form 10-k -...

FORM 10-KNORTHWEST AIRLINES CORP - NWAFiled: February 29, 2008 (period: December 31, 2007)

Annual report which provides a comprehensive overview of the company for the past year

Table of Contents

10-K - 10-K

Part III

PART I

Item 1. BUSINESS Item

1A.RISK FACTORS

Item1B.

UNRESOLVED STAFF COMMENTS

Item 2. PROPERTIES Item 3. LEGAL PROCEEDINGS Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS PART II

Item 5. MARKET FOR REGISTRANT S COMMON EQUITY, RELATEDSTOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES

Item 6. SELECTED FINANCIAL DATA Item 7. Management s Discussion and Analysis of Financial Condition and Results of

Operations and Item 8. Consolidated Financial Statements andSupplementary Data are integral to understanding the selected financial datapresented in the table above.

Item7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK

Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARYDATA

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING AND FINANCIAL DISCLOSURE

Item9A.

CONTROLS AND PROCEDURES

Item9B.

OTHER INFORMATION

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Item 11. EXECUTIVE COMPENSATION Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ANDDIRECTOR INDEPENDENCE

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES SIGNATURES

EX-10.5 (EX-10.5)

EX-10.6 (EX-10.6)

EX-10.7 (EX-10.7)

EX-10.22 (EX-10.22)

EX-12.1 (EX-12.1)

EX-12.2 (EX-12.2)

EX-21.1 (EX-21.1)

EX-23.1 (EX-23.1)

EX-31.1 (EX-31.1)

EX-31.2 (EX-31.2)

EX-32.1 (EX-32.1)

EX-32.2 (EX-32.2)

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

⌧

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007

OR

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

Commission file number 0-23642

NORTHWEST AIRLINES CORPORATION(Exact name of registrant as 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 telephone number, including area code(612) 726-2111

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on which registeredCommon Stock, par value $0.01 per share

The New York Stock Exchange

Preferred Stock Purchase Rights

The New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ⌧ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o No ⌧ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the preceding 12 months (or for such shorter 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 ⌧ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will

not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in

Source: NORTHWEST AIRLINES C, 10-K, February 29, 2008

Part III of this Form 10-K or any amendment to this Form 10-K.⌧ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See

definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ⌧ Accelerated filer o Non-accelerated filer o Smaller Reporting Companyo

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No ⌧

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 29, 2007 was $4.3 billion. Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of

the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ⌧ No o As of January 31, 2008, there were 236,427,125 shares of the registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE Part III of this Form 10-K incorporates by reference certain information from the registrant’s definitive Proxy Statement for its

2008 Annual Meeting of Stockholders to be filed with the Securities Exchange Commission.


PART I

Item 1. BUSINESS

Northwest Airlines Corporation (“NWA Corp.” and, together with its subsidiaries, the “Company”) is the direct parentcorporation of Northwest Airlines, Inc. (“Northwest”). Unless otherwise indicated, the terms “we,” “us,” and “our” refer to NWACorp. and all consolidated subsidiaries. Northwest operates the world’s seventh largest airline, as measured by 2007 revenuepassenger miles (“RPMs”), and is engaged in the business of transporting passengers and cargo. Northwest began operations in 1926. Northwest’s business focuses on the operation of a global airline network through its strategic assets that include:

• domestic hubs at Detroit, Minneapolis/St. Paul and Memphis;• an extensive Pacific route system with a hub in Tokyo;• a transatlantic joint venture with KLM Royal Dutch Airlines (“KLM”), which operates through a hub in Amsterdam;• a domestic and international alliance with Continental Airlines, Inc. (“Continental”) and Delta Air Lines, Inc. (“Delta”);• membership in SkyTeam, a global airline alliance with KLM, Continental, Delta, Air France, Aeroflot, Aeromexico,

Alitalia, China Southern, CSA Czech Airlines, and Korean Air;• agreements with three domestic regional carriers, including Pinnacle Airlines, Inc. (“Pinnacle”), Mesaba Aviation, Inc.

(“Mesaba”), a wholly-owned subsidiary, and Compass Airlines, Inc. (“Compass”), a wholly-owned subsidiary, all ofwhich operate as Northwest Airlink carriers;

• a cargo business that operates a dedicated freighter fleet of aircraft through hubs in Anchorage and Tokyo.

Northwest’s business strategies are designed to utilize these assets to the Company’s competitive advantage. The Company maintains a Web site at http://www.nwa.com. Information contained on the Company’s Web site is notincorporated into this annual report on Form 10-K. Annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports onForm 8-K, all amendments to those reports and other information about the Company are available free of charge through its Web siteat http://ir.nwa.com as soon as reasonably practicable after those reports are electronically filed with or furnished to the Securities andExchange Commission (“SEC”). See “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results ofOperations — Overview” for a discussion of trends and factors affecting the Company and the airline industry. The Company ismanaged as one cohesive business unit, but employs various strategies specific to the geographic regions in which it operates. See“Item 8. Consolidated Financial Statements and Supplementary Data, Note 20 — Geographic Regions” for a discussion ofNorthwest’s operations by geographic region. Chapter 11 Proceedings

Background and General Bankruptcy Matters. The following discussion provides general background information regarding theCompany’s Chapter 11 cases, and is not intended to be an exhaustive summary. Detailed information pertaining to the bankruptcyfilings may be obtained at http://www.nwa-restructuring.com. See also “Item 8. Consolidated Financial Statements andSupplementary Data, Note 1 — Voluntary Reorganization Under Chapter 11 Proceedings.” Information contained on the Company’sWeb site is not incorporated into this annual report on Form 10-K.

On September 14, 2005 (the “Petition Date”), NWA Corp. and 12 of its direct and indirect subsidiaries (collectively, the

“Debtors”) filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code with the United StatesBankruptcy Court for the Southern District of New York (the “Bankruptcy Court”). Subsequently, on September 30, 2005, NWAAircraft Finance, Inc., an indirect subsidiary of NWA Corp., also filed a voluntary petition for relief under Chapter 11. On May 18,2007, the Bankruptcy Court entered an order approving and confirming the Debtors’ First Amended Joint and Consolidated Plan ofReorganization Under Chapter 11 of the Bankruptcy Code (as confirmed, the “Plan” or “Plan of Reorganization”). The Plan becameeffective and the Debtors emerged from bankruptcy protection on May 31, 2007 (the “Effective Date”). On the Effective Date, theCompany implemented fresh-start reporting in accordance with the American Institute of Certified Public Accountants Statement ofPosition 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code (“SOP 90-7”).

As a result of the application of fresh-start reporting in accordance with SOP 90-7 upon the Company’s emergence from

bankruptcy on May 31, 2007, the financial statements prior to June 1, 2007 are not comparable with the financial statements forperiods on or after June 1, 2007. References to “Successor Company” refer to the Company on or after June 1, 2007, after givingeffect to the application of fresh-start reporting. References to “Predecessor Company” refer to the Company prior to June 1, 2007. See “Item 8. Consolidated Financial Statements and Supplementary Data, Note 2 — Fresh-Start Reporting” for further details.

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The Plan generally provided for the full payment or reinstatement of allowed administrative claims, priority claims, and secured

claims, and the distribution of new common stock of the Successor Company to the Debtors’ creditors, employees and others insatisfaction of allowed unsecured claims. The Plan contemplates the issuance of approximately 277 million shares of new commonstock by the Successor Company (out of the 400 million shares of new common stock authorized under its amended and restatedcertificate of incorporation), as follows:

• 225.8 million shares of common stock are issuable to holders of certain general unsecured claims;• 8.6 million shares of common stock are issuable to holders of guaranty claims;• 27.8 million shares of common stock were issued pursuant to the Rights Offering and an Equity Commitment Agreement;

and• 15.2 million shares of common stock are subject to awards under a management equity plan.

The new common stock is listed on the New York Stock Exchange (the “NYSE”) and began trading under the symbol “NWA” on

May 31, 2007. Pursuant to the Plan of Reorganization, stockholders of NWA Corp. prior to the Effective Date received nodistributions and their stock was cancelled.

In connection with the consummation of the Plan of Reorganization, on the Effective Date, the Company’s existing $1.225 billion

Senior Corporate Credit Facility (“Bank Credit Facility”) was converted into exit financing in accordance with its terms. See “Item 8.Consolidated Financial Statements and Supplementary Data, Note 8 — Long-Term Debt and Short-Term Borrowings” for additionalinformation.

Operations and Route Network

Northwest and its Airlink partners operate substantial domestic and international route networks and directly serve as many as239 destinations in 21 countries in North America, Asia and Europe.

Domestic System

Northwest operates its domestic system through its hubs at Detroit, Minneapolis/St. Paul and Memphis. Detroit. Detroit is the eighth largest origination/destination hub in the United States (“U.S.”). Northwest and its Airlink carriers

together serve 146 destinations from Detroit. For the six months ended June 30, 2007, they enplaned 55% of originating passengersfrom Detroit, while the next largest competitor enplaned 11%.

Minneapolis/St. Paul. Minneapolis/St. Paul is the ninth largest origination/destination hub in the U.S. Northwest and its Airlink

carriers together serve 149 destinations from Minneapolis/St. Paul. For the six months ended June 30, 2007, they enplaned 59% oforiginating passengers from Minneapolis/St. Paul, while the next largest competitor enplaned 10%.

