                             186.3          273.1
  Expenses accelerated for
    financial reporting
    purposes                                             437.4          326.2
  Leases capitalized for
    financial reporting
    purposes                                             114.8          141.2
  Alternative minimum tax
    credit carryforwards                                  97.6          145.6
  Net operating loss
    carryforwards                                          -             48.1
  Foreign tax credit
    carryforwards                                          -             16.6
--------------------------------------------------------------------------------
  Total deferred tax assets                              836.1          950.8
--------------------------------------------------------------------------------
Net deferred tax liability                           $   851.7      $   689.7
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

As of December 31, 1996, the Company has utilized all of its regular net
operating loss carryforwards ("NOLs"). For tax purposes, the Company utilized
NOLs of approximately $129.5 million, $684.4 million and $394.4 million in 1996,
1995 and 1994, respectively. The Company utilized alternative minimum tax net
operating losses ("AMTNOLs") of $105.1 million and $446.7 million in 1995 and
1994, respectively. The Company has alternative minimum tax credits of
approximately $97.6 million available for carryforward to future years' tax
returns. The alternative minimum tax credit has an unlimited carryforward
period. In 1995, the Company utilized its remaining AMTNOL carryforward, as well
as its remaining investment credit carryforward and its remaining foreign tax
credits available for alternative minimum tax purposes. 

Sections 382 and 383 of the Internal Revenue Code of 1986 (the "Code") and the
regulations thereunder impose limitations on the carryforward amounts of NOLs,
AMTNOLs and credits that can be used to offset taxable income (or used as a
credit) in any single year if the 

<PAGE>

corporation experiences more than a 50% ownership change, as defined therein,
over a three-year testing period ending on any testing date. The annual
limitation on the amount of such NOLs, AMTNOLs and credits is calculated in part
based on the value of the Company's stock. Management believes that the offering
of outstanding common stock by existing stockholders in November 1995 triggered
an ownership change, but that no ownership change occurred prior to the
offering. If such an ownership change in fact occurred as a result of the
November 1995 offering, management believes that even as limited by Sections 382
and 383 of the Code, the NOLs, AMTNOLs and credits would be used significantly
earlier than their expiration, and the annual limitation would not have an
adverse impact on the Company. However, if the Internal Revenue Service (the
"IRS") were to assert successfully that an ownership change had occurred on any
prior date, including August 1, 1993 (the date of the labor agreements), the
impairment of the Company's ability to use its NOLs, AMTNOLs and credit
carryforwards would be significant because the value of the Company's stock on
certain prior testing dates (which adversely affects the annual limitation
described above) was relatively low.

In November 1995, the IRS issued proposed adjustments to the tax returns of the
Company for the 1988 through 1991 tax years. Certain of these proposed
adjustments result from a disagreement between the Company and the IRS as to the
timing of the recognition of approximately $385 million of taxable income. The
IRS has also proposed that the Company recognize additional taxable income of
approximately $375 million. The Company disagrees with the IRS' proposals. The
Company is vigorously contesting all of the proposed adjustments and believes
that its positions are correct. To the extent the IRS were to prevail on any of
these issues, the Company would recognize taxable income and utilize net
operating loss carryforwards sooner than otherwise scheduled. For financial
reporting purposes, any adjustments to taxable income would largely be accounted
for as temporary differences and would not result in a material charge to income
tax expense.

NOTE I - COMMITMENTS

The Company's new aircraft orders as of December 31, 1996, include commitments
to acquire 20 Airbus A320 aircraft (13 in 1998 and seven in 1999), 25 Boeing
757-200 aircraft from 2003 through 2005, and 16 Airbus A330 aircraft (eight each
in 2004 and 2005). The Company also has agreed to purchase three DC9-30 aircraft
in 1997. Committed expenditures for these aircraft and related equipment,
including estimated amounts for contractual price escalations and predelivery
deposits, will be approximately: $19 million in 1997, $536 million in 1998, $298
million in 1999, $87 million in 2001, and $3.6 billion from 2002 to 2005. The
Company has substitution rights with respect to the Airbus A330 aircraft.

In addition to the above, the Company has ordered four Boeing 747-400 aircraft
at an aggregate cost, including related equipment and contractual price
escalations, of approximately $750 million. The Company is scheduled to take
delivery of two aircraft in 2002 and two aircraft as early as 1999 or as late as
2003. The Company is required to make pre-delivery deposits approximately two
years prior to delivery of the aircraft.

