**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

** **

**FORM 10-Q**

** **

**QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d)**

**OF THE SECURITIES EXCHANGE ACT OF1934**

** **

**For the quarterly period endedMarch 31, 2005**

** **

**Commission file number 0-23642**

** **

**NORTHWEST AIRLINES CORPORATION**

(Exact name of registrantas specified in its charter)

 

| **Delaware**                                                        | ** ** | **41-1905580**                           |
|---------------------------------------------------------------------|------------|------------------------------------------|
| **(State or other jurisdiction of incorporation or  organization)** | ** ** | **(I.R.S. Employer Identification No.)** |
| ** **                                                          | ** ** | ** **                               |
| **2700 Lone Oak Parkway,  Eagan, Minnesota**                        | ** ** | **55121**                                |
| **(Address of principal executive offices)**                        | ** ** | **(Zip Code)**                           |

 

Registrant’s telephonenumber, including area code         **(612)  726-2111**

** **

**Indicate by check mark whether the registrant (1)has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes**ý   No o

** **

**Indicate by check mark whether the registrant is anaccelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes**ý  No o

 

**As of March 31, 2005, there were 87,148,458 sharesof the registrant’s Common Stock outstanding.**

 

 

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| *Northwest  Airlines Corporation* |
|-----------------------------------|
| * *                          |
|                              |
| PART  I. FINANCIAL INFORMATION    |
|                              |
|                              | Item  1. | Financial  Statements. |
|                              |   |   |
|                              |   | Condensed Consolidated Statements of  Operations - Three months ended March 31, 2005 and 2004 |
|                              |   |   |
|                              |   | Condensed Consolidated Balance Sheets -  March 31, 2005 and December 31, 2004 |
|                              |   |   |
|                              |   | Condensed Consolidated Statements of Cash  Flows - Three months ended March 31, 2005 and 2004 |
|                              |   |   |
|                              |   | Notes  to Condensed Consolidated Financial Statements |
|                              |   |   |
|                              |   | The Computations of Ratio of Earnings to Fixed  Charges and Ratio of Earnings to Fixed Charges and Preferred Stock  Requirements are attached hereto and filed as Exhibits 12.1 and 12.2 |
|                              |   |   |
|                              | Item  2. | Management’s  Discussion and Analysis of Financial Condition and Results of Operations. |
|                              |   |   |
|                              | Item  3. | Quantitative  and Qualitative Disclosures About Market Risk. |
|                              |   |   |
|                              | Item  4. | Controls  and Procedures. |
|                              |   |   |
| PART II. OTHER INFORMATION        |
|                              |   |
|                              | Item  1. | Legal  Proceedings. |
|                              | Item  6. | Exhibits. |
|                              |   |   |
| SIGNATURE                         |   |
|                              |   |   |
| EXHIBIT INDEX                     |

 

2

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| PART I. FINANCIAL  INFORMATION                  |
|-------------------------------------------------|
|                                            |
| **Item 1****.  Financial Statements.**          |
|                                            |
| *Northwest Airlines Corporation*                |
|                                            |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |

 
| ** **                                               | ** ** | **Three Months Ended** | ** ** |
|----------------------------------------------------------|------------|------------------------|------------|
| ** **                                               | ** ** | **March 31**           | ** ** |
| ***(Unaudited, in millions except per share amounts)***  | ** ** | **2005**               | ** ** | **2004** | ** ** |
| **Operating Revenues**                                   |       |                   |       |   |   |
| Passenger                                                |       | $                      | 2,035      |   | $ | 1,963 |   |
| Regional carrier revenues                                |       | 276                    |       | 217 |   |
| Cargo                                                    |       | 206                    |       | 183 |   |
| Other                                                    |       | 281                    |       | 240 |   |
| Total operating revenues                                 |       | 2,798                  |       | 2,603 |   |
|                                                     |       |                   |       |   |   |
| **Operating Expenses**                                   |       |                   |       |   |   |
| Salaries, wages and benefits                             |       | 955                    |       | 937 |   |
| Aircraft fuel and taxes                                  |       | 630                    |       | 450 |   |
| Selling and marketing                                    |       | 205                    |       | 175 |   |
| Other rentals and landing fees                           |       | 156                    |       | 146 |   |
| Aircraft maintenance materials and repairs               |       | 144                    |       | 111 |   |
| Depreciation and amortization                            |       | 138                    |       | 141 |   |
| Aircraft rentals                                         |       | 104                    |       | 114 |   |
| Regional carrier expenses                                |       | 356                    |       | 256 |   |
| Other                                                    |       | 402                    |       | 381 |   |
| Total operating expenses                                 |       | 3,090                  |       | 2,711 |   |
|                                                     |       |                   |       |   |   |
| **Operating Income (Loss)**                              |       | (292                   | )          | (108 | ) |
|                                                     |       |                   |       |   |   |
| **Other Income (Expense)**                               |       |                   |       |   |   |
| Interest expense, net                                    |       | (151                   | )          | (132 | ) |
| Investment income                                        |       | 16                     |       | 13 |   |
| Other, net                                               |       | (18                    | )          | 4 |   |
| Total other income (expense)                             |       | (153                   | )          | (115 | ) |
|                                                     |       |                   |       |   |   |
| **Income (Loss) Before Income Taxes**                    |       | (445                   | )          | (223 | ) |
|                                                     |       |                   |       |   |   |
| Income tax expense (benefit)                             |       | 5                      |       | — |   |
|                                                     |       |                   |       |   |   |
| **Net Income (Loss)**                                    |       | (450                   | )          | (223 | ) |
|                                                     |       |                   |       |   |   |
| Preferred stock requirements                             |       | (8                     | )          | (7 | ) |
|                                                     |       |                   |       |   |   |
| **Net Income (Loss) Applicable to Common  Stockholders** |       | $                      | (458       | ) | $ | (230 | ) |
|                                                     |       |                   |       |   |   |
| Earnings (loss) per common share:                        |       |                   |       |   |   |
| *Basic and Diluted*                                      |       | $                      | (5.28      | ) | $ | (2.67 | ) |
|                                                     |       |                   |       |   |   |
| Average shares used in computation:                      |       |                   |       |   |   |
| *Basic and Diluted*                                      |       | 87                     |       | 86 |   |
|                                                     |       |                   |       |   |   |
| *See accompanying notes.*                                |       |                   |       |   |   |

 

3

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| *Northwest Airlines Corporation*      |
|---------------------------------------|
|                                  |
| CONDENSED CONSOLIDATED BALANCE SHEETS |

 
| ** **                                                         | ** ** | **March 31** | ** ** | **December 31** | ** ** |
|--------------------------------------------------------------------|------------|--------------|------------|-----------------|------------|
| ***(Unaudited, in millions)***                                     | ** ** | **2005**     | ** ** | **2004**        | ** ** |
| **Assets**                                                         |       |         |       |            |       |
|                                                               |       |         |       |            |       |
| **Current Assets**                                                 |       |         |       |            |       |
| Cash and cash equivalents                                          |       | $            | 518        |            | $          | 707 |   |
| Unrestricted short-term investments                                |       | 1,614        |       | 1,752           |       |
| Restricted short-term investments                                  |       | 173          |       | 152             |       |
| Accounts receivable, net                                           |       | 521          |       | 460             |       |
| Flight equipment spare parts, net                                  |       | 134          |       | 125             |       |
| Prepaid expenses and other                                         |       | 572          |       | 382             |       |
| Total current assets                                               |       | 3,532        |       | 3,578           |       |
|                                                               |       |         |       |            |       |
| **Property and Equipment**                                         |       |         |       |            |       |
| Flight equipment, net                                              |       | 7,316        |       | 7,355           |       |
| Other property and equipment, net                                  |       | 755          |       | 769             |       |
| Total property and equipment                                       |       | 8,071        |       | 8,124           |       |
|                                                               |       |         |       |            |       |
| **Flight Equipment Under Capital Leases, net**                     |       | 144          |       | 146             |       |
|                                                               |       |         |       |            |       |
| **Other Assets**                                                   |       |         |       |            |       |
| Intangible pension asset                                           |       | 671          |       | 671             |       |
| International routes                                               |       | 634          |       | 634             |       |
| Investments in affiliated companies                                |       | 59           |       | 55              |       |
| Other                                                              |       | 710          |       | 834             |       |
| Total other assets                                                 |       | 2,074        |       | 2,194           |       |
| Total Assets                                                       |       | $            | 13,821     |            | $          | 14,042 |   |
|                                                               |       |         |       |            |       |
| **Liabilities and Stockholders’ Equity (Deficit)**            |       |         |       |            |       |
|                                                               |       |         |       |            |       |
| **Current Liabilities**                                            |       |         |       |            |       |
| Air traffic liability                                              |       | $            | 1,792      |            | $          | 1,468 |   |
| Accounts payable and other liabilities                             |       | 2,364        |       | 2,280           |       |
| Current maturities of long-term debt and capital lease obligations |       | 580          |       | 749             |       |
| Total current liabilities                                          |       | 4,736        |       | 4,497           |       |
|                                                               |       |         |       |            |       |
| **Long-Term Debt**                                                 |       | 7,607        |       | 7,715           |       |
|                                                               |       |         |       |            |       |
| **Long-Term Obligations Under Capital Leases**                     |       | 305          |       | 308             |       |
|                                                               |       |         |       |            |       |
| **Deferred Credits and Other Liabilities**                         |       |         |       |            |       |
| Long-term pension and postretirement health care benefits          |       | 3,635        |       | 3,593           |       |
| Other                                                              |       | 811          |       | 753             |       |
| Total deferred credits and other liabilities                       |       | 4,446        |       | 4,346           |       |
|                                                               |       |         |       |            |       |
| **Preferred Redeemable Stock**                                     |       | 270          |       | 263             |       |
|                                                               |       |         |       |            |       |
| **Common Stockholders’ Equity (Deficit)**                     |       |         |       |            |       |
| Common stock                                                       |       | 1            |       | 1               |       |
| Additional paid-in capital                                         |       | 1,476        |       | 1,471           |       |
| Accumulated deficit                                                |       | (2,458       | )          | (1,999          | )          |
| Accumulated other comprehensive income (loss)                      |       | (1,550       | )          | (1,547          | )          |
| Treasury stock                                                     |       | (1,012       | )          | (1,013          | )          |
| Total common stockholders’ equity (deficit)                   |       | (3,543       | )          | (3,087          | )          |
| Total Liabilities and Stockholders’ Equity (Deficit)          |       | $            | 13,821     |            | $          | 14,042 |   |
|                                                               |       |         |       |            |       |
| *See accompanying notes.*                                          |       |         |       |            |       |