Memphis. Memphis is the sixteenth largest origination/destination hub in the U.S. Northwest and its Airlink carriers together

serve 84 destinations from Memphis. For the six months ended June 30, 2007, they enplaned 58% of originating passengers fromMemphis, while the next largest competitor enplaned 10%.

Other Domestic System Operations. Domestic “non-hub” operations include service to as many as 19 destinations from

Indianapolis, service from several heartland cities to New York, Washington D.C. and Florida destinations, and service from severalwest coast gateway cities to Hawaii.

International System

Northwest operates international flights to the Pacific and/or the Atlantic regions from its Detroit, Minneapolis/St. Paul and

Memphis hubs, as well as from gateway cities including Boston, Hartford, Honolulu, Los Angeles, San Francisco, Seattle, andPortland.

Pacific. Northwest has served the Pacific market since 1947 and has one of the largest Pacific route networks of any U.S. carrier.

Northwest’s Pacific operations are centered at Narita International Airport in Tokyo, where it has 375 permanent weekly takeoffs andlandings (“slots”) as of December 31, 2007, the most for any non-Japanese carrier. Under the U.S. — Japan bilateral aviationagreement, Northwest is one of two U.S. carriers with the right to operate unlimited frequencies between any point in the U.S. andJapan. Northwest also enjoys “fifth freedom” rights that allow Northwest to operate service from any gateway in Japan to pointsbeyond Japan and to carry Japanese originating passengers. Northwest and United Airlines, Inc. (“United”) are the only U.S.passenger carriers that have fifth freedom rights from Japan. Northwest uses its slots and bilateral rights to operate a network linkingseven U.S. gateways and 12 Asian destinations via Tokyo. The Asian destinations served via Tokyo are Bangkok, Beijing, Busan,Guam, Guangzhou, Hong Kong, Manila, Nagoya, Saipan, Seoul, Shanghai, and Singapore. Additionally, Northwest flies nonstopbetween Detroit and Osaka and Nagoya, and uses its fifth freedom rights to fly beyond Osaka to Taipei and beyond Nagoya to


Manila. Northwest also operates nonstop service between Nagoya and Guam and Saipan and between Osaka and Guam, Honolulu,and Saipan.

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Recently, the Company was awarded new route authorities to provide nonstop service from Detroit to Shanghai beginning in

March 2009. When combined with our existing China route authorities and our slot position at Narita International Airport, theCompany is well positioned to meet growing demand in China and maintain our leadership position in the Pacific.

Atlantic. Northwest and KLM operate an extensive transatlantic network pursuant to a commercial and operational joint venture.

This joint venture benefits from having antitrust immunity, which allows for coordinated pricing, scheduling, product developmentand marketing. In 1992, the U.S. and the Netherlands entered into an “open-skies” bilateral aviation treaty, which authorizes theairlines of each country to provide international air transportation between any U.S. — Netherlands city pair and to operate connectingservice to destinations in other countries. Northwest and KLM operate joint service between Amsterdam and 18 cities in the U.S.,Canada and Mexico, as well as between Amsterdam and India. Codesharing between Northwest and KLM has been implemented onflights to 65 European, eight Middle Eastern, 14 African, eight Asian and 184 North American cities. Codesharing is an agreementwhereby an airline’s flights can be marketed under the two-letter designator code of another airline, thereby allowing the two carriersto provide joint service with one aircraft. The Northwest-KLM joint venture can be terminated by either party on three years’ notice. In May 2004, Air France acquired KLM, and KLM and Air France became wholly-owned subsidiaries of a new holding company. OnJune 28, 2007, Northwest and KLM, together with Air France, Delta, Alitalia, and CSA Czech Airlines filed a joint application forantitrust immunity with the U.S. Department of Transportation (“DOT”). If approved, this application would enable Northwest,KLM, Delta and Air France to cooperate under an expanded transatlantic joint venture. On October 18, 2007, the DOT entered ascheduling order which establishes a timeline for consideration of Northwest’s application for expanded antitrust immunity with itsSkyTeam alliance partners KLM, Air France, Delta, Alitalia, and CSA Czech Airlines.

In April 2007, the U.S. and the European Union (“E.U.”) approved an “open skies” air services agreement that provides airlines

from the U.S. and E.U. Member States open access to each others’ markets, with freedom of pricing and unlimited rights to fly beyondthe U.S. and beyond each E.U. Member State. Under the open skies agreement, which goes into effect on March 30, 2008, every U.S.and E.U. airline is authorized to operate between airports in the U.S. and London’s Heathrow, Gatwick and other airports. As a resultof the open skies agreement, the Company announced an expansion of its transatlantic route network with three new daily nonstopflights to London Heathrow from Detroit, Minneapolis/St. Paul and Seattle. Scheduled to begin in the spring of 2008, the Company’snew nonstop service will provide its passenger’s access to Heathrow for the first time.

See “Item 8. Consolidated Financial Statements and Supplementary Data, Note 20 — Geographic Regions” for a discussion of

Northwest’s operations by geographic region. Alliances In addition to its transatlantic joint venture with KLM, Northwest has strengthened its network through other alliance

partnerships. Long-term alliances are an effective way for Northwest to enter markets that it would not be able to serve alone. Alliance relationships can include codesharing, reciprocal frequent flyer programs, “through” luggage check-in, reciprocal airportlounge access, joint marketing, sharing of airport facilities and joint procurement of certain goods and services.

Since 1998, Northwest and Continental have been in a domestic and international commercial alliance that connects the two

carriers’ networks and includes extensive codesharing, frequent flyer program reciprocity and other cooperative marketing programs. The alliance agreement has a term through December 31, 2025.

In August 2002, the Company entered into a commercial alliance agreement with Continental and Delta. This agreement is

designed to connect the three carriers’ domestic and international networks and provides for codesharing, reciprocity of frequent flyerprograms, airport club use and other cooperative marketing programs. The combined network has increased Northwest’s presence inthe South, East and Mountain West regions of the U.S., as well as in Latin America. The alliance agreement has a term throughJune 12, 2013, and contemplates a five year renewal term.

In September 2004, Northwest, together with KLM and Continental, joined the global SkyTeam Alliance. The addition of

Northwest, KLM and Continental made SkyTeam the world’s second largest airline alliance. The eleven members of the SkyTeamAlliance, Northwest, KLM, Continental, Delta, Air France, Alitalia, Aeromexico, China Southern, CSA Czech Airlines, Korean Air,and Aeroflot and three associate members - Air Europa, Copa Airlines, and Kenya Airways currently serve over 427 millionpassengers annually with more than 16,400 daily departures to 841 destinations in 162 countries. Northwest customers are now ableto accrue and redeem frequent flyer miles in their WorldPerks accounts and enjoy travel on any flight operated by a SkyTeam Alliancemember carrier. This alliance affords customers the benefits and service options when traveling on multiple airlines while beingtreated similarly to a customer traveling on a single airline. The alliance agreement has a term through June 12, 2012, and if notterminated on that date, continues in effect for five more years.

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Northwest also has domestic frequent flyer and codesharing agreements with several other airlines including Alaska Airlines,

Horizon Air, Hawaiian Airlines, American Eagle, Midwest Airlines, and Gulfstream International Airlines. In the Pacific, Northwesthas frequent flyer agreements with Malaysia Airlines, Japan Airlines, Jet Airways of India, Cebu Pacific Airlines, Air Tahiti Nui,Kingfisher Airlines, and China Airlines. In the Atlantic, in addition to its extensive relationship with KLM, Northwest has a frequentflyer agreement with Malev Hungarian Airlines.

Regional Partnerships Northwest has airline services agreements (“ASAs”) with three regional carriers: Pinnacle, Mesaba and Compass. Pursuant to the

ASAs, these regional carriers are required to operate their flights under the Northwest “NW” code and operate as Northwest Airlink. The purpose of these ASAs is to provide service to small cities and more frequent service to larger cities, increasing connecting trafficat Northwest’s domestic hubs. The business terms of these agreements involve capacity purchase arrangements. Under thesearrangements, Northwest controls the scheduling, pricing, reservations, ticketing and seat inventories for Pinnacle, Mesaba andCompass flights. Northwest is entitled to all ticket, cargo and mail revenues associated with these flights. The regional carriers arepaid based on operations for certain expenses and receive reimbursement for other expenses.

Pinnacle Airlines. Pinnacle operated 137 of Northwest’s fleet of Bombardier Canadair Regional Jet (“CRJ”) CRJ200 aircraft as

of December 31, 2007. As of December 31, 2006, the Company owned 11.4% of the Common Stock of Pinnacle Airlines Corp. andaccounted for this investment under the equity method of accounting. On November 29, 2007, the Company entered into a stockredemption agreement with Pinnacle Airlines Corp., pursuant to which Pinnacle repurchased the Company’s 11.4% equity interest inPinnacle common stock for $32.9 million. The Company recorded a loss on the sale of common stock of $14.2 million in the fourthquarter 2007.

In January 2008, Northwest sold its Class A Preferred share to Pinnacle for a purchase price of $20 million. The Class A

Preferred share was marked-to-market upon Northwest’s adoption of fresh-start reporting; therefore, no gain or loss was recognizedupon the sale.