Consistent with prior practice, the Company intends to finance its aircraft
deliveries through a combination of internally generated funds, debt and lease
financing. Financing has been arranged for the Airbus A320 aircraft deliveries.
This financing is available for use at the option of the Company and can be
utilized as either debt or lease financing. In addition, the Company has another
facility (which expires in October 1999) pursuant to which the lenders have
extended commitments to provide, at the option of the Company, up to $240
million of debt financing for up to six B757 aircraft delivered in 1996 and/or
the Airbus A320 aircraft to be delivered in 1998 and 1999. There were no
borrowings outstanding under this facility at December 31, 1996. Loans
thereunder have a final maturity not later than October 2016.

NOTE J - LITIGATION 

The Company is involved in a variety of legal actions relating to antitrust,
contract, trade practice, environmental and other legal matters relating to the
Company's business. While the Company is unable to predict the ultimate outcome
of these legal actions, it is the opinion of management that the disposition of
these matters will not have a material adverse effect on the Company's
Consolidated Financial Statements taken as a whole.


<PAGE>

NOTE K - PENSION BENEFITS

The Company has several noncontributory pension plans covering substantially all
of its employees. The benefits for these plans are based primarily on years of
service and/or employee compensation. It is the Company's policy to annually
fund at least the minimum contribution as required by the Employee Retirement
Income Security Act of 1974.

The net periodic pension cost of defined benefit pension plans included the
following (in millions):


<TABLE>
<CAPTION>

                                                                   Year Ended December 31
---------------------------------------------------------------------------------------------------
                                                              1996           1995           1994
---------------------------------------------------------------------------------------------------
<S>                                                         <C>            <C>            <C>
Service cost - benefits earned during the period            $ 115.7        $  77.3        $  89.0
Interest cost on projected benefit obligations                267.2          237.0          216.9
Actual (gain) loss on plan assets                            (399.1)        (564.8)          23.4

Net amortization and deferral                                 201.3          361.8         (188.6)
---------------------------------------------------------------------------------------------------
Net periodic pension cost                                   $ 185.1        $ 111.3        $ 140.7
---------------------------------------------------------------------------------------------------

</TABLE>

The following table sets forth the defined benefit pension plans' funded status 
and amounts recognized in the Company's Consolidated Balance Sheets as of 
December 31 (in millions):

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------
                                                              1996                          1995
----------------------------------------------------------------------------------------------------------------
                                                     ASSETS        ACCUMULATED      Assets       Accumulated
                                                     EXCEED         BENEFITS        Exceed        Benefits
                                                   ACCUMULATED       EXCEED       Accumulated      Exceed
                                                    BENEFITS         ASSETS        Benefits        Assets
----------------------------------------------------------------------------------------------------------------
<S>                                                 <C>             <C>           <C>             <C>
ACTUARIAL PRESENT VALUE OF:
  Vested benefit obligations                        $   218.9       $ 2,792.4     $    221.9      $ 2,702.8
  Nonvested benefit obligations                          25.3           245.7           30.0          277.9
----------------------------------------------------------------------------------------------------------------
  Accumulated benefit obligations                       244.2         3,038.1          251.9        2,980.7
  Effect of projected future salary increases            42.2           374.5           35.5          435.9
----------------------------------------------------------------------------------------------------------------
Projected benefit obligations                       $   286.4       $ 3,412.6     $    287.4     $  3,416.6
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Plan assets at fair value                           $   292.4       $ 2,716.3     $    268.5     $  2,285.1

Less projected benefit obligations                      286.4         3,412.6          287.4        3,416.6
----------------------------------------------------------------------------------------------------------------
Projected benefit obligations (in excess of)
  less than plan assets                                   6.0          (696.3)         (18.9)      (1,131.5)
Unrecognized prior service cost                           5.1           198.0            4.9          218.6
Unrecognized net loss                                     5.4           346.7           39.7          727.7
Adjustment required to recognize minimum liability        -            (188.4)           -           (528.5)
----------------------------------------------------------------------------------------------------------------
Prepaid (accrued) pension cost at December 31      $     16.5        $ (340.0)   $      25.7     $   (713.7)
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------

</TABLE>

As of December 31, 1996 and 1995, plan assets were invested primarily in equity
and debt securities.