 

4

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| *Northwest Airlines Corporation*                 |
|--------------------------------------------------|
|                                             |
| CONDENSED  CONSOLIDATED STATEMENTS OF CASH FLOWS |

 
| ** **                                                                                          | ** ** | **Three Months Ended** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                                          | ** ** | **March 31**           | ** ** |
| ***(Unaudited, in millions)***                                                                      | ** ** | **2005**               | ** ** | **2004** | ** ** |
|                                                                                                |       |                   |       |   |   |
| **Cash Flows from Operating Activities**                                                            |       |                   |       |   |   |
| Net loss                                                                                            |       | $                      | (450       | ) | $ | (223 | ) |
| Adjustments to reconcile net loss to net cash provided by (used in)  operating activities:          |       |                   |       |   |   |
| Depreciation and amortization                                                                       |       | 138                    |       | 141 |   |
| Pension and other postretirement benefit contributions less than  expense                           |       | 49                     |       | 114 |   |
| Changes in certain assets and liabilities                                                           |       | 140                    |       | 174 |   |
| Other, net                                                                                          |       | 6                      |       | (8 | ) |
| Net cash provided by (used in) operating activities                                                 |       | (117                   | )          | 198 |   |
|                                                                                                |       |                   |       |   |   |
| **Cash Flows from Investment Activities**                                                           |       |                   |       |   |   |
| Capital expenditures                                                                                |       | (50                    | )          | (43 | ) |
| Purchase of short-term investments                                                                  |       | (230                   | )          | (215 | ) |
| Proceeds from sales of short-term investments                                                       |       | 360                    |       | 124 |   |
| Proceeds from sale of Pinnacle note receivable                                                      |       | 102                    |       | — |   |
| Other, net                                                                                          |       | 4                      |       | 12 |   |
| Net cash provided by (used in) investing activities                                                 |       | 186                    |       | (122 | ) |
|                                                                                                |       |                   |       |   |   |
| **Cash Flows from Financing Activities**                                                            |       |                   |       |   |   |
| Proceeds from long-term debt                                                                        |       | 16                     |       | 298 |   |
| Payments of long-term debt and capital lease obligations                                            |       | (273                   | )          | (245 | ) |
| Other, net                                                                                          |       | (1                     | )          | (5 | ) |
| Net cash provided by (used in) financing activities                                                 |       | (258                   | )          | 48 |   |
|                                                                                                |       |                   |       |   |   |
| **Increase (Decrease) in Cash and Cash Equivalents**                                                |       | (189                   | )          | 124 |   |
|                                                                                                |       |                   |       |   |   |
| Cash and cash equivalents at beginning of period                                                    |       | 707                    |       | 1,146 |   |
| Cash and cash equivalents at end of period                                                          |       | $                      | 518        |   | $ | 1,270 |   |
|                                                                                                |       |                   |       |   |   |
| Cash and cash equivalents and unrestricted short-term investments at  end of period                 |       | $                      | 2,132      |   | $ | 2,936 |   |
|                                                                                                |       |                   |       |   |   |
| Supplemental Cash Flow Information:                                                                 |       |                   |       |   |   |
| Interest paid                                                                                       |       | $                      | 137        |   | $ | 101 |   |
|                                                                                                |       |                   |       |   |   |
| Investing and Financing Activities Not Affecting Cash:                                              |       |                   |       |   |   |
| Manufacturer financing of aircraft, aircraft predelivery deposits and  other  non-cash transactions |       | $                      | 56         |   | $ | 108 |   |
|                                                                                                |       |                   |       |   |   |
| *See accompanying notes.*                                                                           |       |                   |       |   |   |

 

5

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| *Northwest Airlines Corporation*                      |
|-------------------------------------------------------|
|                                                  |
| NOTES TO CONDENSED  CONSOLIDATED FINANCIAL STATEMENTS |

** **

**Note 1 — Basis of Presentation**

 

      The condensed consolidated financialstatements of Northwest Airlines Corporation (“NWA Corp.”), a holding companywhose principal indirect operating subsidiary is Northwest Airlines, Inc. (“Northwest”),include the accounts of NWA Corp. and all consolidated subsidiaries(collectively, the “Company”).  Thecondensed consolidated financial statements included herein have been preparedpursuant to the rules and regulations of the Securities and Exchange Commission(“SEC”).  The information and footnotedisclosures normally included in annual financial statements prepared inaccordance with U.S. Generally Accepted Accounting Principles (“GAAP”) havebeen condensed or omitted as permitted by such rules and regulations. Thesefinancial statements and related notes should be read in conjunction with thefinancial statements and notes included in the Company’s audited consolidatedfinancial statements, which are provided in the Company’s Annual Report on Form10-K for the year ended December 31, 2004. The Company’s accounting and reporting policies are summarized in “Note1 — Summary of Significant Accounting Policies” in the Annual Report on Form10-K for 2004.

 

      The Company maintains a Web site at *http://www.nwa.com*.  Information contained on the Company’swebsite is not incorporated into this Quarterly Report on Form 10-Q.  Annual reports on Form 10-K, quarterlyreports on Form 10-Q, current reports on Form 8-K, all amendments to thosereports and other information about the Company are available free of chargethrough this Web site at *http://ir.nwa.com*as soon as reasonably practicable after those reports are electronically filedwith or furnished to the SEC.

 

      In the opinion of management, the interimfinancial statements reflect adjustments, consisting of normal recurringaccruals, unless otherwise noted, which are necessary to present fairly theCompany’s financial position, results of operations and cash flows for theperiods indicated.  Certain prior periodamounts have been reclassified to conform to the current period financialstatement presentation.

 

      The Company’s results of operations forinterim periods are not necessarily indicative of the results for an entireyear due to seasonal factors as well as competitive and general economicconditions.  The Company’s second andthird quarter operating results have historically been more favorable due toincreased leisure travel on domestic and international routes during the springand summer months.

 

## **Note2 — Recent Accounting Pronouncements**

 

      In December 2004, the FinancialAccounting Standards Board (“FASB”) issued Statement of Financial AccountingStandards (“SFAS”) No. 123 (Revised 2004), *Share-Based Payment* (“SFAS No. 123R”).  In addition to requiring supplementaldisclosures, SFAS No. 123R eliminates the option to apply the intrinsic valuemeasurement provisions of Accounting Principles Board Opinion No. 25, *Accounting for Stock Issued to Employees* (“APBNo. 25”) to stock compensation awards issued to employees.  Furthermore, the Company is required torecognize compensation cost for the portion of outstanding awards previouslyaccounted for under the provisions of APB No. 25 for which the requisiteservice had not been rendered as of the adoption date for this Statement.  The Statement also requires companies toestimate forfeitures of stock compensation awards as of the grant date of theaward.  Because the Company voluntarilyadopted the fair value method prescribed by SFAS No. 123, *Accounting for Stock-Based Compensation* (“SFASNo. 123”), effective January 1, 2003, the unvested awards still accounted forunder the provisions of APB No. 25, and therefore subject to the provisions ofSFAS No. 123R, are minimal. Additionally, the overall impact of estimating the remaining forfeituresfor awards outstanding as of the adoption date is insignificant.  Therefore, the impact of adopting SFAS No.123R will be immaterial.  SFAS No. 123Ris effective for the fiscal quarter beginning January 1, 2006, althoughearly adoption is permitted.

 

      In September 2004, the Emerging IssuesTask Force (“EITF”) issued EITF Issue 04-8, *TheEffect of Contingently Convertible Debt on Diluted Earnings per Share*(“EITF04-8”).  EITF 04-8 requires companies toinclude certain convertible debt and equity instruments that were previouslyexcluded into their calculations of diluted earnings per share, and to restatethe diluted earnings per share calculation for all periods during which timethe applicable convertible instruments were outstanding.  The Company adopted the provisions of EITF04-8 as of December 31, 2004.  As furtherdiscussed in “Note 4 — Earnings (Loss) Per Share Data”, 9.3 million and 9.8 millionshares issuable upon conversion of the Company’s 6.625% and 7.625% seniorconvertible notes issued in May 2003 and November 2003, respectively, will beincluded in the Company’s diluted earnings per share calculation in periodswhen the Company reports net income applicable to common shareholders and theimpact is dilutive.

 

 

6

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**Note3 — Geographic Regions**

 

      The Company is managed as one cohesive business unit, of whichrevenues are derived primarily from the commercial transportation of passengersand cargo.  Operating revenues fromflight segments serving a foreign destination are classified into the Pacificor Atlantic regions, as appropriate.  Thefollowing table shows the operating revenues for each region (in millions):

 
| ** **                 | ** ** | **Three months ended** | ** ** |
|----------------------------|------------|------------------------|------------|
| ** **                 | ** ** | **March 31**           | ** ** |
| ** **                 | ** ** | **2005**               | ** ** | **2004** | ** ** |
| Domestic                   | ** ** | **$**                  | **1,931**  |   | $ | 1,796 |   |
| Pacific, principally Japan | ** ** | **592**                |       | 553 |   |
| Atlantic                   | ** ** | **275**                |       | 254 |   |
| Total operating revenues   | ** ** | **$**                  | **2,798**  |   | $ | 2,603 |   |

 

## **     **The Company’s tangible assets consist primarily of flight equipment,which are utilized across geographic markets and therefore have not beenallocated.

