Among the airlines that have come and gone over the years, Northwest Airlines ranks as not only one of the largest and most influential but also as one that went on to create something larger.
When Northwest Airlines and Delta Air Lines merged in 2008, they created the world’s largest airline, and one that to this date still ranks as the largest in several metrics including assets owned and market capitalization.
Northwest Airlines’ Early Days and the Shift of Its Focus on Asia
Northwest Airlines was founded in 1926 as Northwest Airways and initially served as an airline focused on mail service before expanding into passenger service in 1927. Just two years after its founding, Northwest Airlines started its first international service, to Canada, which would prove the humble beginnings of Northwest’s soon internationally-oriented business.
After trialing transpacific flights during the 1930s, Northwest Airlines eventually started serving Japan with direct services after the end of the Second World War. Northwest Airlines’ route network in Asia quickly expanded, with destinations such as Okinawa, Seoul, Manila, Shanghai, and Taipei added to its offerings.
With its clear post-war focus on Asia, Northwest Airlines adopted the brand name Northwest Orient as it continued introducing new Asia routes and adding capacity with new aircraft. The company was also heavily involved in the foundation of Japan Airlines (JAL) and handled JAL flight operations in the early years of that airline.
While Northwest Airlines evolved to become much more than a domestic and transpacific airline, it remained a pioneer in the Asian aviation market throughout its history as an independent airline.
Notably, Northwest Airlines was the first U.S. airline to launch flights to mainland China after the Chinese Civil War, with one-stop services to Shanghai commencing in 1984. Twelve years later, Northwest also launched the first nonstop flight between China and the United States, strengthening its position as the leading carrier for China-bound travelers in North America.
Northwest Airlines’ Domestic and Transatlantic Expansion
When United Airlines took over Pan American Airways’ pacific division in 1985, Northwest Airlines’ enviable position as the leading U.S. airline in East Asia came under threat. United, with its 50-state-wide domestic network, was now directly in competition with Northwest in the transpacific market.
This prompted Northwest Airlines to expand its domestic feeder network and intensify expansion across the Atlantic, where it was far from as dominant as in the Pacific market.
In 1986, Northwest Airlines acquired Republic Airlines, a significant player in the domestic market, in a move to boost its feeder network and stay competitive against the now much larger United Airlines. The acquisition meant that Northwest now had a feeder network to keep the threat from United at bay, but it also turned out to be a complicated and costly purchase for Northwest Airlines.
By 1989, as ill effects from the problematic integration of Republic Airlines had mostly subsided, Northwest was bought out by a consortium of investors that included KLM in a leveraged buyout that turned out extremely costly for the company.
To meet debt obligations, Northwest offloaded assets—including aircraft—and forced employee groups to accept lowered salaries to stay afloat amid the Gulf War, which added further strain to Northwest’s business. As Northwest Airlines finally turned a profit again in 1993, it still found itself in a situation where it was lagging behind large competitors in the transatlantic market.
Fortunately for Northwest, a solution emerged in one of its owners, KLM, with which it entered a strategic alliance.
With KLM’s transatlantic and European routes now part of its network, Northwest Airlines was essentially covered on all fronts through its long-running transpacific network, its domestic network boosted by the acquisition of Republic Airlines, and now also across the Atlantic thanks to KLM.
Facing and Surviving Bankruptcy
Northwest Airlines’ eventually successful integration of Republic Airlines and its strategic partnership with KLM allowed the airline to return to profitability and some degree of stability. However, by the turn of the millennium, Northwest faced new challenges that forced it to file for bankruptcy protection in 2005.
Leading up to Northwest’s bankruptcy filing were numerous challenges that severely hampered the airline’s profitability. Arguably the most important of those was the rising competition from U.S. low-cost carriers in combination with rising labor costs.
Issues were further compounded by the tragic 9/11 terrorist attacks, which caused customer demand for air travel to plummet.
Internal factors also played a role in Northwest Airlines’ precarious financial situation in the early 2000s, though. For instance, Northwest Airlines refused to follow U.S. airline peers in raising ticket prices in 2004—winning it customers but costing it some much-needed potential profits.
Further, Northwest’s ambitious expansion into the burgeoning Chinese market quickly came to a halt with the outbreak of severe acute respiratory syndrome (SARS) in 2002, crippling the company’s expansion efforts in its historically significant Asia aviation market.
When Northwest Airlines was forced to file for bankruptcy protection in 2005, it was nevertheless far from alone. By that time, three other major U.S. airlines – Delta Air Lines, United Airlines, and US Airways – had already filed for bankruptcy protection.
Fortunately, Northwest Airlines successfully emerged from bankruptcy protection in 2007 after aggressively cutting costs and selling off assets. Northwest Airlines lived to fight another day.
Becoming Part of Something Larger to Become the Largest
The aviation industry Northwest Airlines was faced with as it emerged from bankruptcy was one of high fuel costs and many competitors—not unlike the environment which had contributed to its bankruptcy filing in the first place.
Delta, which had emerged from bankruptcy protection just a few weeks prior, was in a similar position. However, not even a year after that, the merger of the two airlines was announced.
While the merger meant the complete disappearance of the Northwest Airlines brand, it did mean that both airlines would enjoy greater economies of scale and a chance to regain trust among consumers after a turbulent period for both airlines.
Before the merger, Northwest Airlines ranked as the United States’ fifth-largest airline. The merger propelled it to become the world’s largest airline in practically every metric until the American Airlines-US Airways merger half a decade later.
Now, over a decade after the merger, Delta Air Lines is still alive and well, ranking as the most profitable airline in the Fortune 500. Although some may still be displeased with the Northwest Airlines brand no longer being around, the eventual fate of both Delta and Northwest turned out much better than many had ever envisioned with both companies in bankruptcy protection.
Even though the Northwest Airlines brand has completely disappeared from aircraft and airports around the world, it would be wrong to put Northwest in the same category as failed airlines that suffered catastrophic bankruptcies or declines into irrelevancy.
That’s not to say that the story of Northwest Airlines is one of immense success, either. Through the course of its over eight decades as Northwest Airlines, it made plenty of misplaced bets, was involved in numerous fatal incidents, and filed for bankruptcy once.
Or, in other words, it was quite an ordinary major airline.