Assumptions used in the accounting for the defined benefit plans as of December
31 were as follows:

--------------------------------------------------------------------------------
                                                    1996        1995       1994
--------------------------------------------------------------------------------
Weighted average discount rate                      7.60%       7.10%      9.15%
Rate of increase in future compensation levels      3.50%       3.50%      3.75%
Expected long-term rate of return on plan assets   10.50%      10.50%     10.50%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


<PAGE>

An additional minimum liability is required to be recorded to the extent that a
plan's accumulated benefit obligation less the accrued pension liability exceeds
plan assets. The minimum liability is recorded as a long-term liability with a
corresponding intangible asset (to the extent of unrecognized prior service
cost) with the difference between the minimum liability and the intangible asset
recorded as a reduction to equity (net of tax). The minimum pension liability
adjustment of $188.4 million has resulted in a $71.6 million intangible asset
included in other assets and a $73.5 million, net of tax, cumulative reduction
in common stockholders' equity at December 31, 1996.

NOTE L - POSTRETIREMENT HEALTH CARE BENEFITS

The Company sponsors various contributory and noncontributory medical, dental
and life insurance benefit plans covering certain eligible retirees and their
dependents. Retired employees are not offered Company-paid medical and dental
benefits after age 64, with the exception of certain employees who retired prior
to 1987 and receive lifetime Company-paid medical and dental benefits. Prior to
age 65, the retiree share of the cost of medical and dental coverage is based on
a combination of years of service and age at retirement. Medical and dental
benefit plans are unfunded and costs are paid as incurred. The pilot group is
provided Company-paid life insurance coverage in amounts which decrease based on
age at retirement and age at time of death.

Net periodic postretirement benefit cost included the following components (in
millions):

                                                    Year Ended December 31
--------------------------------------------------------------------------------
                                                  1996        1995       1994
--------------------------------------------------------------------------------
Service cost                                     $ 10.3      $  7.3     $  6.8
Interest cost                                      22.1        20.8       15.1
Net amortization and deferral                       3.2          .2         .1
Actual gain on plan assets                          (.4)        (.4)       (.5)
--------------------------------------------------------------------------------
Net periodic
  postretirement
  benefit cost                                   $ 35.2      $ 27.9     $ 21.5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

The following table sets forth the plans' combined funded status and amounts
recognized in the Company's Consolidated Balance Sheet as of December 31 (in
millions):

--------------------------------------------------------------------------------
                                                             1996       1995
--------------------------------------------------------------------------------

ACCUMULATED POSTRETIREMENT
  BENEFIT OBLIGATION:
  Retirees                                                 $  103.7   $  116.8
  Fully eligible active plan
    participants                                               67.1       52.7
  Other active plan
    participants                                              142.8      116.6
--------------------------------------------------------------------------------
                                                              313.6      286.1

Plan assets at fair value                                       5.1        5.1
--------------------------------------------------------------------------------
Accumulated postretirement
  benefit obligation in excess
  of plan assets                                              308.5      281.0
Unrecognized net loss                                         (72.4)     (65.7)
--------------------------------------------------------------------------------
Accrued postretirement
  benefit cost                                              $ 236.1    $ 215.3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

At December 31, 1996, the weighted average annual assumed rate of increase in
the per capita cost of covered benefits (i.e., health care cost trend rate) is
7.0% for 1997 and is assumed to decrease gradually to 4.5% for 2002 and remain
at that level thereafter (a rate of 7.5% was assumed for 1996). This health care
cost trend assumption has a significant impact on the amounts reported. For
example, increasing the assumed health care cost trend rates by one percentage
point would increase the accumulated postretirement benefit obligation as of
December 31, 1996, by $35.9 million and the aggregate of the service and
interest cost components of net periodic postretirement benefit cost for 1996 by
$4.8 million. The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 7.6% at December 31, 1996 and
7.10% at December 31, 1995.