 

## **Note 4 — Earnings(Loss) Per Share Data**

 

Thefollowing table sets forth the computation of basic and diluted earnings (loss)per common share:

 
| ** **                                                               | ** ** | **Three months ended** | ** ** |
|--------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                               | ** ** | **March 31**           | ** ** |
| ***(In millions, except per share data)***                               | ** ** | **2005**               | ** ** | **2004** | ** ** |
| **Numerator:**                                                           |       |                   |       |   |   |
| Net income (loss)                                                        | ** ** | **$**                  | **(450**   | ) | $ | (223 | ) |
| Preferred stock requirements                                             | ** ** | **(8**                 | )          | (7 | ) |
| Net income (loss) applicable to common stockholders                      | ** ** | **$**                  | **(458**   | ) | $ | (230 | ) |
|                                                                     |       |                   |       |   |   |
| **Denominator:**                                                         |       |                   |       |   |   |
| Weighted-average shares outstanding for basic earnings (loss) per  share | ** ** | **86,729,563**         |       | 86,114,328 |   |
|                                                                     |       |                   |       |   |   |
| Earnings (loss) per common share:                                        |       |                   |       |   |   |
| Net income (loss) before preferred stock requirements                    | ** ** | **$**                  | **(5.19**  | ) | $ | (2.59 | ) |
| Preferred stock requirements                                             | ** ** | **(0.09**              | )          | (0.08 | ) |
| Net income (loss) applicable to common stockholders                      | ** ** | **$**                  | **(5.28**  | ) | $ | (2.67 | ) |

 

      For the three months endedMarch 31, 2005 and 2004, respectively, 19,418,282 and 19,972,830 incrementalshares related to contingently convertible debt, the dilutive portion ofemployee stock options and unvested restricted shares under the treasury methodand shares held in non-qualified rabbi trusts were not included in the dilutedearnings per share calculation because the Company reported a net loss forthese periods.  Incremental sharesrelated to dilutive securities have an anti-dilutive impact on earnings pershare when a net loss is reported and therefore are not included in the calculation.

 

      Because of the stated intentof the parties to settle the Series C Preferred Stock with cash rather than bythe Company’s issuing additional common stock, 6,435,509 and 6,504,881 sharesof Series C Common Stock equivalents are excluded from the effect of dilutivesecurities for the three months ended March 31, 2005 and 2004, respectively.

 

      The Company had totalemployee stock options and restricted shares outstanding of 9,413,809 and6,500,603 as of March 31, 2005 and 2004, respectively.

 

7

----

 

**Note 5 — Comprehensive Income(Loss)**

 

      Comprehensive income (loss) consisted of the following (inmillions):

 
| ** **                                                      | ** ** | **Three months ended** | ** ** |
|-----------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                      | ** ** | **March 31**           | ** ** |
| ** **                                                      | ** ** | **2005**               | ** ** | **2004** | ** ** |
| Net income (loss)                                               | ** ** | **$**                  | **(450**   | ) | $ | (223 | ) |
| Change in unrealized gain/loss on available-for-sale securities | ** ** | **(3**                 | )          | 1 |   |
| Change in deferred gain/loss from hedging activities            | ** ** | **3**                  |       | (13 | ) |
| Foreign currency translation adjustments                        | ** ** | **(3**                 | )          | 2 |   |
| Comprehensive income (loss)                                     | ** ** | **$**                  | **(453**   | ) | $ | (233 | ) |

 

**Note 6 — Income Taxes**

 

Under the provisions ofSFAS No. 109, *Accounting for Income Taxes*(“SFAS No. 109”), the realization of the future tax benefits of a deferred taxasset is dependent on future taxable income against which such tax benefits canbe applied.  All available evidence mustbe considered in the determination of whether sufficient future taxable incomewill exist.  Such evidence includes, butis not limited to, the company’s financial performance, the market environmentin which the company operates, the utilization of past tax credits, and thelength of relevant carryback and carryforward periods.  Sufficient negative evidence, such ascumulative net losses during a three-year period that includes the current yearand the prior two years, may require that a valuation allowance be establishedwith respect to existing and future deferred tax assets.  As a result, the Company was required toprovide a valuation allowance on deferred tax assets recorded for lossesbeginning in the first quarter 2003.  Thefirst quarter 2005 net loss was therefore not reduced by any tax benefit.  Additionally, it is more likely than not thatfuture deferred tax assets will require a valuation allowance to be recorded tofully reserve against the uncertainty that those assets would be realized.

 

**Note 7 — Long-term Debt**

 

      Maturities of long-term debt, excluding capital leaseobligations, through December 31, 2009 are as follows (in millions):

 

| 2005 | ** ** | $280  | (1)    |
|------|------------|-------|--------|
| 2006 | ** ** | 898   | (2)    |
| 2007 | ** ** | 1,403 | (2)    |
| 2008 | ** ** | 579   |   |
| 2009 | ** ** | 1,080 |   |

 

----

(1)                             Theabove table reflects a refinancing of $148 million previously due in November2005 under the $975 million term loan facility; see further discussion in “Note10—Subsequent Events”.

(2)                             Includes$79 million and $567 million of aircraft related loan obligations maturing in2006 and 2007, respectively, that may be extended for an additional nine yearsfrom their maturity dates at the Company’s election.

 

Holders of $225 million of the $375 millionconvertible unsecured notes due after 2009 may require NWA Corp. to repurchasesuch notes in 2008 (and holders of all the notes also have other dates after2009, but prior to maturity, on which NWA Corp. can be required to repurchasesuch notes).

 

8

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On November 23, 2004, the Company completed therestructuring of its $975 million revolving bank credit facility, which wasscheduled to mature in October 2005, by entering into an Amended and RestatedCredit and Guarantee Agreement with a consortium of lenders that amended andrestructured the revolving credit facility into a term loan.  The term loan has an initial principal amountof $975 million and is comprised of two tranches bearing different interestrates and with different principal amortization periods.  The first tranche, in the principal amount of$575 million, bears interest at LIBOR plus 51⁄4% and is payable 25% at the end ofthe first year, 121⁄2% at the end of each of the second and third years and 50%at the end of the fifth year.  The secondtranche, in the principal amount of $400 million, bears interest at LIBOR plus63⁄4% and is payable 1% at the end of each of the first five years and 95% at theend of the sixth year, on November 23, 2010. The 25% of the first tranche and the 1% of the second tranche payable in2005 (which together total $148 million) have been refinanced — see discussionin “Note 10—Subsequent Events”.

 

The term loan is secured by substantially the samecollateral the Company pledged to secure the original revolving bank creditfacility.  The Agreement contains acovenant requiring the Company to maintain unrestricted cash, cash equivalentsand short term investments in an amount not less than $900 million at anytime.  In addition, the Agreementcontains a covenant that requires the Company to maintain specified ratios ofearnings to fixed charges as follows:

 
| **Number of**      | ** ** | ** **                                            | ** ** | **Required**       | ** ** |
|--------------------|------------|-------------------------------------------------------|------------|--------------------|------------|
| **Months Covered** | ** ** | **Period Ending**                                     | ** ** | **Coverage Ratio** | ** ** |
| Nine               |       | December 31, 2004                                     |       | 0.50  to 1.0       |       |
| Twelve             |       | March 31, 2005                                        |       | 0.50  to 1.0       |       |
| -                  |       | June 30, 2005 through  March 31, 2006                 |       | Waived             | (1)        |
| Three              |       | June 30, 2006                                         |       | 1.00  to 1.0       |       |
| Six                |       | September 30, 2006                                    |       | 1.05  to 1.0       |       |
| Nine               |       | December 31, 2006                                     |       | 1.15  to 1.0       |       |
| Twelve             |       | March 31, 2007                                        |       | 1.30  to 1.0       |       |
| Twelve             |       | June 30, 2007                                         |       | 1.45  to 1.0       |       |
| Rolling twelve     |       | September 30, 2007 and each quarter ending thereafter |       | 1.50  to 1.0       |       |

----

(1)          On April 13, 2005, theCompany obtained an amendment that waived the fixed charges coverage covenantassociated with the term loan facility for the periods ending June 30, 2005through March 31, 2006; see further discussion in “Note 10—Subsequent Events”.

 

For purposes of calculating this ratio, earnings aredefined as operating income adjusted to exclude the effects of depreciation,amortization and aircraft rents and to include the effects of interest incomeand governmental reimbursements for losses resulting from developmentsaffecting the aviation industry. Earnings also exclude non-recurring non-cash charges (subject to theinclusion of any cash payments then or thereafter made with respect thereto)and are determined without giving effect to any acceleration of rentalexpense.  Fixed charges are defined asinterest expense and aircraft rents (without giving effect to any accelerationof rental expense).  Although the Companywas in compliance with the covenant on March 31, 2005, continued compliancedepends on many factors, some of which are beyond the Company’s control,including the overall industry revenue environment and the level of fuelcosts.  Thus, there can be no assurance that the Company will be able tosatisfy these requirements through the expiration of the facility.