On January 11, 2007, the Bankruptcy Court approved the Amended Airline Services Agreement with Pinnacle (“Amended

Pinnacle ASA”) between the Predecessor Company and Pinnacle. The Amended Pinnacle ASA provides that Pinnacle Airlines willcontinue to be a long-term partner of Northwest through at least 2017. In addition to reaching terms on an amended airline servicesagreement, Northwest granted Pinnacle an allowed general unsecured claim of $377.5 million for full and final satisfaction of any andall claims filed against the Predecessor Company, which resulted in an incremental charge to reorganization expense of $306.7 millionduring the first quarter of 2007. The Amended Pinnacle ASA and related agreements provide Northwest with, among other things,certainty of Pinnacle’s performance at rates consistent with Northwest’s cost savings targets and resolution of the Pinnacle claims.

Mesaba. As of December 31, 2007, Mesaba was the operator of 49 Saab 340 turbo-prop aircraft, four CRJ200 aircraft, and 13

CRJ900 aircraft. On October 13, 2005, Mesaba filed a voluntary petition for relief under Chapter 11 of the United States BankruptcyCode in the United States Bankruptcy Court for the District of Minnesota (Case No. 05-39258 (GFK)).

On January 22, 2007, the Predecessor Company entered into a Stock Purchase and Reorganization Agreement with Mesaba under

which the Predecessor Company agreed to purchase all of the equity interests in Mesaba following its reorganization under Chapter 11and granted the Mesaba estate a general unsecured claim of $145 million for full and final satisfaction of any and all claims filedagainst the Predecessor Company. The Predecessor Company also agreed to resolve all outstanding claims with Mesaba’s parent,MAIR Holdings, Inc. (“MAIR”) and to sell MAIR all of Northwest’s stock in MAIR. Mesaba filed its plan of reorganization (the“Mesaba Plan”) and its disclosure statement with respect to the Mesaba Plan (the “Mesaba Disclosure Statement”) with the UnitedStates Bankruptcy Court for the District of Minnesota on January 22, 2007 and January 24, 2007, respectively. The Mesaba Plan wasconfirmed on April 10, 2007. In conjunction with the consummation of Mesaba’s Plan, Mesaba was acquired by Northwest Airlineson April 24, 2007 and became a wholly-owned consolidated subsidiary.

Compass. Compass Airlines, Inc., a wholly-owned indirect subsidiary of NWA Corp., operates as a Northwest Airlink carrier. Compass received its Federal Aviation Administration certification to begin commercial passenger operations on April 5, 2007, andcommenced flight operations on May 2, 2007, with its first CRJ200 revenue flight. Subsequently, on August 21, 2007, Compasscompleted its first revenue flight with the new dual class 76-seat Embraer 175 regional jet aircraft. As of December 31, 2007,Compass was the operator of nine Embraer 175 aircraft.

See “Item 8. Consolidated Financial Statements and Supplementary Data, Note 19 — Related Party Transactions” regarding theCompany’s transactions with Pinnacle.

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Cargo The Company is the largest cargo carrier among U.S. passenger airlines based on revenue, and the only one to operate a dedicated

freighter fleet. In 2007, cargo accounted for 6.7% of the Company’s operating revenues, with approximately 76% of its cargorevenues resulting from cargo originating in or destined for Asia. Through its cargo hubs in Anchorage and Tokyo, the Companyserves most major air freight markets between the U.S. and Asia with a fleet of dedicated Boeing 747-200 freighter aircraft. Inaddition to revenues earned from the dedicated freighter fleet, the Company also generates cargo revenues in domestic andinternational markets through the use of cargo space on its passenger aircraft.

Effective September 30, 2005, Northwest Airlines Cargo joined SkyTeam Cargo. SkyTeam Cargo is the largest global airline

cargo alliance. The eight members of SkyTeam Cargo, Northwest Airlines Cargo, Aeromexico Cargo, Air France Cargo, AlitaliaCargo, CSA Czech Airlines Cargo, Delta Air Logistics, KLM Cargo, and Korean Air Cargo, currently serve more than 728destinations in more than 149 countries on six continents. This alliance offers customers a consistent standard of performance, qualityand detailed attention to service.

Other Travel Related Activities

MLT Inc. MLT Inc. (“MLT”), an indirect wholly-owned subsidiary of NWA Corp., is among the largest vacation wholesalecompanies in the U.S. MLT develops and markets Worry-Free Vacations that include air transportation, hotel accommodations andcar rentals. In addition to its Worry-Free Vacations charter programs, MLT markets and supports Northwest’s WorldVacations travelpackages to destinations throughout the U.S., Canada, Mexico, the Caribbean, Europe and Asia, primarily on Northwest. Thesevacation programs, in addition to providing a competitive and quality tour product, increase the sale of Northwest services andpromote and support new and existing Northwest destinations. In 2007, MLT had $506 million in operating revenues.

Frequent Flyer Program. Northwest operates a frequent flyer loyalty program known as “WorldPerks.” WorldPerks is designed

to retain and increase traveler loyalty by offering incentives to travelers for their continued patronage. Under the WorldPerksprogram, miles are earned by flying on Northwest or its alliance partners and by using the services of program partners for such thingsas credit card use, hotel stays, car rentals and other activities. Northwest sells mileage credits to the program and alliance partners. WorldPerks members accumulate mileage in their accounts and later redeem mileage for free or upgraded travel on Northwest andalliance partners. WorldPerks members that achieve certain mileage thresholds also receive enhanced service benefits from Northwestsuch as special service lines, advance flight boarding and upgrades.

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Employees

The airline industry is labor-intensive and as of December 31, 2007, the Company had approximately 34,000 full-time equivalentemployees of whom approximately 1,900 were foreign nationals working primarily in Asia. Unions represent approximately 80% ofthe Company’s employees. Collective bargaining agreements (“CBAs”) provide standards for wages, hours of work, workingconditions, settlement of disputes and other matters. The major agreements with domestic employees will become amendable onvarious dates as follows:

Employee Group

ApproximateNumber ofFull-time

EquivalentEmployees

Covered

Union

AmendableDate

Northwest Airlines, Inc.

Pilots

4,500

Air Line Pilots Association, International (“ALPA”)

12/31/2011 Agents and Clerks

6,000

International Association of Machinists &Aerospace Workers (“IAM”)

12/31/2011*

Equipment Service Employees and

Stock Clerks

5,000

International Association of Machinists &Aerospace Workers (“IAM”)

12/31/2011*

Flight Attendants

7,700

Association of Flight Attendants - CommunicationWorkers of America (“AFA-CWA”)

12/31/2011

Mechanics and Related Employees

900

Aircraft Mechanics Fraternal Association(“AMFA”)

12/31/2011

Mesaba Aviation, Inc.

Pilots

1,000


12/1/2010 Flight Attendants

400

Association of Flight Attendants - CommunicationWorkers of America (“AFA-CWA”)

12/1/2010

Mechanics and Related Employees

200

Aircraft Mechanics Fraternal Association(“AMFA”)

12/1/2010

Compass Airlines, Inc.

Pilots

150


4/1/2013

* Assumes the Company will exercise its contractual right to unilaterally extend this agreement one year past its original amendabledate of December 31, 2010.

Regulation

General. The Airline Deregulation Act of 1978, as amended, eliminated domestic economic regulation of passenger and freightair transportation in many regards. Nevertheless, the industry remains regulated in a number of areas. The DOT has jurisdiction overinternational route authorities and various consumer protection matters, such as advertising, denied boarding compensation, baggageliability and access for persons with disabilities. Northwest is subject to regulations of the DOT and the Federal AviationAdministration (“FAA”) because it holds certificates of public convenience and necessity, air carrier operating certificates and otherauthority granted by those agencies. The FAA regulates flight operations, including air space control and aircraft standards,maintenance, ground facilities, transportation of hazardous materials and other technical matters. The Department of Justice (“DOJ”)has jurisdiction over airline competition matters, including mergers and acquisitions, under federal antitrust laws. The TransportationSecurity Administration (“TSA”) regulates airline and airport security. Other federal agencies have jurisdiction over postaloperations, use of radio facilities by aircraft and certain other aspects of Northwest’s operations.

International Service. Northwest operates its international routes under route certificates and other authorities issued by the DOT.

Many of Northwest’s international route certificates are permanent and do not require renewal by the DOT. Certain otherinternational route certificates and other authorities are temporary and subject to periodic renewal. Northwest requests renewals ofthese certificates and other authorities when and as appropriate. The DOT typically renews temporary authorities on routes when theauthorized carrier is providing a reasonable level of service. With respect to foreign air transportation, the DOT must approveagreements between air carriers, including codesharing agreements, and may grant antitrust immunity for those agreements in somesituations.


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Northwest’s right to operate to foreign countries, including Japan, China and other countries in Asia and Europe, is governed by

aviation agreements between the U.S. and the respective foreign countries. Many aviation agreements permit an unlimited number ofcarriers to operate between the U.S. and a specific foreign country, while others limit the number of carriers and flights on a giveninternational route. From time to time, the U.S. or its foreign country counterpart may seek to renegotiate or cancel an aviationagreement. In the event an aviation agreement is amended or cancelled, such a change could adversely affect Northwest’s ability tomaintain or expand air service to the relevant foreign country.

Operations to and from foreign countries are subject to the applicable laws and regulations of those countries. There are

restrictions on the number and timing of operations at certain international airports served by Northwest, including Tokyo. Additionally, slots for international flights are subject to certain restrictions on use and transfer.