<PAGE>

NOTE M - RELATED PARTY TRANSACTIONS

KLM Royal Dutch Airlines owns 21,684,099 shares of Class A Common Stock of the
Company at December 31, 1996. During 1992, Northwest and KLM signed a Commercial
Cooperation and Integration Agreement. The intent of the agreement is to enhance
the joint presence of each airline in the United States, Europe and other
destinations by integrating the systems and services of each carrier. Northwest
and KLM have been granted antitrust immunity by the U.S. Department of
Transportation, enabling them to operate their transatlantic flights pursuant to
a joint venture alliance and to coordinate pricing, scheduling, product
development and marketing. Northwest and KLM have implemented code-sharing (the
joint designation of flights under the Northwest "NW" code and the KLM "KL"
code) on flights to certain European, Middle Eastern, African and U.S. cities,
with additional cities planned for 1997. Net settlements, other than normal
interline ticket settlements, related to the transatlantic alliance have not
been material in any period.

The Company has an investment in WORLDSPAN, an affiliate that provides computer
reservations services, which it accounts for using the equity method. The
Company recorded expenses for certain reservation system services provided by
this affiliate of $83.4 million, $87.7 million and $86.4 million in 1996, 1995
and 1994, respectively.

The Company owns 29.5% of the common stock of Mesaba Holdings, Inc., the holding
company of Mesaba Aviation, Inc. ("Mesaba"), which operates as a Northwest
Airlink. Northwest has an Airline Services Agreement ("ASA") with Mesaba under
which Northwest determines Mesaba's commuter aircraft scheduling. In return,
Northwest has agreed to guarantee Mesaba certain pre-tax profit levels for the
year ending March 31, 1997. As of December 31, 1996, the Company has leased six
Saab 340 aircraft and is committed to lease an additional 44 aircraft. Mesaba
has agreed to sublease these aircraft subject to the execution of a new ASA
which is currently under negotiation. 

The Company entered into a Regional Jet Services Agreement with Mesaba in
October 1996. The Company has also agreed to purchase 12 Avro Regional Jet
aircraft. These aircraft are scheduled for delivery, eight in 1997 and four in
1998, and will be subleased to Mesaba. Committed expenditures for these
aircraft, including related equipment and contractual price escalations, are
approximately $300 million.


<PAGE>

NOTE N - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

FAIR VALUES OF FINANCIAL INSTRUMENTS  The financial statement carrying values
and estimated fair values of the Company's financial instruments, including
current maturities, as of December 31 were (in millions):


<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------
                                                           1996                          1995
---------------------------------------------------------------------------------------------------------
                                                 CARRYING         FAIR          Carrying         Fair
                                                   VALUE          VALUE           Value          Value
---------------------------------------------------------------------------------------------------------
<S>                                             <C>            <C>            <C>            <C>
CASH AND CASH EQUIVALENTS:
  Held-to-maturity debt securities:
    Commercial paper                            $   435.6      $   435.6      $   604.7      $   604.7
    Other                                             8.5            8.5          161.7          161.7
  Available-for-sale debt securities                101.5          101.5           70.1           70.1
  Cash                                               13.8           13.8           14.4           14.4
---------------------------------------------------------------------------------------------------------
                                                $   559.4      $   559.4      $   850.9      $   850.9
---------------------------------------------------------------------------------------------------------

SHORT-TERM INVESTMENTS:
  Held-to-maturity debt securities:
    Commercial paper                            $    10.5      $    10.5      $     1.0      $     1.0
    Other                                            91.9           91.9          259.7          259.7
  Available-for-sale debt securities                150.7          150.7            -              -
---------------------------------------------------------------------------------------------------------
                                                $   253.1      $   253.1      $   260.7      $   260.7
---------------------------------------------------------------------------------------------------------

Long-term Debt                                  $ 2,060.4      $ 2,166.7      $ 2,467.1      $ 2,738.8
Mandatorily Redeemable Preferred
  Security of Subsidiary                            549.2          536.2          618.4          611.4
Series A and B Preferred Stock                      239.8          198.7          656.9          522.9

Series C Preferred Stock                            362.8          332.4          288.6          309.3
---------------------------------------------------------------------------------------------------------

</TABLE>


The Company considers all unrestricted investments with an original maturity of
three months or less on their acquisition date to be cash equivalents. The
Company classifies investments with an original maturity of more than three
months that are expected to be sold or called by the issuer within the next
year, and those temporarily restricted, as short-term investments. Purchases of
short-term investments classified as available-for-sale securities during 1996
were $161.3 million and proceeds from sales of such securities were $10.6
million. At December 31, 1996 and 1995, short-term investments included $60.4
and $140.7 million, respectively, of temporarily restricted investments. The
temporarily restricted investments were pledged as collateral under various
agreements. 