 

9

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**Note 8 — Fleet Informationand Commitments**

 

As shown in the following table, Northwest operated afleet of 432 aircraft at March 31, 2005, consisting of 364 narrow-body and 68wide-body aircraft.  Northwest’s purchasecommitments for aircraft as of March 31, 2005 are also provided.

 
| ** **                             | ** ** | ** **   | ** ** | ** ** | ** ** | ** **  | ** ** | ** **    | ** ** | **Temporarily** | ** ** | **Total**      | ** ** | **Aircraft** | ** ** |
|----------------------------------------|------------|--------------|------------|------------|------------|-------------|------------|---------------|------------|-----------------|------------|----------------|------------|--------------|------------|
| ** **                             | ** ** | **Seating**  | ** ** | ** ** | ** ** | **Capital** | ** ** | **Operating** | ** ** | **Not in**      | ** ** | **Aircraft**   | ** ** | **on Firm**  | ** ** |
| **Aircraft Type**                      | ** ** | **Capacity** | ** ** | **Owned**  | ** ** | **Lease**   | ** ** | **Lease**     | ** ** | **Service**     | ** ** | **in Service** | ** ** | **Order**    | ** ** |
|                                   |       |         |       |       |       |        |       |          |       |            |       |           |       |         |       |
| **Passenger Aircraft**                 |       |         |       |       |       |        |       |          |       |            |       |           |       |         |       |
| Airbus:                                |       |         |       |       |       |        |       |          |       |            |       |           |       |         |       |
| A319                                   |       | 124          |       | 60         |       | —      |       | 12            |       | —          |       | 72             |       | 9            |       |
| A320                                   |       | 148          |       | 43         |       | 4           |       | 31            |       | —          |       | 78             |       | 2            |       |
| A330-200                               |       | 243          |       | 7          |       | —      |       | —        |       | —          |       | 7              |       | 5            |       |
| A330-300                               |       | 298          |       | 8          |       | —      |       | —        |       | —          |       | 8              |       | 12           |       |
|                                   |       |         |       |       |       |        |       |          |       |            |       |           |       |         |       |
| Boeing:                                |       |         |       |       |       |        |       |          |       |            |       |           |       |         |       |
| 757-200                                |       | 180-184      |       | 32         |       | 5           |       | 19            |       | (5              | )          | 51             |       | —       |       |
| 757-300                                |       | 224          |       | 16         |       | —      |       | —        |       | —          |       | 16             |       | —       |       |
| 747-200                                |       | 353-430      |       | 4          |       | —      |       | 3             |       | (2              | )          | 5              |       | —       |       |
| 747-400                                |       | 403          |       | 4          |       | —      |       | 12            |       | —          |       | 16             |       | —       |       |
|                                   |       |         |       |       |       |        |       |          |       |            |       |           |       |         |       |
| DC9                                    |       | 78-125       |       | 146        |       | —      |       | 4             |       | (3              | )          | 147            |       | —       |       |
| DC10                                   |       | 273          |       | 14         |       | —      |       | 8             |       | (2              | )          | 20             |       | —       |       |
|                                   |       |         |       | 334        |       | 9           |       | 89            |       | (12             | )          | 420            |       | 28           |       |
|                                   |       |         |       |       |       |        |       |          |       |            |       |           |       |         |       |
| **Freighter Aircraft**                 |       |         |       |       |       |        |       |          |       |            |       |           |       |         |       |
| Boeing 747-200F                        |       |         |       | 8          |       | —      |       | 5             |       | (1              | )          | 12             |       | —       |       |
|                                   |       |         |       |       |       |        |       |          |       |            |       |           |       |         |       |
| **Total Northwest  Operated Aircraft** | ** ** | ** **   | ** ** | **342**    | ** ** | **9**       | ** ** | **94**        | ** ** | **(13**         | **)**      | **432**        | ** ** | **28**       | ** ** |
| ** **                             | ** ** | ** **   | ** ** | ** ** | ** ** | ** **  | ** ** | ** **    | ** ** | ** **      | ** ** | ** **     | ** ** | ** **   | ** ** |
| **Regional Aircraft**                  |       |         |       |       |       |        |       |          |       |            |       |           |       |         |       |
| BAE AVRO RJ85                          |       | 69           |       | 10         |       | —      |       | 25            |       | —          |       | 35             |       | —       |       |
| Bombardier CRJ-200/440                 |       | 44-50        |       | —     |       | —      |       | 123           |       | (3              | )          | 120            |       | 31           | ** ** |
| SAAB 340                               |       | 30-34        |       | —     |       | —      |       | 49            |       | —          |       | 49             |       | —       |       |
|                                   |       |         |       |       |       |        |       |          |       |            |       |           |       |         |       |
| **Total Airlink Operated Aircraft**    | ** ** | ** **   | ** ** | **10**     | ** ** | **—**  | ** ** | **197**       | ** ** | **(3**          | **)**      | **204**        | ** ** | **31**       |       |
|                                   |       |         |       |       |       |        |       |          |       |            |       |           |       |         |       |
| **Total Aircraft**                     | ** ** | ** **   | ** ** | **352**    | ** ** | **9**       | ** ** | **291**       | ** ** | **(16**         | **)**      | **636**        | ** ** | **59**       |       |

 

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(1)  On April 22, 2005, theCompany announced that it had ordered 15 additional CRJ 200 aircraft fordelivery between 2005 and 2006.  TheCompany has signed a non-binding letter of intent for these aircraft to beleased or subleased to and operated by Mesaba Aviation, Inc. (“Mesaba”), asubsidiary company of MAIR Holdings, Inc. (“MAIR”), and a Northwest Airlinkcarrier.  Under the terms of this letterof intent, Mesaba would also be given exclusive rights to operate an additional20 CRJ aircraft should the Company elect to exercise additional options.  See further discussion in “Note 10—SubsequentEvents”.  These aircraft are included inthe table presented above.

 

      Committed expenditures for the 59 aircraft and relatedequipment on firm order, including estimated amounts for contractual priceescalations and predelivery deposits, will be approximately $936 million forthe remainder of 2005, $803 million in 2006, $877 million in 2007 and $90million in 2008.  Consistent with priorpractice, the Company intends to finance its aircraft deliveries through acombination of internally generated funds, debt and long-term leasefinancing.  Financing commitmentsavailable for use by the Company are in place for all of the aircraft on firmorder and range from 80% - 100% of each aircraft’s purchase price.  The Company has the option and intends tofinance the CRJ200/440 aircraft through long-term operating lease commitmentsfrom the manufacturer, and if the manufacturer does not provide the financing, theCompany is not obligated to take delivery of the aircraft.  These aircraft will, in turn, be leased orsubleased to and operated by a Northwest Airlink carrier.

 

10

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The Company took delivery of two Airbus aircraft andsix Bombardier CRJ aircraft during the three months ended March 31, 2005.  The Company entered into operating leaseswith respect to the six Bombardier CRJ aircraft and then subleased all of theaircraft to Pinnacle Airlines pursuant to the Company’s airline servicesagreement with Pinnacle Airlines.  Inconnection with the acquisition of these eight aircraft, the Company enteredinto long-term debt arrangements and operating leases.  Under such arrangements, the aggregate amountof debt incurred totaled $56 million and the minimum lease payments at thepoint of inception equaled $117 million.

 

**Note 9 — Pension and Other Postretirement Benefits**

 

The Company has several noncontributory pension planscovering substantially all of its employees. The benefits for these plans are based primarily on years of serviceand, in some cases, employee compensation.

 

The components of netperiodic cost of defined benefit plans included the following (in millions):

 
| ** **                                      | ** ** | **Three months ended March 31** | ** ** |
|-------------------------------------------------|------------|---------------------------------|------------|
| ** **                                      | ** ** | **Pension Benefits**            | ** ** | **Other Benefits** | ** ** |
| ** **                                      | ** ** | **2005**                        | ** ** | **2004** | ** ** | **2005** | ** ** | **2004** | ** ** |
| Service cost                                    | ** ** | **$**                           | **64**     | ** ** | $ | 63 | ** ** | **$** | **9** | ** ** | $ | 7 |   |
| Interest cost                                   | ** ** | **137**                         | ** ** | 134 | ** ** | **14** | ** ** | 13 |   |
| Expected return on plan assets                  | ** ** | **(129**                        | **)**      | (124 | ) | **—** | ** ** | — |   |
| Amortization of prior service cost              | ** ** | **19**                          | ** ** | 19 | ** ** | **(3** | **)** | (2 | ) |
| Recognized net actuarial loss and  other events |       | **36**                          | ** ** | 20 |   | **7** | ** ** | 6 |   |
| Net periodic benefit cost                       | ** ** | **$**                           | **127**    | ** ** | $ | 112 | ** ** | **$** | **27** | ** ** | $ | 24 |   |

 

OnApril 10, 2004, the President signed into law the Pension Funding Equity Act(the “Pension Act”), which temporarily reduces the Company’s required pensioncontributions through two mechanisms: (1) certain companies were permitted toelect partial relief from the deficit reduction contribution requirements thatotherwise would have applied in 2004 and 2005, an election the Company made;and (2) the applicable discount rate used to determine funding was increased toreflect yields on indices of high quality corporate bonds instead of 30-yearU.S. Treasury rates.

 

      Including the effect of the Pension Act,the Company’s 2005 calendar year cash contributions to qualified pension planswill approximate $420 million.  OnJanuary 14, 2005, the Company contributed $84 million to these plans.  Subsequently, on April 15, 2005, the Companycontributed another $92 million to these plans, with the balance due during theremainder of 2005. Absent further legislative relief, authorization by the IRSto reschedule future contributions, contractual relief under the Company’scollective bargaining agreements, substantial changes in interest rates, orasset returns significantly above the 9.5% annual rate currently assumed, weexpect our calendar year 2006 and 2007 cash contributions to be significantlyhigher than our 2005 cash contributions.

 

**Note 10 — Subsequent Events**

 

      On March 25, 2005, the Company announcedthat it was in discussions with the lenders to refinance $148 million due inNovember 2005 under the $975 million term loan facility.  This refinancingwas completed on April 15, 2005, with the new $148 million tranche bearinginterest at LIBOR plus 6.25% and payable in six years.  As part of these discussions,on April 13, 2005, the Company also obtained an amendment that waived the fixedcharges coverage covenant associated with the term loan facility through March31, 2006 as well as changed the next covenant measurement date from the quarterending June 30, 2005 to the quarter ending June 30, 2006.  The Company wasin compliance with the covenant requirements as of March 31, 2005. However, the lenders provided this amendment principally in consideration ofthe sharp rise in fuel prices since the beginning of the year, which made itunlikely that the Company would remain in compliance absent the waiver.