On March 30, 2008, a new Air Transport Agreement between the U.S. and the E.U. Member States will go into effect. This

Agreement will create new competitive opportunities and competition on routes between the U.S. and Europe and, among otherthings, will enable Northwest to commence services to London Heathrow Airport, subject to the availability of slots.

Consumer Protection. In November 2007, the DOT issued a proposal to increase by 100 percent the minimum amount of

compensation that airlines must pay to consumers who have been denied boarding on oversold flights. That rulemaking proceeding ispending.

In December 2007, a U.S. District Court ruled that passenger “bill of rights” legislation enacted by New York State, whichimposes requirements on airlines additional to those imposed by federal law and regulation, was not preempted by federal law. Anappeal of that decision has been filed with a U.S. Court of Appeals and is pending.

Aviation Security. The TSA regulates civil aviation security under the Aviation and Transportation Security Act (“AviationSecurity Act”). This law federalized substantially all aspects of civil aviation security and requires, among other things, theimplementation of certain security measures by airlines and airports, such as the requirement that all passenger bags be screened forexplosives. Since the events of September 11, 2001, Congress has mandated, and the TSA has implemented, numerous securityprocedures that have imposed and will continue to impose additional compliance responsibilities and costs on airlines. Funding forairline and airport security under the law is provided in part by a $2.50 per segment passenger security fee, subject to a limit of $10per roundtrip. In addition, the law authorizes the TSA to impose an air carrier fee, capped by the aggregate of costs paid by all aircarriers in calendar year 2000 for screening passengers and property. The per-carrier limit is capped at the amount expended by thatindividual air carrier in calendar year 2000. This cap is to remain in effect until the TSA revises the per-carrier limit by market shareor any other appropriate method. In the fiscal year 2005 Department of Homeland Security Appropriations Act, Congress required theGovernment Accountability Office (“GAO”) to conduct a review of the carrier reported costs; as a result of this review, the GAOestimated that the industry-wide aviation security costs were underreported, suggesting that some carriers may not have paid theappropriate air carrier fee. The industry, through the Air Transport Association, raised strong objections to the GAO’s conclusionsand the methodologies used in reaching such conclusions. In January 2006, the TSA adopted the GAO’s findings and assessed theCompany and a number of U.S. and foreign carriers with a substantial increase in the additional security fee which would be imposedretroactively to the beginning of 2005, and continuing into 2006 and future years. In February 2006, the affected carriers protested thefee increase through an administrative proceeding at the TSA. In May 2007, the TSA issued Final Decisions ordering the Companyand the other affected carriers to pay the additional assessments for 2005 and 2006. Under protest and reserving its rights of appeal,the Company paid the accrued assessments in July 2007 and is paying them going forward. The Company and other affected carriershave requested judicial review of the TSA’s fee assessment in federal court. It is expected that aviation security laws and processeswill continue to be under review and subject to change by the federal government in the future.

In November 2004, the TSA implemented a test of a passenger pre-screening program, named “Secure Flight,” utilizing

passenger data provided to the TSA by U.S. airlines, and in August 2007 the TSA issued a rulemaking notice regardingimplementation of the program. On December 17, 2004, the president signed into law the Intelligence Reform and TerrorismPrevention Act of 2004, which requires the TSA to take additional actions regarding passenger and air cargo security. InOctober 2006, new TSA requirements for security of cargo on passenger and all-cargo aircraft went into effect. In August 2007, thepresident signed into law the Implementing Recommendations of the 9/11 Commission Act of 2007, which requires the TSA toestablish, within three years, a system for screening 100 percent of cargo transported on passenger aircraft to, from or within the U.S.

On April 7, 2005, the Bureau of Customs and Border Protection (“CBP”) issued a rule requiring airlines, for security screening

purposes, to electronically transmit passenger and crew data to the CBP before flights arrive in or depart from the U.S. InAugust 2007, the CBP issued a new rule establishing methods and new procedures for the transmission of passenger data, effectiveFebruary 2008. The CBP also published a final rule in December 2003 requiring airlines to electronically transmit cargo data beforecargo arrives in and departs from the U.S.

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Airport Access. Four of the nation’s airports, Chicago O’Hare, LaGuardia (New York), Kennedy International (New York) and

Ronald Reagan National (Washington, D.C.), were designated by the FAA as “high density traffic airports.” The number of takeoffand landing slots at these airports was limited during certain peak demand time periods. Legislation passed in March 2000 resulted inthe elimination of slot restrictions, effective July 2002 at Chicago O’Hare and January 2007 at LaGuardia and Kennedy International. In August 2004, the FAA implemented temporary restrictions at Chicago O’Hare to limit congestion. The Chicago O’Harerestrictions became a Final Rule effective October 2006 and will continue through October 2008. The FAA also decided not toeliminate slot restrictions at LaGuardia as planned due to continued congestion; carriers are currently operating under a Final Order atLaGuardia, pending the outcome of an FAA rulemaking process. The Final Order will remain in effect until at least November 2008,the earliest that a Final Rule at LaGuardia could be put in place. The FAA also set hourly caps at Kennedy International beginningMarch 15, 2008 continuing through 2009. Newark Liberty Airport has been designated by the FAA as a “level 3 coordinated airport”for the summer 2008 season, requiring airlines to seek advance schedule approval from the FAA. The FAA permits the buying,selling, trading or leasing of slots subject to certain restrictions.

In January 2008, the Secretary of Transportation proposed a new policy intended to ease airport congestion by encouraging U.S.

airports to change their method of calculating landing fees from a weight-based method to a method that allows variable charges basedon time of day and traffic volume factors. This proposed change to existing policy is pending.

Labor. The Railway Labor Act (“RLA”) governs the labor relations of employers and employees engaged in the airline industry.

Comprehensive provisions are set forth in the RLA establishing the right of airline employees to organize and bargain collectivelyalong craft or class lines and imposing a duty upon air carriers and their employees to exert every reasonable effort to make andmaintain collective bargaining agreements. The RLA contains detailed procedures that must be exhausted before a lawful workstoppage may occur. Pursuant to the RLA, Northwest has CBAs with seven domestic unions representing nine separate employeegroups. In addition, Northwest has agreements with four unions representing its employees in countries throughout Asia. Theseagreements are not subject to the RLA, although Northwest is subject to local labor laws. Mesaba has CBAs with three unionsrepresenting three separate employee groups. Compass has a CBA with one union representing one employee group.

Under the RLA, an amendable labor contract continues in effect while the parties negotiate a new contract. In addition to direct

contract negotiations, the RLA also provides for mediation, potential arbitration of unresolved issues and a 30-day “cooling-off”period after the end of which either party can resort to self-help. The self-help remedies include, but are not limited to, a strike by themembers of the labor union and the imposition of proposed contract amendments and, in the event of a strike, the hiring ofreplacement workers by the Company. See “Item 1A. Risk Factors” for additional labor discussion.

Noise Abatement. The Airport Noise and Capacity Act of 1990 (“ANCA”) recognizes the right of airport operators with special

noise problems to implement local noise abatement procedures as long as such procedures do not interfere unreasonably with theinterstate and foreign commerce of the national air transportation system. As a result of litigation and pressure from airport arearesidents, airport operators have taken local actions over the years to reduce aircraft noise. These actions include restrictions on nightoperations, frequency of aircraft operations and various other procedures for noise abatement. While Northwest has sufficientoperational and scheduling flexibility to accommodate current local noise restrictions, its operations could be adversely affected iflocally imposed regulations become more restrictive or widespread.

Under the direction of the United Nations International Civil Aviation Organization (the “ICAO”), world governments, including

the U.S., continue to consider more stringent aircraft noise certification standards than that contained in the ANCA. A new ICAOnoise standard (Chapter 4) was adopted in 2001 that established more stringent noise requirements for newly manufactured aircraftafter January 1, 2006. As adopted, the new rule is not accompanied by a mandatory phase-out of in-service Chapter 3 aircraft,including certain aircraft operated by Northwest. FAA reauthorization legislation, known as “Vision 100 — Century of AviationReauthorization Act” and signed into law by the president on December 12, 2003, required the FAA to issue regulations implementingChapter 4 noise standards consistent with ICAO recommendations. In July 2005, the FAA issued a rule adopting Chapter 4standards. All of the Company’s aircraft will be in compliance with these new FAA rules either as Stage 3 or Stage 4 aircraft.

Safety. The Company is subject to FAA jurisdiction pertaining to aircraft maintenance and operations, including equipment,

dispatch, communications, training, flight personnel and other matters affecting air safety. To ensure compliance with its regulations,the FAA requires all U.S. airlines to obtain operating, airworthiness and other certificates, which are subject to suspension orrevocation for cause.

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Under FAA regulations, the Company has established, and the FAA has approved, maintenance programs for all aircraft operated

by Northwest. These programs provide for the ongoing maintenance of Northwest’s aircraft, ranging from frequent routineinspections to major overhauls. Northwest’s aircraft require various levels of maintenance or “checks” and periodically undergocomplete overhauls. Maintenance programs are monitored closely by the FAA, with FAA representatives routinely present atNorthwest’s maintenance facilities. The FAA issues Airworthiness Directives (“ADs”), which mandate changes to an air carrier’smaintenance program. These ADs (which include requirements for structural modifications to certain aircraft) are issued to ensurethat the nation’s transport aircraft fleet remains airworthy. Northwest is currently, and expects to remain, in compliance with allapplicable requirements under all ADs and the FAA approved maintenance programs.