The fair values of the Company's long-term debt were estimated using quoted
market prices, where available. For long-term debt and preferred securities not
actively traded, other than Series C Preferred Stock, fair values were estimated
using discounted cash flow analyses, based on the Company's current incremental
borrowing rates for similar types of securities. The fair value of the Series C
Preferred Stock shares is based on the assumed conversion to common stock and
valuing such shares at the closing quoted market price for Class A Common Stock.


<PAGE>

FOREIGN EXCHANGE RISK MANAGEMENT  The Company is exposed to the effect of 
foreign exchange rate fluctuations on the U.S. dollar value of foreign 
currency-denominated operating revenues and expenses. The Company's largest 
exposure to foreign currency fluctuations comes from the Japanese yen. In 
1996, yen-denominated revenues exceeded yen-denominated expenses by 
approximately 70 billion yen (which was approximately 56% of the aggregate 
excess of foreign currency-denominated revenues over foreign 
currency-denominated expenses). From time to time, the Company uses a collar 
option strategy to hedge a portion of its anticipated yen-denominated net 
cash flows. As of December 31, 1996, the Company had $94 million (10.9 
billion yen) in collar options outstanding to hedge approximately 85% of its 
anticipated first quarter 1997 yen net cash flows. The collars involve the 
purchase of Japanese yen put options coupled with the simultaneous sale of 
Japanese yen call options with identical expiration dates and notional yen 
amounts. The Company is exposed to credit loss in the event of nonperformance 
by counterparties to the yen collar options. The counterparties to the option 
contracts as of December 31, 1996, consist of five banks. The Company does 
not anticipate nonperformance by any of these counterparties. The amount of 
such credit exposure is generally the unrealized gains in such contracts. 
Realized and unrealized gains and losses on Japanese yen collar option 
contracts are recognized currently in net income. Open contracts are recorded 
at fair value since they do not qualify as hedges for financial accounting 
purposes. As of December 31, 1996, there are no material unrealized gains or 
losses on outstanding yen collar option contracts.

FUEL PRICE RISK MANAGEMENT  The Company manages a portion of the price risk 
of fuel costs utilizing both regulated exchange traded futures contracts and 
fuel swap agreements. Gains or losses on hedge contracts are deferred until 
the related fuel inventory is expensed. As of December 31, 1996, the Company 
had no material hedges for future fuel requirements.

<PAGE>

NOTE O - QUARTERLY FINANCIAL DATA (UNAUDITED)
Unaudited quarterly results of operations for the years ended December 31, 1996
and 1995, are summarized below (in millions, except per share amounts):

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------
                                                                  1st            2nd            3rd            4th
                                                                Quarter        Quarter        Quarter        Quarter
------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>            <C>            <C>            <C>
1996:
Operating revenues                                             $ 2,264.8      $ 2,540.4      $ 2,735.2      $ 2,340.1
Operating income                                                   134.4          374.7          469.4           75.3

Net income                                                     $    53.4      $   202.8      $   253.9      $    26.0
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------

PRIMARY PER COMMON SHARE:
  Before effects of acquisition of preferred stock             $      .41     $     1.90     $     2.42     $      .20

  Acquisition of preferred stock                                     -              -               .73           -
------------------------------------------------------------------------------------------------------------------------
  Earnings per common share                                    $      .41     $     1.90     $     3.15     $      .20
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------

FULLY DILUTED PER COMMON SHARE:
  Before effects of acquisition of preferred stock             $      .37     $     1.72     $     2.20     $      .19

  Acquisition of preferred stock                                     -              -               .66           -
------------------------------------------------------------------------------------------------------------------------
  Earnings per common share                                    $      .37     $     1.72     $     2.86     $      .19
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------

1995:
Operating revenues                                             $ 2,043.0      $ 2,279.4      $ 2,561.0      $ 2,201.5
Operating income                                                   147.3          249.6          425.2           91.3
Income before extraordinary item                                     2.6          104.8          231.1            3.6
Net gain on extinguishment of debt                                   -              -              -             49.9
Net income                                                     $     2.6      $   104.8      $   231.1      $    53.5
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------

PRIMARY:
  Before effects of extraordinary item 
    and exchange of preferred stock                            $     (.13)    $      .96     $     2.27     $     (.10)
  Net gain on extinguishment of debt                                 -              -              -               .51