 

11

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      On April 22, 2005, the Company announcedthat it had ordered 15 additional CRJ-200 aircraft, with deliveries scheduledto commence in the third quarter of 2005. The Company intends to finance these aircraft through long-termoperating leases with the manufacturer. The Company has signed a non-binding letter of intent for these aircraftto be leased or subleased to and operated by Mesaba Aviation, Inc. (“Mesaba”),a subsidiary company of MAIR Holdings, Inc. (“MAIR”), and a Northwest Airlinkcarrier.  Under the terms of this letterof intent, Mesaba would also be given exclusive rights to operate another 20CRJs should the Company elect to exercise additional options.  The Company’s existing Avro RJ85 and Saabservice agreements with Mesaba will be replaced with a new 10 year airlineservices agreement, subject to final approval by the parties, MAIR’s board ofdirectors and any applicable regulatory approvals.  Upon execution of a definitive airlineservices agreement, MAIR will amend the currently outstanding warrants to theCompany, resulting in warrants covering an aggregate of 4,112,500 shares ofMAIR’s common stock at an exercise price of $8.74.

 

      On April 1, 2005, the Company completed an8.5 billion yen (approximately $78 million) secured financing with ShinseiBank, Limited, maturing on June 20, 2006 (“Shinsei” loan).   The loan proceeds were reduced by fees andexpenses, pre-paid interest and a liquidity reserve.  This financing bears interest at the rate of2.878% per annum with interest payable on March 20, 2006 and at maturity.  The financing is secured by certain of theCompany’s properties in Tokyo. Subsequently, on April 20, 2005, the Company completed a 2.5 billion yen(approximately $23 million) financing with Airline Funding, LLC (“AirlineFunding” ), which will remain outstanding concurrently with the Shinsei loanuntil maturity on June 20, 2006.  TheAirline Funding financing is secured by a second lien on properties in Tokyowith the first lien being held by Shinsei Bank, Limited.

 

12

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# **Item2**.    Management’sDiscussion and Analysis of Financial Condition and Results of Operations.

 

Northwest and other large network airlines continue toface significant financial challenges. Industry trends that produced record losses over the past four yearspersist, with the growth of low cost carriers and expanded product distributionthrough the internet resulting in a revenue environment that is increasinglyprice sensitive.  These longer termdevelopments, combined with the lingering effects of the September 11, 2001terrorist attacks, the conflict in Iraq and the SARS epidemic, have reducedpassenger yields to levels where Northwest and other airlines with traditionallabor cost structures cannot be profitable on a sustained basis.  This already difficult financial environmentwas exacerbated during the first quarter of 2005 when Delta, another largenetwork airline, adopted a simplified fare pricing strategy similar to thoseemployed by low cost carriers.  Northwestand its competitors were thus impacted by additional downward pressure onrevenues even as average fuel prices for the quarter reached record levels.

 

These challenges have left all of the major legacyairlines with no choice but to significantly reduce their labor costs bybringing wage rates and work rules in line with the new revenue environment.  United and US Airways obtained new laborcontracts through Chapter 11 bankruptcy protection.  American and Delta each realized labor costreductions in the face of an imminent bankruptcy filing.  Continental, which for many years hasmaintained labor costs well below its major competitors, was nonetheless forcedto seek additional reductions from its workers, most of whom recently ratifiednew agreements that incorporate substantial cost savings.

 

Northwest has been among the most successful carriersin reducing non-labor expenses, executing a series of aggressive cost reductionefforts beginning in early 2001.  Inaddition, the Company achieved an important first step in restructuring itslabor contracts in October 2004 when it reached a two year bridge agreementwith its pilots to reduce wage and benefit costs.  Under the agreement, which was effectiveDecember 1, 2004, the pilots agreed to $265 million in annual wage, benefit andother contract changes and salaried and management employees took $35 millionin annual salary and benefit reductions. Northwest’s overall labor costs remain above its major competitors.  The Company is therefore seeking additionalwage and work rule changes that would increase the total savings to $1.1billion annually, inclusive of the $300 million in reductions obtained throughthe pilot and management actions.  Inaddition, it is asking the labor unions to agree to restructure their pensionprograms by freezing the current defined benefit plans and replacing them withdefined contribution plans.  Thesechanges are essential in order for Northwest to return to profitability.

 

Continued high fuel prices will result in significantlosses for the Company absent the Company’s ability to lower its unit costs,increase its unit revenues or both, and, in the absence of such developments,will have a significant impact on the Company’s ability to maintain adequateliquidity.  Even as the Company hasincurred substantial losses in recent years, it has successfully built liquiditythrough the sale of non-strategic assets or by obtaining new financing.  However, the limited amount of unencumberedassets available for these purposes and the Company’s current level ofindebtedness are likely to impede our ability to generate additional cashthrough such means.  See “Item 7.Management’s Discussion and Analysis of Financial Condition and Results ofOperations — Northwest and the Current Status of the Airline Industry” in theCompany’s December 31, 2004 Annual Report on Form 10-K for a detaileddiscussion of the factors that have caused the structural decline in industryrevenue and the other financial and operational challenges the Company faces.

 

For the quarter ended March 31, 2005, the Companyreported a net loss applicable to common stockholders of $458 million and anoperating loss of $292 million, which compares with a net loss applicable tocommon stockholders of $230 million and an operating loss of $108 million forthe quarter ended March 31, 2004.  Netloss per common share was $5.28 in the first quarter of 2005 versus a net lossper common share of $2.67 in the first quarter of 2004.

 

Included in the 2005 results for the March quarter wasa loss of approximately $18 million on the sale of the Company’s PinnacleAirlines note to Pinnacle Airlines Corp. This loss represented the difference between the $120 millionoutstanding balance on the note at the time of the sale and the purchase priceof $102 million, inclusive of accrued interest. Additionally, Pinnacle Airlines Corp. agreed to pay down the $5 millionthat was outstanding under a $25 million revolving credit facility that itmaintains with Northwest.

 

Substantially all of the Company’s results of operations areattributable to its principal indirect operating subsidiary, Northwest, and thefollowing discussion pertains primarily to Northwest.  The Company’s results of operations includeother subsidiaries, of which MLT Inc. (“MLT”) is the most significant.

 

13

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Information with respect to the Company’s operatingstatistics follows (1):

 
| ** **                                                | ** ** | **Three months ended** | ** **   | ** ** | ** ** |
|-----------------------------------------------------------|------------|------------------------|--------------|------------|------------|
| ** **                                                | ** ** | **March 31**           | ** **   | ** ** | ** ** |
| ** **                                                | ** ** | **2005**               | ** **   | **2004**   | ** ** | **% Chg.** | ** ** |
| Scheduled service:                                        |       |                   |         |       |       |   |   |
| Available seat miles (ASM) (millions)                     | ** ** | **22,765**             |         | 21,831     |       | 4.3 |   |
| Revenue passenger miles (RPM) (millions)                  | ** ** | **18,168**             |         | 16,705     |       | 8.8 |   |
| Passenger load factor                                     | ** ** | **79.8**               | **%**        | 76.5       | %          | 3.3 | pts. |
| Revenue passengers (millions)                             | ** ** | **13.5**               |         | 12.5       |       | 7.9 |   |
| Passenger revenue per RPM (yield)                         | ** ** | **11.20**              | ***¢*** | 11.75      | *¢*   | (4.7 | ) |
| Passenger revenue per ASM (RASM)                          | ** ** | **8.94**               | ***¢*** | 8.99       | *¢*   | (0.6 | ) |
|                                                      |       |                   | ** **   |       |       |   |   |
| Total operating ASM (millions)                            | ** ** | **22,825**             | ** **   | 21,894     |       | 4.3 |   |
|                                                      |       |                   | ** **   |       |       |   |   |
| Passenger service operating expense per total ASM (2) (3) | ** ** | **10.97**              | ***¢*** | 10.23      | *¢*   | 7.2 | * * |
|                                                      |       |                   | ** **   |       |       |   |   |
| Cargo ton miles (millions)                                | ** ** | **542**                | ** **   | 540        |       | 0.4 |   |
| Cargo revenue per ton mile                                | ** ** | **38.10**              | ***¢*** | 33.79      | *¢*   | 12.8 | * * |
| Fuel gallons consumed (millions)                          | ** ** | **432**                |         | 421        |       | 2.6 |   |
| Average fuel cost per gallon, excluding taxes             | ** ** | **137.91**             | * *     | 100.16     | *¢*   | 37.7 | * * |
| Number of operating aircraft at end of period             | ** ** | **432**                |         | 432        |       | n/m |   |
| Full-time equivalent employees at end of period           | ** ** | **39,105**             |         | 39,230     |       | (0.3 | ) |

 

----

(1)          All statisticsexclude Northwest Airlink regional carriers, which is consistent with how theCompany reports statistics to the Department of Transportation (“DOT”) and iscomparable to statistics reported by other major network airlines.

(2)          This financial measureexcludes non-passenger service expenses. The Company believes that providing financial measures directly relatedto passenger service operations allows investors to evaluate and compare the Company’score operating results to those of the industry.

(3)          Passenger serviceoperating expense excludes the following items unrelated to passenger serviceoperations (in millions): 

 
| ** **                                  | ** ** | **Three months ended** | ** ** |
|---------------------------------------------|------------|------------------------|------------|
| ** **                                  | ** ** | **March 31**           | ** ** |
| ** **                                  | ** ** | **2005**               | ** ** | **2004** | ** ** |
| Freighter operations                        | ** ** | **$**                  | **154**    |   | $ | 140 |   |
| MLT Inc. - net of intercompany eliminations | ** ** | **64**                 |       | 60 |   |
| Regional carriers                           | ** ** | **356**                |       | 256 |   |
| Other                                       | ** ** | **12**                 |       | 15 |   |
|                                             |            |                        |            |  |  |  |  |

 

14

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**Resultsof Operations—Three months ended March 31, 2005 and 2004**

 

      *Operating Revenues*.  Operating revenues increased 7.5% ($195million), the result of higher system passenger, regional carrier, cargo andother revenues.