A combination of FAA and Occupational Safety and Health Administration regulations on both the federal and state levels apply

to all of Northwest’s ground-based operations in the U.S. Environmental. The Company is subject to regulation under various environmental laws and regulations, including the Clean Air

Act, the Clean Water Act and Comprehensive Environmental Response, Compensation and Liability Act of 1980. In addition, manystate and local governments have adopted environmental laws and regulations to which the Company’s operations are subject. Environmental laws and regulations are administered by numerous federal and state agencies.

In November 2005, the Environmental Protection Agency (the “EPA”) issued a rule implementing the aircraft emissions

standards previously approved by the ICAO, of which the U.S. is a member. Following issuance of the EPA rule, a lawsuit was filedin the U.S. Court of Appeals for the District of Columbia Circuit on behalf of state and local air regulators against the EPAchallenging its rule regulating aircraft emissions on the grounds that the international emissions standards codified by the EPA rule arenot stringent enough. Northwest believes it is in compliance with the emissions standards that were codified by the EPA rule.

Northwest, along with other airlines, has been identified as a potentially responsible party at various environmental sites.

Management believes that Northwest’s share of liability for the cost of the remediation of these sites, if any, will not have a materialadverse effect on the Company’s financial statements.

Civil Reserve Air Fleet Program. Northwest renewed its participation in the Civil Reserve Air Fleet Program (“CRAF”), pursuant

to which Northwest has agreed to make available, during the period beginning October 1, 2007 and ending September 30, 2008, 18Boeing 747-200/400 passenger aircraft, 16 Boeing 757-300 passenger aircraft, ten Boeing 757-200 passenger aircraft, 17 AirbusA330-300 passenger aircraft, 11 Airbus A330-200 passenger aircraft and 13 Boeing 747-200 freighter aircraft for use by the U.S.military under certain stages of readiness related to national emergencies. The program is a standby arrangement that allows the U.S.Department of Defense U.S. Transportation Command to call on some or all of these 85 contractually committed Northwest aircraftand their crews to supplement military airlift capabilities.

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Item 1A. RISK FACTORS Risk Factors Related to Northwest and the Airline Industry

We are vulnerable to increases in aircraft fuel costs. Because fuel costs are a significant portion of our operating costs, substantial changes in fuel costs would materially affect our

operating results. Fuel prices continue to be susceptible to, among other factors, political unrest in various parts of the world,Organization of Petroleum Exporting Countries (“OPEC”) policy, the rapid growth of economies in China and India, the levels ofinventory carried by industries, the amounts of reserves built by governments, disruptions to production and refining facilities andweather. In 2005 Hurricane Katrina and Hurricane Rita caused widespread disruption to oil production, refinery operations andpipeline capacity in portions of the U.S. Gulf Coast. As a result of these disruptions, the price of jet fuel increased significantly andthe availability of jet fuel supplies diminished during the fall of 2005. These and other factors that impact the global supply anddemand for aircraft fuel may affect our financial performance due to its high sensitivity to fuel prices. A one-cent change in the costof each gallon of fuel would impact operating expenses by approximately $1.4 million per month (based on our 2007 mainline andregional aircraft fuel consumption). The Company’s mainline fuel expense per available seat mile excluding mark-to-marketadjustments related to fuel derivative contracts that settle in future periods was 3.43 cents, on average, for 2007 and 2006. From timeto time, we hedge some of our future fuel purchases to protect against potential spikes in price. However, these hedging strategiesmay not always be effective and can result in losses depending on price changes. As of February 29, 2008, the Company had hedgedthe price of approximately 18% of its estimated 2008 fuel requirements. As of February 28, 2007, the Company had hedged the priceof approximately 40% of its estimated 2007 fuel requirements.

The airline industry is intensely competitive.

The airline industry is intensely competitive. Our competitors include other major domestic airlines as well as foreign, regional andnew entrant airlines, some of which have more financial resources and/or lower cost structures than ours. In most of our markets wecompete with at least one of these carriers. Our revenues are sensitive to numerous factors, and the actions of other carriers in theareas of pricing, scheduling and promotions can have a substantial adverse impact on our revenues.

Industry revenues are also impacted by growth of low cost airlines and the use of internet travel Web sites. Using the advantage oflow unit costs, driven in large part by lower labor costs, low cost carriers and carriers who have achieved lower labor costs are able tooperate profitably while offering substantially lower fares. Internet travel Web sites have driven significant distribution cost savingsfor airlines, but have also allowed consumers to become more efficient at finding lower fare alternatives than in the past by providingthem with more powerful pricing information. Such factors become even more significant in periods when the industry experienceslarge losses, as airlines under financial stress, or in bankruptcy, may institute pricing structures intended to protect market share, orraise cash quickly, irrespective of the impact to long-term profitability.

In addition, several of our U.S. competitors, including US Airways, United, Delta and several small U.S. competitors, have

recently reorganized under bankruptcy protection. Other carriers could file for bankruptcy or threaten to do so to reduce their costs.Carriers operating under bankruptcy protection can operate in a manner that could be adverse to the Company and could emerge frombankruptcy as more vigorous competitors.

From time to time the U.S. airline industry has undergone consolidations, as in the recent merger of US Airways and America

West, and may experience additional consolidation in the future. If other airlines participate in merger activity, those airlines maysignificantly improve their cost structures or revenue generation capabilities, thereby potentially making them stronger competitors ofNorthwest.

The airline industry is sensitive to global events. Global events have also significantly impacted airline industry revenue. The commencement of the war in Iraq depressed air

travel, particularly on international routes. The outbreak of Severe Acute Respiratory Syndrome (“SARS”) also depressed travel oninternational routes and sensitized passengers to the potential for air travel to facilitate the spread of contagious diseases. Anescalation of the war in the Middle East, or another outbreak of SARS, Avian flu, or other influenza-type illness, if it were to persistfor an extended period, could again materially affect the airline industry and the Company by reducing revenues and impacting travelbehavior.

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Our actual financial results may vary significantly from the projections filed with the Bankruptcy Court. In connection with the Company’s Plan, the Debtors were required to prepare projected financial information to demonstrate to

the Bankruptcy Court the feasibility of the Plan and the ability of the Debtors to continue operations upon emergence frombankruptcy. As filed with the Bankruptcy Court on February 15, 2007, as part of the initial form of the disclosure statement, whichalso was filed with the SEC, and as part of the disclosure statement approved by the Bankruptcy Court, the projections reflectednumerous assumptions concerning anticipated future performance and prevailing and anticipated market and economic conditions thatwere and continue to be beyond our control and that may not materialize. For example, the projections included an assumptionregarding the timing of deliveries of Boeing 787-8 aircraft which is no longer accurate as a result of announced delays in the Boeing787-8 production program. Projections are inherently subject to uncertainties and to a wide variety of significant business, economicand competitive risks. Our actual results may vary from those contemplated by the projections and the variations may be material.

Because our consolidated financial statements following our emergence from bankruptcy reflect fresh-start reporting

adjustments, financial information in our financial statements following emergence will not be comparable to NWA Corp.’sfinancial information from periods prior to emergence from bankruptcy.

Following our reorganization, we adopted fresh-start reporting in accordance with SOP 90-7, pursuant to which our

reorganization value, which represented the fair value of the entity before considering liabilities and approximated the amount awilling buyer would pay for the assets of the entity immediately after the reorganization, has been allocated to the fair value of assetsin conformity with Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations (“SFAS No. 141”), usingthe purchase method of accounting for business combinations. We stated liabilities, other than deferred taxes and pension and otherpost-retirement benefit obligations, at fair value or at the present values of the amounts to be paid. The amount remaining afterallocation of the reorganization value to the fair value of identified tangible and intangible assets has been reflected as goodwill, whichis subject to periodic evaluation for impairment. In addition, under fresh-start reporting the accumulated deficit has been eliminated.Thus, our balance sheets and results of operations are not comparable in many respects to balance sheets and consolidated statementsof operations data for periods prior to the adoption of fresh-start reporting.

Additional terrorist attacks or the fear of such attacks, even if not made directly on the airline industry, could negatively affect

the Company and the airline industry. The terrorist attacks of September 11, 2001 involving commercial aircraft severely and adversely affected the Company’s

financial condition and results of operations, as well as prospects for the airline industry generally. Among the effects experiencedfrom the September 11, 2001 terrorist attacks were substantial flight disruption costs caused by the FAA, a division of the DOT, whichimposed a temporary grounding of the U.S. airline industry’s fleet, significantly increased security costs and associated passengerinconvenience, increased insurance costs, substantially higher ticket refunds and significantly decreased traffic and revenue perrevenue passenger mile (“yield”).

Additional terrorist attacks, even if not made directly on the airline industry, or the fear of or the precautions taken in anticipation

of such attacks (including elevated national threat warnings or selective cancellation or redirection of flights) could materially andadversely affect the Company and the airline industry. The war in Iraq and additional international hostilities could also have amaterial adverse impact on the Company’s financial condition, liquidity and results of operations. The Company’s financial resourcesmight not be sufficient to absorb the adverse effects of any further terrorist attacks or an increase in post-war unrest in Iraq or otherinternational hostilities involving the U.S.

Additional security requirements may increase the Company’s costs and decrease its traffic. Since September 11, 2001, the U.S. Department of Homeland Security (“DHS”) and the TSA have implemented numerous

security measures that affect airline operations and costs, and are likely to implement additional measures in the future. In addition,foreign governments have also begun to institute additional security measures at foreign airports Northwest serves. A substantialportion of the costs of these security measures is borne by the airlines and their passengers, increasing the Company’s costs and/orreducing its revenue.