  Exchange of preferred stock                                         .65           -              -              -
------------------------------------------------------------------------------------------------------------------------
  Earnings per common share                                    $      .52     $      .96     $     2.27     $      .41
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------

FULLY DILUTED:
  Before effects of extraordinary item
    and exchange of preferred stock                            $     (.10)    $      .92     $     2.11     $     (.09)
  Net gain on extinguishment of debt                                 -              -              -               .47

  Exchange of preferred stock                                         .61           -              -              -
------------------------------------------------------------------------------------------------------------------------
  Earnings per common share                                    $      .51     $      .92     $     2.11     $      .38
-----------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------

</TABLE>

The sum of the quarterly earnings per share amounts does not equal the annual
amount reported since per share amounts are computed independently for each
quarter and for the full year based on respective weighted average common share
equivalents outstanding.

<PAGE>

NOTE P - CONDENSED CONSOLIDATED FINANCIAL INFORMATION OF NORTHWEST AIRLINES,
INC.

Northwest Airlines Corporation (formerly Wings Holdings Inc.) and its wholly
owned subsidiary, Wings Acquisition Corp., were formed and incorporated by a
group of investors in order to acquire all of the outstanding stock of NWA Inc.
(the "Acquisition"), the parent company of Northwest Airlines, Inc. In 1989,
Wings Acquisition Corp. was merged with and into NWA Inc., with NWA Inc. being
the surviving entity. The Acquisition was recorded using the purchase method of
accounting and, accordingly, the purchase price was allocated to the assets
acquired and liabilities assumed based on their estimated fair market value at
the date of Acquisition, determined primarily by independent appraisals.

After reflecting these values and certain acquisition indebtedness of NWA Inc.
in the financial statements of Northwest, condensed financial information of
Northwest consists of the following (in millions):


<TABLE>
<CAPTION>

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

                                                                   Year Ended December 31
---------------------------------------------------------------------------------------------------
                                                             1996           1995           1994
---------------------------------------------------------------------------------------------------
<S>                                                       <C>            <C>            <C>
Operating revenues                                        $ 9,651.3      $ 8,806.6      $ 8,057.0
Operating expenses                                          8,641.7        7,937.0        7,257.7
---------------------------------------------------------------------------------------------------
Operating income                                            1,009.6          869.6          799.3
Other income (expense)                                       (183.6)        (316.4)        (298.1)
---------------------------------------------------------------------------------------------------
Income before income taxes and extraordinary item             826.0          553.2          501.2
Income tax expense                                            308.8          215.9          198.2
---------------------------------------------------------------------------------------------------
Income before extraordinary item                              517.2          337.3          303.0
Net gain on extinguishment of debt                              -             50.4            -
---------------------------------------------------------------------------------------------------
Net income                                                $   517.2      $   387.7      $   303.0
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------

</TABLE>

<TABLE>
<CAPTION>

CONDENSED CONSOLIDATED BALANCE SHEET DATA
                                                                 December 31
------------------------------------------------------------------------------------
                                                             1996           1995
------------------------------------------------------------------------------------
<S>                                                       <C>            <C>
Current assets                                            $ 1,626.8      $ 1,861.1
Noncurrent assets                                           5,818.3        5,460.9
Current liabilities                                         2,832.2        2,535.6
Long-term debt and obligations under capital leases         2,103.9        2,351.8
Deferred credits and other liabilities                        935.7        1,277.3
Mandatorily redeemable preferred security of subsidiary       549.2          618.4
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------

</TABLE>


<PAGE>

                                      SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Dated: March 6, 1997

                                  NORTHWEST AIRLINES CORPORATION


                                  By:     /s/ Mark W. Osterberg

                                  Name:   Mark W. Osterberg
                                  Title:  Vice President/Chief Accounting 
                                          Officer


<PAGE>

                                    EXHIBIT INDEX


EXHIBIT NUMBER                DESCRIPTION                 
--------------                -----------                 

    23.1                Consent of Ernst & Young LLP

    25.1                Form T-1

    27.1                Financial Data Schedule

    99.1                Prospectus Supplement, Subject to Completion, dated 
                        March 6, 1997 (as filed pursuant to Rule 424(b)(3) (File
                        Nos. 333-13307 and 333-2516) and incorporated herein by
                        reference)