 

Systempassenger revenues increased 3.7% ($72 million).  The following analysis by region is based oninformation reported to the Department of Transportation and excludes regionalcarriers:

 
| ** **                         | ** ** | **System** | ** ** | **Domestic** | ** ** | **Pacific** | ** ** | **Atlantic** | ** ** |
|------------------------------------|------------|------------|------------|--------------|------------|-------------|------------|--------------|------------|
| **2005**                           | ** ** | ** ** | ** ** | ** **   | ** ** | ** **  | ** ** | ** **   | ** ** |
| Passenger revenues (in millions)   |       | $          | 2,035      |         | $          | 1,356       |       | $            | 455        |   | $ | 224 |   |
|                               |       |       |       |         |       |        |       |         |       |
| **Increase (Decrease) from 2004:** |       |       |       |         |       |        |       |         |       |
| Passenger revenues (in millions)   |       | $          | 72         |         | $          | (20         | )          | $            | 62         |   | $ | 30 |   |
| Percent                            |       | 3.7        | %          | (1.4         | )%         | 15.8        | %          | 15.1         | %          |
|                               |       |       |       |         |       |        |       |         |       |
| Scheduled service ASMs (capacity)  |       | 4.3        | %          | 0.2          | %          | 10.4        | %          | 13.2         | %          |
| Scheduled service RPMs (traffic)   |       | 8.8        | %          | 7.3          | %          | 8.3         | %          | 16.5         | %          |
| Passenger load factor              |       | 3.3        | pts.       | 5.0          | pts.       | (1.7        | ) pts.     | 2.3          | pts.       |
| Yield                              |       | (4.7       | )%         | (8.1         | )%         | 7.0         | %          | (1.1         | )%         |
| Passenger RASM                     |       | (0.6       | )%         | (1.6         | )%         | 4.8         | %          | 1.7          | %          |

 

As indicated in the above table:

•                  Domestic passenger revenuesdecreased slightly, primarily due to significantly lower yields that were largelyoffset by higher traffic.

•                  Pacific passenger revenuesshowed a strong increase due to significantly improved yields and traffic onhigher capacity.

•                  Atlantic passenger revenuesincreased substantially due to a sharp rise in traffic on significantly morecapacity.

 

Regionalcarrier revenues increased 27.2% ($59 million) to $276 million, due primarilyto the increased capacity from 33 additional Bombardier CRJ aircraft that haveentered service since March 31, 2004.

 

Cargorevenues increased 12.6% ($23 million) to $206 million due to a 12.8% higheryield per ton mile.  Other revenueincreased 17.1% ($41 million) as a result of increased rental revenue, higherticket change fees and other non-transportation service fees.

 

*OperatingExpenses*.  Operating expensesincreased 14.0% ($379 million) for the three months ended March 31, 2005.  The following table and notes presentoperating expenses for the three months ended March 31, 2005 and 2004 anddescribe significant year-over-year variances:

 
| ** **                                 | ** ** | **Three months ended** | ** ** | **Increase**   | ** ** | ** **    | ** ** | ** ** | ** ** |
|--------------------------------------------|------------|------------------------|------------|----------------|------------|---------------|------------|------------|------------|
| ** **                                 | ** ** | **March 31**           | ** ** | **(Decrease)** | ** ** | **Percent**   | ** ** | ** ** | ** ** |
| **(in millions)**                          | ** ** | **2005**               | ** ** | **2004**       | ** ** | **from 2004** | ** ** | **Change** | ** ** | **Note** | ** ** |
| **Operating Expenses**                     |       |                   |       |           |       |          |       |       |       |   |   |
| Salaries, wages and benefits               | ** ** | **$**                  | **955**    | ** **     | $          | 937           |       | $          | 18         |   | 1.9 | % | A |   |
| Aircraft fuel and taxes                    | ** ** | **630**                |       | 450            |       | 180           |       | 40.0       |       | B |   |
| Selling and marketing                      | ** ** | **205**                |       | 175            |       | 30            |       | 17.1       |       | C |   |
| Other rentals and landing fees             | ** ** | **156**                |       | 146            |       | 10            |       | 6.8        |       | D |   |
| Aircraft maintenance materials and repairs | ** ** | **144**                |       | 111            |       | 33            |       | 29.7       |       | E |   |
| Depreciation and amortization              | ** ** | **138**                |       | 141            |       | (3            | )          | (2.1       | )          | F |   |
| Aircraft rentals                           | ** ** | **104**                |       | 114            |       | (10           | )          | (8.8       | )          | G |   |
| Regional carrier expenses                  | ** ** | **356**                |       | 256            |       | 100           |       | 39.1       |       | H |   |
| Other                                      | ** ** | **402**                |       | 381            |       | 21            |       | 5.5        |       | I |   |
| **Total operating expenses**               | ** ** | **$**                  | **3,090**  | ** **     | $          | 2,711         |       | $          | 379        |   | 14.0 | % |   |   |

 

15

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      A.  Salaries,wages and benefits increased primarily due to higher pension expense, annualwage rate increases, and increased capacity. These were partially offset by pilot and management concessions, whichwere effective as of December 1, 2004.

      B.  Aircraftfuel and taxes were higher due to a 37.7% increase in the average fuel cost pergallon to $1.38 (net of hedging transactions) and 2.6% more****gallonsconsumed.  Fuel hedge transactionsreduced fuel costs by $19 million in the first quarter of 2005.

      C.  Selling andmarketing increases were partially volume related, due to a 3.7% increase inpassenger revenue, a 27.2% increase in regional carrier revenues, and higherGDS fees.

      D.  Otherrentals and landing fees increased due to higher rates across the system.

      E.   Aircraftmaintenance materials and repairs increased by $33 million, due primarily tohigher material usage as the Company utilized excess capacity to increaseengine overhauls.

      F.   Depreciationexpense remained relatively unchanged as the cost associated with new aircraftdeliveries was offset by other flight equipment becoming fully depreciated.

      G.  Aircraftrental expense decreased primarily due to accelerated rentals in 2004 foraircraft subsequently purchased off lease.

      H.  The $100million increase was primarily driven by increased regional carrier capacityand higher regional carrier fuel costs.

      I.    Otherexpenses (which include MLT operating expenses, outside services, insurance,passenger food, personnel expenses, communication expenses and supplies)increased, which was principally volume related.

 

*OtherIncome and Expense.*  Non-operatingexpense increased 33.0% ($38 million) primarily due to higher interest expenserelated to increased debt levels.

 

**Liquidity and Capital Resources**

 

Asof March 31, 2005, the Company had cash, cash equivalents and short-terminvestments of $2.30 billion.  Thisamount includes $173 million of restricted short-term investments (which mayinclude amounts held as cash), resulting in liquidity of $2.13 billion.

 

*CashFlows.* Liquidity decreased by $327 million during the three months endedMarch 31, 2005, largely due to net losses, capital expenditures and debtpayments.

 

*Operating Activities.*  Net cash used in operating activities for thethree months ended March 31, 2005, was $117 million, which compares with $198million cash provided by operating activities for the three months ended March31, 2004.  This decrease resulted from ahigher net loss in 2005.

 

*Investing Activities.*  Investing activities in the three monthsended March 31, 2005, consisted primarily of the sale of short-terminvestments, aircraft capital expenditures and other related costs.  Other related costs include engine purchases,costs to commission aircraft before entering revenue service, deposits onordered aircraft, facility improvements and ground equipment purchases.  Investing activities during the quarter alsoincluded proceeds of $102 million from the sale of the Company’s notereceivable from Pinnacle Airlines. Investing activities for the three months ended March 31, 2004, otherthan aircraft and related purchases and short-term investments, includedfacility and aircraft modification programs.

 

*Financing Activities. *Financing activities in the three months ended March 31, 2005, consistedprimarily of the repayment of $188 million unsecured notes due in March 2005,plus payment of other debt and capital lease obligations.  Financing activities in the three monthsended March 31, 2004, included financing one Airbus A330-300 aircraft withlong-term debt, the issuance of $300 million unsecured notes due in 2009,repayment of $138 million unsecured notes due in March 2004, plus payment ofother debt and capital lease obligations.

 

 

16

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The Company also took delivery of two Airbus A319aircraft and six Bombardier CRJ aircraft during the three months ended March31, 2005.  The Airbus A319 aircraft wereacquired largely through non-cash transactions with the manufacturer, which arereflected as long-term debt on the Company’s consolidated balance sheets butare not classified as cash flow activities. The Bombardier CRJ aircraft were acquired with long-term operatingleases and subleased to Pinnacle Airlines pursuant to the Company’s airlineservices agreement with Pinnacle Airlines. In connection with the acquisition of these eight aircraft, the Companyentered into long-term debt arrangements and operating leases.  Under such arrangements, the aggregate amountof debt incurred totaled $56 million and the minimum lease payments at thepoint of inception equaled $117 million.

 

Investing activities affecting cash flows and non-cashtransactions and leasing activities related to the initial acquisition ofaircraft consisted of the following for the three months ended March 31:

 
| ** **           | ** ** | **Investing Activities**

**Affecting Cash**

**Flows** | ** ** | **Non-cash**

**Transactions and**

**Leasing Activities** | ** ** |
|----------------------|------------|---------------------------------------------------------|------------|------------------------------------------------------------|------------|
| ** **           | ** ** | **2005**                                                | ** ** | **2004**                                                   | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **           | ** ** | ** **                                              | ** ** | ** **                                                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| Airbus A319          | ** ** | **—**                                              | ** ** | **—**                                                 | ** ** | **2** | ** ** | **—** | ** ** |
| Airbus A330-300      | ** ** | **—**                                              |       | —                                                     | ** ** | **—** |   | 1 |   |
| Bombardier CRJ - 440 | ** ** | **—**                                              |       | —                                                     | ** ** | **2** |   | 3 |   |
| Bombardier CRJ - 200 | ** ** | **—**                                              |       | —                                                     | ** ** | **4** |   | 8 |   |
| ** **           |       | **—**                                              |       | —                                                     | ** ** | **8** |   | 12 |   |

 

 

*      Debt.*Maturities of long-term debt, excluding capital lease obligations, throughDecember 31, 2009 are as follows (in millions):

 

| 2005 |   | $     | 280        | (1) |
|------|--------|-------|------------|-----|
| 2006 |   | 898   | (2)        |
| 2007 |   | 1,403 | (2)        |
| 2008 |   | 579   | ** ** |
| 2009 |   | 1,080 | ** ** |

 

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(1)                            Theabove table reflects a refinancing of $148 million previously due in November2005 under the $975 million term loan facility; see further discussion in “Note10—Subsequent Events”.