Security measures imposed by the U.S. and foreign governments after September 11, 2001 have increased Northwest’s costs and

may further adversely affect the Company and its financial results. Additional measures taken to enhance either passenger or cargosecurity procedures and/or to recover associated costs in the future may result in similar adverse effects.

Union disputes, employee strikes and other labor-related disruptions may adversely affect the Company’s operations.

Unions represent approximately 80% of the Company’s employees. The Railway Labor Act (“RLA”) governs the labor relationsof employers and employees engaged in the airline industry. The RLA contains detailed procedures that must be exhausted before alawful work stoppage may occur. Pursuant to the RLA, the Company has CBAs with seven domestic unions representing separateemployee groups.

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Under the RLA, an amendable labor contract continues in effect while the parties negotiate a new contract. In addition to direct

contract negotiations, the RLA also provides for mediation, potential arbitration of unresolved issues and a 30-day “cooling-off”period after the end of which either party can resort to self-help. The self-help remedies include, but are not limited to, a strike by themembers of the labor union and the imposition of proposed contract amendments and, in the event of a strike, the hiring ofreplacement workers by the Company. In addition to the risks associated with self-help there is also the risk that dissatisfiedemployees, either with or without union involvement, could engage in illegal slowdowns, work stoppages, or other actions that maydisrupt operations.

The loss of skilled employees upon whom the Company depends to operate its business or the inability to attract additional

qualified personnel could adversely affect its results of operations. The Company believes that its future success will depend in large part on its ability to attract and retain highly qualified

management, technical and other personnel. The Company may not be successful in retaining key personnel or in attracting andretaining other highly qualified personnel. Any inability to retain or attract significant numbers of qualified management and otherpersonnel could adversely affect its business.

The Company’s degree of leverage may limit its financial and operating activities. The Company continues to have significant indebtedness even after its exit from bankruptcy. Further, our historical capital

requirements have been significant and our future capital requirements are significant; these requirements may also be affected bygeneral economic conditions, industry trends, performance, and many other factors that are not within our control. The Companycannot ensure that we will be able to obtain financing in the future. In addition, the Company cannot ensure that we will notexperience losses in the future. Our profitability and ability to generate cash flow will likely depend upon our ability to implementsuccessfully our business strategy. However, the Company cannot ensure that we will be able to accomplish these results.

The covenants in the Company’s Bank Credit Facility may restrict the Company’s activities and require satisfaction of certain

financial tests. The Company’s Bank Credit Facility contains a number of covenants and other provisions that may restrict the Company’s ability

to engage in various financing transactions and operating activities. The Bank Credit Facility also requires the Company to satisfycertain financial tests. The ability of the Company to meet these financial covenants may be affected by events beyond its control. Ifthe Company defaults under any of these requirements, the lenders could declare all outstanding borrowings, accrued interest and feesto be due and payable. If that were to occur, there can be no assurance that the Company would have sufficient liquidity to repay orrefinance this indebtedness or any of its other debt.

Changes in government regulations could increase our operating costs and limit our ability to conduct our business. Airlines are subject to extensive regulatory requirements in the U.S. and internationally. In the last several years, Congress has

passed laws and the FAA has issued a number of maintenance directives and other operating regulations that impose substantial costson airlines. Additional laws, regulations, taxes and airport charges have been proposed from time to time that could significantlyincrease the cost of airline operations or reduce revenues. For example, current proposals to address congestion at and around airportscould limit our operations, reduce our revenues and/or increase our costs. The ability of U.S. carriers to operate international routes issubject to change because the appropriate landing slots or facilities may not be available, or because applicable arrangements betweenthe U.S. and foreign governments may be amended from time to time. If an open skies policy were to be adopted for any of theseroutes, such an event could have a material adverse impact on the Company’s financial position and results of operations and couldresult in the impairment of material amounts of related tangible assets. Recently, the U.S. and the European Union entered into an“open skies” agreement that will become effective at the end of March 2008. We cannot give assurance that laws or regulationsenacted in the future will not adversely affect the industry or the Company.

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Our insurance costs have increased substantially and further increases could harm our business. Following September 11, 2001, aviation insurers significantly increased airline insurance premiums and reduced the maximum

amount of coverage available to airlines for certain types of claims. In addition, other insurance costs increased significantlyfollowing the 2005 Hurricane Katrina and Hurricane Rita events. Our total aviation and other insurance expenses were $36 millionhigher in 2007 than in 2000. The FAA is currently providing aviation war risk insurance as required by the Homeland Security Act of2002 as amended by the Consolidated Appropriations Act of 2005 and subsequently by the Continuing Appropriations Resolution2007. However, following multiple extensions, this coverage is scheduled to expire on March 30, 2008. While the government mayagain extend the period that it provides excess war risk coverage, there is no assurance that this will occur, or if it does, how long theextension will last, what will be included in the coverage, or at what cost the coverage will be provided. Should the U.S. governmentstop providing war risk insurance in its current form to the U.S. airline industry, it is expected that the premiums charged bycommercial aviation insurers for this coverage, if available at all, would be substantially higher than the premiums currently chargedby the government, the maximum amount of coverage available would be reduced, and the type of coverage could be more restrictive. Commercial aviation insurers could further increase insurance premiums and reduce or cancel coverage, in the event of a new terroristattack or other events adversely affecting the airline industry. Significant increases in insurance premiums could negatively impactour financial condition and results of operations. If we are unable to obtain adequate war risk insurance, our business could bematerially and adversely affected.

If we were to be involved in an accident, we could be exposed to significant tort liability. Although we carry insurance to cover

damages arising from an accident, resulting tort liability could be higher than our policy limits which could negatively impact ourfinancial condition.

We are exposed to foreign currency exchange rate fluctuations. We conduct a significant portion of our operations in foreign locations. As a result, we have operating revenues and, to a lesser

extent, operating expenses, as well as assets and liabilities, denominated in foreign currencies, principally the Japanese yen. Fluctuations in foreign currencies can significantly affect our operating performance and the value of our assets and liabilities locatedoutside of the U.S. From time to time, we use financial instruments to hedge our exposure to foreign currencies. However, thesehedging strategies may not always be effective. As of December 31, 2007, the Company had hedged approximately 42.6 percent of its2008 anticipated yen-denominated sales. The 2008 Japanese yen hedges consist of forward contracts which hedge approximately 32.7percent of yen-denominated sales at an average rate of 109.3 yen per U.S. dollar and collar options which hedge approximately 9.9percent of yen-denominated sales with a rate range between 102.4 and 116.4 yen per U.S. dollar. As of December 31, 2006, theCompany had no forward contracts or collar options outstanding related to its anticipated 2007 yen-denominated sales. As ofDecember 31, 2007, the Company had also hedged approximately 66.4 percent of its 2008 anticipated Canadian dollar denominatedsales with forward contracts at an average rate of 1.0008 Canadian dollars per U.S. dollar. As of December 31, 2006, the Companyhad no forward contracts outstanding related to its anticipated 2007 Canadian dollar denominated sales.

We are exposed to changes in interest rates. We had $7.1 billion of debt and capital lease obligations that were accruing interest as of December 31, 2007 and $3.8 billion of

total balance sheet cash, cash equivalents, and short-term investments as of December 31, 2007. Of the indebtedness, 70% bearsinterest at floating rates. An increase in interest rates would have an overall negative impact on our earnings as increased interestexpense would only be partially offset by increased interest income. From time to time, we use financial instruments to hedge ourexposure to interest rate fluctuations. However, these hedging strategies may not always be effective. As of December 31, 2007 theCompany had entered into individual interest rate cap hedges related to three floating rate debt instruments, with a total cumulativenotional amount of $429 million. The objective of the interest rate cap hedges is to protect the anticipated payments of interest (cashflows) on the designated debt instruments from adverse market interest rate changes.

14


Any “ownership change” could limit our ability to utilize our net operating loss carryforwards.

Under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), a corporation is generally allowed a

deduction in any taxable year for net operating losses carried over from prior years. As of December 31, 2007, the Company hadapproximately $3.6 billion of federal and state net operating loss (“NOL”) carryforwards. A corporation’s use of its NOLcarryforwards is generally limited under Section 382 of the Internal Revenue Code if a corporation undergoes an “ownership change.” However, when an “ownership change” occurs pursuant to the implementation of a plan of reorganization under the Bankruptcy Code(as was the case on the Effective Date of the Company’s Plan), special rules in either Section 382(l)(5) or Section 382(l)(6) of theInternal Revenue Code apply instead of the general Section 382 limitation rules. In general terms, Sections 382(l)(5) or (l)(6) allowfor a more favorable utilization of a company’s NOL carryforwards than would otherwise have been available following an“ownership change” not in connection with a plan of reorganization. We have not yet determined whether we will be eligible for, orwill rely on, Section 382(l)(5) of the Internal Revenue Code, or whether we will instead rely on Section 382(l)(6) of the InternalRevenue Code. Assuming we are eligible for, and rely on, Section 382(l)(5) of the Internal Revenue Code, a second “ownershipchange” within two years from the Effective Date of the Plan would eliminate completely our ability to utilize our NOLcarryforwards. Even if we rely on Section 382(1)(6) of the Internal Revenue Code, an “ownership change” after the Effective Date ofthe Plan could significantly limit our ability to utilize our NOL carryforwards for taxable years including or following the subsequent“ownership change.” To avoid a potential adverse effect on our ability to utilize our NOL carryforwards after the Effective Date ofthe Plan, we have imposed restrictions on certain transfers of our common stock.