(2)                            Includes$79 million and $567 million of aircraft related loan obligations maturing in2006 and 2007, respectively, that may be extended for an additional nine yearsfrom their maturity dates at the Company’s election.

 

Holders of $225 million of the $375 millionconvertible unsecured notes due after 2009 may require NWA Corp. to repurchasesuch notes in 2008 (and holders of all the notes also have other dates after2009, but prior to maturity, on which NWA Corp. can be required to repurchasesuch notes).

 

OnNovember 23, 2004, the Company completed the restructuring of its $975 millionrevolving bank credit facility, which was scheduled to mature in October 2005,by entering into an Amended and Restated Credit and Guarantee Agreement with aconsortium of lenders that amended and restructured the revolving creditfacility into a term loan.  The term loanhas an initial principal amount of $975 million and is comprised of twotranches bearing different interest rates and with different principalamortization periods.  The first tranche,in the principal amount of $575 million, bears interest at LIBOR plus 51⁄4% andis payable 25% at the end of the first year, 121⁄2% at the end of each of thesecond and third years and 50% at the end of the fifth year.  The second tranche, in the principal amountof $400 million, bears interest at LIBOR plus 63⁄4% and is payable 1% at the endof each of the first five years and 95% at the end of the sixth year, onNovember 23, 2010.  The 25% of the firsttranche and the 1% of the second tranche payable in 2005 (which together total$148 million) have been refinanced — see discussion in “Note 10—SubsequentEvents”.

 

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The term loan is secured by substantially the samecollateral the Company pledged to secure the original revolving bank creditfacility.  The Agreement contains acovenant requiring the Company to maintain unrestricted cash, cash equivalentsand short term investments in an amount not less than $900 million at any time.  In addition, the Agreement contains acovenant that requires the Company to maintain specified ratios of earnings tofixed charges as follows:

 
| **Number of**      | ** ** | ** **                                            | ** ** | **Required**       | ** ** |
|--------------------|------------|-------------------------------------------------------|------------|--------------------|------------|
| **Months Covered** | ** ** | **Period Ending**                                     | ** ** | **Coverage Ratio** | ** ** |
| Nine               |       | December 31, 2004                                     |       | 0.50  to 1.0       |       |
| Twelve             |       | March 31, 2005                                        |       | 0.50  to 1.0       |       |
| -                  |       | June 30, 2005 through March 31, 2006                  |       | Waived             | (1)        |
| Three              |       | June 30, 2006                                         |       | 1.00  to 1.0       |       |
| Six                |       | September 30, 2006                                    |       | 1.05  to 1.0       |       |
| Nine               |       | December 31, 2006                                     |       | 1.15  to 1.0       |       |
| Twelve             |       | March 31, 2007                                        |       | 1.30  to 1.0       |       |
| Twelve             |       | June 30, 2007                                         |       | 1.45  to 1.0       |       |
| Rolling twelve     |       | September 30, 2007 and each quarter ending thereafter |       | 1.50  to 1.0       |       |

 

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(1)          On April 13, 2005, theCompany obtained an amendment that waived the fixed charges coverage covenantassociated with the term loan facility for the periods ending June 30, 2005through March 31, 2006; see further discussion in “Note 10—Subsequent Events”.

 

For purposes of calculating this ratio, earnings aredefined as operating income adjusted to exclude the effects of depreciation,amortization and aircraft rents and to include the effects of interest incomeand governmental reimbursements for losses resulting from developmentsaffecting the aviation industry. Earnings also exclude non-recurring non-cash charges (subject to theinclusion of any cash payments then or thereafter made with respect thereto)and are determined without giving effect to any acceleration of rentalexpense.  Fixed charges are defined asinterest expense and aircraft rents (without giving effect to any accelerationof rental expense).  Although the Companywas in compliance with the covenant on March 31, 2005, continued compliancedepends on many factors, some of which are beyond the Company’s control,including the overall industry revenue environment and the level of fuelcosts.  Thus, there can be no assurance that the Company will be able tosatisfy these requirements through the expiration of the facility.

 

*      Aircraft Commitments.*  Committed expenditures for the 59 aircraftand related equipment on firm order, including estimated amounts for contractualprice escalations and predelivery deposits, will be approximately $936 millionfor the remainder of 2005, $803 million in 2006, $877 million in 2007 and $90million in 2008.  Consistent with priorpractice, the Company intends to finance its aircraft deliveries through acombination of internally generated funds, debt and long-term leasefinancing.  Financing commitmentsavailable for use by the Company are in place for all of the aircraft on firmorder and range from 80% - 100% of each aircraft’s purchase price.  The Company has the option and intends tofinance the CRJ200/440 aircraft through long-term operating lease commitmentsfrom the manufacturer, and if the manufacturer does not provide the financing,the Company is not obligated to take delivery of the aircraft.  These aircraft will, in turn, be leased orsubleased to and operated by a Northwest Airlink carrier.

 

*Pension Funding Obligations.*  TheCompany has several noncontributory pension plans covering substantially all ofits employees.  As of December 31, 2004,the Company’s plans were significantly underfunded as measured under theprovisions of SFAS No. 87, *Employers’Accounting for Pensions*(“SFAS No. 87”).  Projected benefit obligations under the planstotaled $9.25 billion, approximately $3.82 billion in excess of the fair valueof plan assets. Unless future asset returns exceed plan assumptions, theCompany will have to satisfy the underfunded amounts of the plans through cashcontributions over time.  The timing andamount of funding requirements also depend upon a number of other factors,including interest rates, potential changes in pension legislation, the Company’sdecision to make voluntary prepayments, applications for and receipt of waiversto reschedule contributions, and changes to pension plan benefits.

 

OnApril 10, 2004, the President signed into law the Pension Act, which reducedthe Company’s required 2004 and 2005 plan year contributions through twomechanisms: (1) certain companies were permitted to elect partial relief fromthe deficit reduction contribution requirements that otherwise would haveapplied, an election the Company made; and (2) the applicable discount rateused to determine funding was increased to reflect yields on indices of highquality corporate bonds instead of 30-year U.S. Treasury rates.

 

 

18

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Includingthe effect of the Pension Act, the Company’s 2005 calendar year cashcontributions to qualified pension plans is expected to approximate $420million.  On January 14, 2005, theCompany contributed $84 million to these plans. Subsequently, on April 15, 2005, the Company contributed another $92million to these plans, with the balance due during the remainder of 2005.  Absent further legislative relief, authorizationby the IRS to reschedule future contributions, contractual relief under theCompany’s collective bargaining agreements, substantial changes in interestrates, or asset returns significantly above the 9.5% annual rate currentlyassumed, the Company expects our calendar year 2006 and 2007 cash contributionsto be significantly higher than our 2005 cash contributions.

 

**Other Information**

 

*Labor Agreements. *Approximately 89% of the Company’s employees aremembers of collective bargaining agreements. The Company has been in discussions with its labor groups over the pastyear, seeking to obtain competitive wage scales, work rules and benefitplans.  On October 14, 2004, the Companyannounced a tentative agreement with our pilots, represented by the Northwestunit of the ALPA.  The bridge agreementincludes $300 million in annual labor cost savings from the Company’s pilotsand its salaried workers, with pilots agreeing to $265 million in annual wage,benefit and other contract changes and salaried and management employees taking$35 million in annual salary and benefit reductions.  The labor cost reductions became effectiveDecember 1, 2004.  Northwest currently isin contract discussions with representatives of the other labor groups, whichinclude the IAM, the Transport Workers of America, AMFA, PFAA, the NorthwestAirlines Meteorology Association and the Aircraft Technical SupportAssociation.  The collective bargainingagreements with AMFA and PFAA become amendable in May 2005 and the collectivebargaining agreements with IAM are currently amendable.  The Company is currently in mediation withAMFA, IAM and PFAA.  Refer to “Item 1.Business - Risk Factors Related to Northwest and the Airline Industry” in theCompany’s Annual Report on Form 10-K for 2004 for additional discussion relatedto the Company’s labor environment.

 

*Expanded Services Between the U.S. and China.*  On June 18, 2004, the United States and thePeople’s Republic of China agreed to a series of amendments to the 1980 U.S. —China Air Transport Agreement.  Theamendments provide for a significant expansion of air services between the twocountries.  On September 3, 2004, the DOTawarded Northwest six additional U.S. — China all-cargo frequencies, three ofwhich became available to Northwest on November 1, 2004, and three that becameavailable on March 25, 2005.  The Companyis using these frequencies to expand its cargo service to Shanghai, via itscargo hubs in Anchorage and Tokyo. Additionally, on February 22, 2005, the DOT awarded Northwest threeadditional U.S. — China all-cargo frequencies that will become available onMarch 25, 2006.

 

*ForeignCurrency.*  The Companyis exposed to the effect of foreign currency exchange rate fluctuations on theU.S. dollar value of foreign currency-denominated operating revenues andexpenses.  The Company’s largest exposurecomes from the Japanese yen.  From timeto time, the Company uses financial instruments to hedge its exposure to theJapanese yen.  Hedging gains or lossesare recorded in accumulated other comprehensive income (loss) until theassociated transportation is provided, at which time they are recognized as anincrease or decrease in revenue.  TheCompany did not hedge any of its first quarter 2005 or 2004 yen-denominatedsales.  The average yen rate for thequarters ended March 31, 2005 and 2004 was 104 and 107, respectively.  At March 31, 2005, the Company has hedgedapproximately 16% and 5% of its remaining 2005 and 2006 anticipatedyen-denominated sales at an average rate of 105 and 101 yen per U.S. dollar,respectively, and has recorded $0.2 million of unrealized gain in accumulatedother comprehensive income associated with those hedges.

 

      *Aircraft Fuel.*  The Company’s earnings are affected bychanges in the price and availability of aircraft fuel.  On an annual basis, the Company’s mainlineand regional carrier fuel consumption approximates 2.1 billion gallons,producing a $21 million variance for each one-cent change in the cost pergallon of fuel.  From time to time, theCompany manages the price risk of fuel costs by utilizing futures contractstraded on regulated futures exchanges, swap agreements and options.  As of March 31, 2005, there were nooutstanding fuel hedges or unrealized gains (losses) in accumulated othercomprehensive income (loss).  As of March31, 2004, the Company had hedged the price of approximately 27% of itsprojected fuel requirements for the second quarter of 2004 through collarsestablished at a crude oil price of $34 to $39 per barrel.  Comparatively, the average crude oil pricefor the first quarter of 2005 was $50 per barrel.

 

*      DC-9Aircraft. *The Company isimplementing a plan to reduce its active DC-9 aircraft fleet by 30 aircraft in2005.  The Company will continue toevaluate these assets for potential impairment as required under SFAS No. 144, *Accounting for the Impairment or Disposal ofLong-Lived Assets*.  Thisreduction will result in the closing of four heavy maintenance check lines atMinneapolis/St. Paul and the reduction of an estimated 800 Minneapolis/St.Paul-based technical positions during the closure.  Charges related to this hangar closure areexpected to be immaterial.

 

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*Forward-Looking Statements.*  Certain of the statements made throughout Management’sDiscussion and Analysis of Financial Condition and Results of Operations andelsewhere in this quarterly report are forward-looking and are based uponinformation available to the Company on the date hereof.  The Company, through its management, may alsofrom time to time make oral forward-looking statements.  In connection with the “safe harbor”provisions of the Private Securities Litigation Reform Act of 1995, the Companyis hereby identifying important factors that could cause actual results todiffer materially from those contained in any forward-looking statement made byor on behalf of the Company.  Any suchstatement is qualified by reference to the following cautionary statements.

 

TheCompany believes that the material risks and uncertainties that could affectthe outlook of an airline operating in the global economy include, amongothers, the future level of air travel demand, the Company’s future passengertraffic and yields, the airline pricing environment, increased costs forsecurity, the cost and availability of aviation insurance coverage and war riskcoverage, the general economic condition of the United States and other regionsof the world, the price and availability of jet fuel, the aftermath of the warin Iraq, the possibility of additional terrorist attacks or the fear of suchattacks, concerns about SARS or other influenza or contagious illnesses, labornegotiations both at other carriers and the Company, low cost carrierexpansion, capacity decisions of other carriers, actions of the U.S. andforeign governments, foreign currency exchange rate fluctuation, inflation andother factors discussed herein. Additional information with respect to these factors and these and otherevents that could cause differences between forward-looking statements andfuture actual results is contained in “Item 2. Management’s Discussion andAnalysis of Financial Condition and Results of Operations” above, and “Item 1.Business - Risk Factors Related to Northwest and the Airline Industry” and “Item7. Management’s Discussion and Analysis of Financial Condition and Results ofOperations” in the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2004.

 

Developments in any of these areas, as well as other risks anduncertainties detailed from time to time in the Company’s Securities andExchange Commission filings, could cause the Company’s results to differ fromresults that have been or may be projected by or on behalf of the Company.  The Company undertakes no obligation topublicly update or revise any forward-looking statements, whether as a resultof new information, future events or otherwise. These statements deal with the Company’s expectations about the futureand are subject to a number of factors that could cause actual results todiffer materially from the Company’s expectations.  All subsequent written or oralforward-looking statements attributable to the Company, or persons acting onbehalf of the Company, are expressly qualified in their entirety by the factorsdescribed above.

## ** **

## **Item 3**.    Quantitativeand Qualitative Disclosures About Market Risk.

 

Information required by this item is provided underthe captions “Foreign Currency” and “Aircraft Fuel” within “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” inthis Quarterly Report on Form 10-Q.  Alsosee “Item 7a. Quantitative and Qualitative Disclosures About Market Risk” inthe Company’s Annual Report on Form 10-K for 2004.

 

## **Item4**.    Controls andProcedures.

 

**Evaluation of Disclosure Controlsand Procedures —** As of March 31, 2005, management performed anevaluation under the supervision and with the participation of the Company’sPresident and Chief Executive Officer and Executive Vice President and ChiefFinancial Officer of the effectiveness of the design and operation of theCompany’s disclosure controls and procedures covered in this Quarterly Reporton Form 10-Q.  Based on that evaluation,the Company’s President and Chief Executive Officer and Executive VicePresident and Chief Financial Officer concluded that the Company’s disclosurecontrols and procedures are effective in alerting them in a timely manner tomaterial information required to be disclosed in the Company’s periodic reportsfiled with the SEC as of the end of such period.

 

**Changes in Internal Control —** There was nochange in the Company’s internal control over financial reporting that occurredduring the Company’s fiscal first quarter ended March 31, 2005 that hasmaterially affected, or is reasonably likely to materially affect, the Company’sinternal control over financial reporting.

 

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PART II.  OTHER INFORMATION

 

**Item 1****.        Legal Proceedings.**

 

      Reference is made to “Item3. Legal Proceedings” in the Company’s Annual Report on Form 10-K for 2004.

 

      *Series C Preferred Stock Litigation.*  In June 2003, the IBT and certain relatedparties commenced litigation against Northwest Airlines Corporation in New Yorkstate court, *International Brotherhood ofTeamsters, Local 2000 et al. v. Northwest Airlines Corporation* (NewYork Sup. Ct., Case No. 601742/03).  InAugust 2003, the IAM and a related party also commenced litigation againstNorthwest Airlines Corporation in New York state court, *International Association of Machinists and AerospaceWorkers et al. v. Northwest Airlines Corporation* (New York Sup. Ct.,Case No. 602476/03).  Both lawsuitschallenge the Company’s decision not to purchase its Series C Preferred Stockand seek to compel the Company to repurchase the Series C Preferred Stock thathad been put to the Company.  The Companyannounced on August 1, 2003, that the Board of Directors had determined thatthe Company could not legally repurchase the outstanding Series C Preferred Stockat that time because the Board was unable to determine that the Company hadadequate surplus to repurchase the outstanding Series C Preferred Stock.  Discovery has commenced.  Although discovery is not complete, plaintiffshave filed motions for summary judgment, and the Company has filed itsresponse.  The Court held a hearing onthe motion on November 4, 2004.  On March24, 2005, the judge ruled that the Company had breached the arrangementsrelated to the Series C Preferred Stock, and indicated that a trial on damageswould be necessary.  The Company intendsto file a motion for reconsideration and, if necessary, an appeal.  A court decision that adequate statutorysurplus is available for a stock repurchase at this time could result in theCompany having to repurchase without deferral the outstanding Series CPreferred Stock (approximately $270 million as of March 31, 2005).

 

      In addition, in the ordinarycourse of its business, the Company is party to various other legal actionswhich the Company believes are incidental to the operation of itsbusiness.  The Company believes that theoutcome of the proceedings to which it is currently a party will not have amaterial adverse effect on the Company’s consolidated financial statementstaken as a whole.

 

**Item 6****.        Exhibits.**

 

                    (a)       Exhibits:

 

10.1                           Amendment No. 7to A330 Purchase Agreement dated as of January 21, 2005 between AVSA, S.A.R.L.and Northwest Airlines, Inc.

12.1                           Computation ofRatio of Earnings to Fixed Charges

12.2                           Computation ofRatio of Earnings to Fixed Charges and Preferred Stock Requirements

31.1                           Rule13a-14(a)/15d-14(a) Certification of Chief Executive Officer

31.2                           Rule13a-14(a)/15d-14(a) Certification of Chief Financial Officer

32.1                           Section 1350Certification of Chief Executive Officer

32.2                           Section 1350Certification of Chief Financial Officer

 

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#### SIGNATURE

 

      Pursuantto the requirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the Registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized this 5th day of May 2005.

 
|     |  NORTHWEST AIRLINES CORPORATION |
|----------|--------------------------------------|
|     |                                 |
|     | By                                   | /s/  James G. Mathews |   |
|     |                                 | James G. Mathews |
| * * |                                 | *Vice President — Finance and Chief Accounting  Officer (principal accounting officer)* |

 

 

 

EXHIBIT INDEX

 
| **Exhibit  No.** | ** ** | **Description**                                                                                                               |
|------------------|------------|-------------------------------------------------------------------------------------------------------------------------------|
|             |       |                                                                                                                          |
| 10.1             |       | Amendment No. 7 to A330  Purchase Agreement dated as of January 21, 2005 between AVSA, S.A.R.L. and  Northwest Airlines, Inc. |
| 12.1             |       | Computation of Ratio of  Earnings to Fixed Charges                                                                            |
| 12.2             |       | Computation of Ratio of  Earnings to Fixed Charges and Preferred Stock Requirements                                           |
| 31.1             |       | Rule 13a-14(a)/15d-14(a)  Certification of Chief Executive Officer                                                            |
| 31.2             |       | Rule 13a-14(a)/15d-14(a)  Certification of Chief Financial Officer                                                            |
| 32.1             |       | Section 1350 Certification  of Chief Executive Officer                                                                        |
| 32.2             |       | Section 1350 Certification  of Chief Financial Officer                                                                        |

 

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