Due to industry seasonality, operating results for any interim periods are not necessarily indicative of those for the entire year.

The airline industry is seasonal in nature. Due to seasonal fluctuations, operating results for any interim period are not necessarily

indicative of those for the entire year. Our second and third quarter operating results have historically been more favorable due toincreased leisure travel on domestic and international routes during the summer months.

The Company relies heavily on automated systems to operate its business and any significant failure of these systems could

harm its business. The Company depends on automated systems to operate its business, including its internal airline reservation systems, flight

operations systems, telecommunication systems and commercial Web sites, including nwa.com. Northwest’s Web site and reservationsystems must be able to accommodate a high volume of traffic and deliver important flight information, as well as process criticalfinancial transactions. Substantial or repeated Web site, reservations systems or telecommunication systems failures could reduce theattractiveness of Northwest’s services versus its competitors and materially impair its ability to market its services and operate itsflights.

The Company’s business relies extensively on third-party providers. Failure of these parties to perform as expected, or

unexpected interruptions in the Company’s relationships with these providers or their provision of services to the Company, couldhave an adverse effect on its financial condition and results of operations.

The Company has engaged a growing number of third-party service providers to perform a large number of functions that are

integral to its business, such as the operation of certain of its regional carriers, provision of information technology infrastructure andservices, provision of maintenance and repairs and performance of aircraft fueling operations, among other vital functions andservices. The Company does not directly control these third-party providers, although it does enter into agreements with many of themthat define expected service performance. Any of these third-party providers, however, may materially fail to meet their serviceperformance commitments to the Company. The failure of these providers to adequately perform their service obligations, or otherunexpected interruptions of services, may reduce the Company’s revenues and increase its expenses or prevent Northwest fromoperating its flights and providing other services to its customers. In addition, the Company’s business and financial performancecould be materially harmed if its customers believe that its services are unreliable or unsatisfactory.

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Forward-Looking Statements

Certain of the statements made in “Item 1. Business,” “Item 7. Management’s Discussion and Analysis of Financial Conditionand Results of Operations” and elsewhere in this annual report on Form 10-K are forward-looking statements and are based uponinformation available to the Company on the date the statements are made. The Company, through its management, may also fromtime to time make oral forward-looking statements. In connection with the “safe harbor” provisions of the Private SecuritiesLitigation Reform Act of 1995, the Company is hereby identifying important factors that could cause actual results to differ materiallyfrom those contained in any forward-looking statement made by or on behalf of the Company. Any such statement is qualified byreference to the following cautionary statements.

The Company believes that the material risks and uncertainties that could affect the outlook of an airline operating in a global

economy include, among others, the ability of the Company to operate pursuant to the terms of its financing facilities (particularly therelated financial covenants), the ability of the Company to attract, motivate and/or retain key executives and associates, the futurelevel of air travel demand, the Company’s future passenger traffic and yields, the airline industry pricing environment, increased costsfor security, the cost and availability of aviation insurance coverage and war risk coverage, the general economic condition of the U.S.and other regions of the world, the price and availability of jet fuel, the war in Iraq, the possibility of additional terrorist attacks or thefear of such attacks, concerns about Severe Acute Respiratory Syndrome (SARS) and other influenza or contagious illnesses, laborstrikes, work disruptions, labor negotiations both at other carriers and the Company, low cost carrier expansion, capacity decisions ofother carriers, actions of the U.S. and foreign governments, foreign currency exchange rate fluctuations and inflation. Additionalinformation with respect to these factors and these and other events that could cause differences between forward-looking statementsand future actual results is contained in “Risk Factors Related to Northwest and the Airline Industry” above.

Developments in any of these areas, as well as other risks and uncertainties detailed from time to time in our Securities and

Exchange Commission filings, could cause the Company’s results to differ from results that have been or may be projected by or onbehalf of the Company. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whetheras a result of 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 to differ materially from the Company’s expectations. Allsubsequent written or oral forward-looking statements attributable to the Company, or persons acting on behalf of the Company, areexpressly qualified in their entirety by the factors described above.

Item 1B. UNRESOLVED STAFF COMMENTS

None.

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Item 2. PROPERTIES

Flight Equipment

As shown in the following table, Northwest operated a mainline fleet of 356 aircraft at December 31, 2007, consisting of 295narrow-body and 61 wide-body aircraft. Northwest’s purchase commitments for aircraft as of December 31, 2007 are also provided.

In Service

Average

Aircraft

Seating

Capital

Operating

Age

on Firm

Aircraft Type

Capacity

Owned

Lease

Lease

Total

(Years)

Order

Passenger Aircraft

Airbus:

A319

124

55

—

2

57

5.8

5

A320

148

45

—

28

73

13.0

2

A330-200

243

11

—

—

11

2.7

—

A330-300

298

21

—

—

21

2.3

—

Boeing:

787-8

TBD

—

—

—

—

—

18

757-200

160-184

38

1

16

55

16.5

—

757-300

224

16

—

—

16

4.8

—

747-400

403

4

—

12

16

14.1

—

McDonnell Douglas:

DC9

100-125

94

—

—

94

35.6

—

284

1

58

343

25

Freighter Aircraft

Boeing 747F

10

—

3

13

25.1

—

Total Northwest Operated Aircraft

294

1

61

356

17.5(1) 25

Regional Aircraft

CRJ200

50

—

—

141

141

4.5

—

Saab 340

33

—

—

49

49

10.1

—

CRJ900

76

13

—

—

13

0.3

23

Embraer 175

76

9

—

—

9

0.2

27

Total Airlink Operated Aircraft

22

—

190

212

50

Total Aircraft

316

1

251

568

75

(1) Excluding DC9 aircraft, the average age of Northwest-operated aircraft is 11.1 years.

In total, the Company took delivery of eight Airbus A330-300, 13 CRJ900 and nine Embraer 175 aircraft during the twelvemonths ended December 31, 2007. In connection with the acquisition of these 30 aircraft, the Company entered into long-term debtarrangements. Under such arrangements, the aggregate amount of debt incurred totaled $1.1 billion.

During 2007, the Company sold 57 aircraft including nine A319, nine DC10-30, seven Boeing 747-200 and 32 DC9 aircraft.

Proceeds from these sales totaled $279 million.

See “Item 8. Consolidated Financial Statements and Supplementary Data, Note 14 — Commitments” for further informationrelated to the Company’s aircraft and commitments. Airport Facilities Northwest leases the majority of its airport facilities. The associated lease terms cover periods up to 30 years and containprovisions for periodic adjustment of lease payments. At most airports that it serves, Northwest has entered into agreements thatprovide for the non-exclusive use of runways, taxiways, terminals and other facilities. Landing fees under these agreements normallyare based on the number of landings and weight of the aircraft.

17


In certain cases, the Company has constructed facilities on leased land that revert to the lessor upon expiration of the lease. These facilities include cargo buildings in Boston, Los Angeles, Seattle and Honolulu; support buildings at the Minneapolis/St. PaulInternational Airport; a line maintenance hangar in Seattle; and several hangars in Detroit. The Company is currently managing and supervising the design and construction of a $60 million luggage system securityexpansion project at the Detroit Metropolitan Wayne County Airport, scheduled to be operationally complete in late 2008. Other Property and Equipment Northwest’s primary offices are located near the Minneapolis/St. Paul International Airport, including its corporate officeslocated on a 160-acre site east of the airport. Other owned facilities include reservations centers in Baltimore, Maryland, Tampa,Florida, Minot, North Dakota and Chisholm, Minnesota, and a data processing center in Eagan, Minnesota. The Company also ownsproperty in Tokyo, including a 1.3-acre site in downtown Tokyo and a 33-acre land parcel, 512-room hotel and flight kitchen locatednear Tokyo’s Narita International Airport. In addition, the Company leases reservations centers in or near Minneapolis/St. Paul,Seattle and Sioux City, Iowa.

Item 3. LEGAL PROCEEDINGS

On September 14, 2005, NWA Corp. and 12 of its direct and indirect subsidiaries filed voluntary petitions for reorganizationunder Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. On September 30, 2005, NWA Aircraft Finance, Inc., an indirectsubsidiary of NWA Corp., also filed a voluntary petition for relief under Chapter 11. On May 18, 2007, the Bankruptcy Court enteredan order (the “Confirmation Order”) approving and confirming the Debtors’ First Amended Joint and Consolidated Plan ofReorganization under Chapter 11 of the Bankruptcy Code. On May 31, 2007, the Debtors emerged from bankruptcy. Thereorganization cases were jointly administered under the caption “In re NWA Corp., et al., Case No. 05-17930 (ALG).” TheConfirmation Order provided for the discharge upon the Effective Date of the Debtors from all Claims (as defined in the Plan) basedupon acts or omissions that occurred prior to the Effective Date. In addition, as established by the Confirmation Order, holders ofpre-Effective Date claims are enjoined from commencing or continuing any action or proceeding against the Reorganized Debtorswith respect to such claims, except as otherwise permitted by the Bankruptcy Court for purposes of determining the amount of theirrespective claims. The legal proceedings outstanding against the Company as of the Petition Date are subject to the injunctionestablished by the Confirmation Order.

Northwest Airlines, Inc. v. Filipas, et al (U.S. Dist. Ct. Minnesota, Case 07-CIV-4803 (JNE/JJG)). On December 12, 2007,Northwest Airlines, Inc. filed a declaratory judgment action against six of its employee pilots seeking a declaration that its recentlyimplemented Target Benefit Pension Plan (collectively bargained for with the Air Line Pilots Association) does not violate anyapplicable prohibitions against age discrimination, including under ERISA. In its complaint, Northwest asks the court to certify adefendant class of all employee pilots who will receive less under the new target plan than they would have received under thepredecessor plan that provided benefits to pilots on a “flat percentage” or “pro rata to pay” basis.

In addition, in the ordinary course of its business, the Company is party to various other legal actions which the Company

believes are incidental to the operation of its business. The Company believes that the outcome of the proceedings to which it iscurrently a party (including those described above) will not have a material adverse effect on the Company’s consolidated financialstatements taken as a whole.

18


Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company’s security holders during the fourth quarter of 2007.

MANAGEMENT

Executive Officers of the Registrant

Douglas M. Steenland, age 56, has served as President and Chief Executive Officer of NWA Corp. and Northwest sinceOctober 2004 and was elected a director of both companies in September 2001. He has served in a number of executive positionssince joining Northwest in 1991, including President from April 2001 to October 2004, Executive Vice President and Chief CorporateOfficer from September 1999 to April 2001, Executive Vice President-Alliances, General Counsel and Secretary from January 1999 toSeptember 1999, Executive Vice President, General Counsel and Secretary from June 1998 to January 1999, and Senior VicePresident, General Counsel and Secretary from July 1994 to June 1998. Prior to joining Northwest, Mr. Steenland was a senior partnerat the Washington, D.C. law firm of Verner, Liipfert, Bernhard, McPherson and Hand. Neal S. Cohen, age 47, was elected Executive Vice President - Strategy, International and Chief Executive Officer of RegionalAirlines of Northwest effective May 31, 2007. He served as Executive Vice President & Chief Financial Officer of NWA Corp. andNorthwest from May 2005 through May 2007. Prior to rejoining Northwest in May 2005, Mr. Cohen served at US Airways asExecutive Vice President and Chief Financial Officer from April 2002 to April 2004, and served as Chief Financial Officer forConseco Finance from April 2001 to March 2002. Prior to his position at Conseco Finance, Mr. Cohen served as Chief FinancialOfficer for Sylvan Learning Systems. From 1991 to 2000, Mr. Cohen held a number of senior marketing and finance positions atNorthwest, including Senior Vice President and Treasurer and Vice President — Market Planning.

David M. Davis, age 41, was elected Executive Vice President & Chief Financial Officer of NWA Corp. and Northwest effectiveMay 31, 2007. He served as Senior Vice President — Finance & Controller of Northwest from August 2005 through May 2007. From November 2004 to August 2005, Mr. Davis served as Chief Financial Officer of Kraton Polymers LLC, and from April 2002 toNovember 2004, he served in senior finance roles at US Airways, including as Executive Vice President — Finance and ChiefFinancial Officer from May 2004 to November 2004. From 2000 to 2002, he served as Vice President — Financial Planning andAnalysis of Budget Group, Inc. and prior to 2000 he served in a number of finance positions at Delta Air Lines and at Northwest.

J. Timothy Griffin, age 56, has served as Executive Vice President-Marketing and Distribution of Northwest sinceJanuary 1999. From June 1993 to January 1999, he served as Senior Vice President-Market Planning and Systems. Prior to joiningNorthwest in 1993, Mr. Griffin held senior positions with Continental Airlines and American Airlines. Andrew C. Roberts, age 47, has served as Executive Vice President — Operations since November 2004. He has served in anumber of executive positions since joining Northwest in 1997, including Senior Vice President — Technical Operations fromAugust 2001 to November 2004, Vice President — Materials Management from April 1999 to August 2001, and Managing Director— Minneapolis/St. Paul Engine Operations from September 1997 to April 1999. Prior to joining Northwest, Mr. Roberts held seniorpositions with Pratt & Whitney and Aviall, Inc.

19


PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERPURCHASES OF EQUITY SECURITIES

The Predecessor Company’s common stock ceased trading on the NASDAQ stock market on September 26, 2005 and begantrading in the “over-the-counter” market under the symbol NWACQ.PK. Upon the Effective Date of the Plan, the outstandingcommon and preferred stock of the Predecessor Company was cancelled for no consideration and the Predecessor Company’sstockholders no longer have any interest as stockholders in the Successor Company by virtue of their ownership of the PredecessorCompany’s common or preferred stock prior to emergence from bankruptcy.

The Successor Company’s common stock is listed on the NYSE and began trading under the symbol “NWA” on May 31, 2007.

The Plan contemplates the issuance of approximately 277 million shares of new common stock by the Successor Company (out of the400 million shares of new common stock authorized under its amended and restated certificate of incorporation), as follows:



Financial results of the Successor Company are not comparable with the results of the Predecessor Company, as discussed in

“Item 8. Consolidated Financial Statements and Supplementary Data, Note 2 — Fresh-Start Reporting.” The table below shows thehigh and low sales prices for the Company’s common stock during 2007 and 2006.

Predecessor

Successor

Period from

Period from

April 1 to

May 31 to

1st Quarter

May 30

June 30

3rd Quarter

4th Quarter

2007:

High

$ 5.55

$ 0.77

$ 26.33

$ 23.95

$ 20.25

Low

$ 0.56

$ 0.00

$ 22.13

$ 14.91

$ 14.26

Predecessor

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

2006:

High

$ 0.56

$ 0.65

$ 0.85

$ 6.55

Low

$ 0.34

$ 0.44

$ 0.47

$ 0.61

As of January 31, 2008, there were 2,653 stockholders of record of our Successor Company common stock.

Since 1989, NWA Corp. has not declared or paid any dividends on the Predecessor Company’s common stock and does not

currently anticipate paying dividends on the Successor Company’s common stock. Under the provisions of the Company’s BankCredit Facility, NWA Corp.’s ability to pay dividends on or repurchase its common stock is restricted. Any future determination topay cash dividends will be at the discretion of the Board of Directors, subject to applicable limitations under Delaware law, and willbe dependent upon the Company’s results of operations, financial condition, contractual restrictions and other factors deemed relevantby the Board of Directors.

Stockholder Rights Plan. Pursuant to the Stockholder Rights Plan (the “Rights Plan”), each share of common stock has attached

to it a right and, until the rights expire or are redeemed, each new share of common stock issued by NWA Corp., will include oneright. Once exercisable, each right entitles the holder (other than the acquiring person or group) to purchase one one-hundredth of ashare of Series A Junior Participating Preferred Stock at an exercise price of $120, subject to adjustment. The rights becomeexercisable upon the occurrence of certain events, including the acquisition by any air carrier with passenger revenues in excess ofapproximately $1 billion per year (as such amount may be increased based on increases in the Consumer Price Index from 2000) (a“Major Carrier”), a holding company of a Major Carrier or any of their respective affiliates acquires beneficial ownership of 20% ormore of NWA Corp.’s outstanding common stock or commences a tender or exchange offer that would result in such person or groupacquiring beneficial ownership of 20% or more of NWA Corp.’s outstanding common stock. The rights expire on May 31, 2017, andmay be redeemed by NWA Corp. at a price of $.01 per right prior to the time they become exercisable.

20


Issuer Purchases of Equity Securities

Common stock repurchases in the fourth quarter of fiscal year 2007 were as follows:

Maximum number of

Total number of

shares (or approximate

shares purchased

dollar value of shares)

Total number

Average price

as part of publicly

that may yet be

of shares

paid

announced plans

purchased under the

Period

purchased (a)

per share

or programs

plans or programs (b)

10/01/07-10/31/07

274

$ 19.91

N/A

N/A

11/01/07-11/30/07

—

—

N/A

N/A

12/01/07-12/31/07

—

—

N/A

N/A

(a) Consisted of vested shares under the Management Equity Plan that were forfeited due to the Company’s disgorgement provision. (b) The Management Equity Plan provides that the Company may permit the withholding of shares to satisfy tax obligations due

upon the vesting of restricted stock. The Management Equity Plan does not specify a maximum number of shares that may bewithheld.

21


Item 6. SELECTED FINANCIAL DATANORTHWEST AIRLINES CORPORATION(In millions, except per share data)

Successor

Predecessor

Period from

Period from

June 1 to

January 1 to

December 31,

May 31,

Year Ended December 31

2007

2007

2006

2005

2004

2003

Statements of Operations

Operating revenues

Passenger

$ 5,660

$ 3,768

$ 9,230

$ 8,902

$ 8,432

$ 7,632

Regional carrier

884

521

1,399

1,335

1,083

860

Cargo

522

318

946

947

830

752

Other

538

317

993

1,102

934

833

Total operating revenues

7,604

4,924

12,568

12,286

11,279

10,077

Operating expenses

6,863

4,561

11,828

13,205

11,784

10,342

Operating income (loss)

741

363

740

(919) (505) (265) Operating margin

9.7% 7.4% 5.9% (7.5)% (4.5)% (2.6)%

Net income (loss) before

cumulative effect of accountingchange

342

1,751

(2,835) (2,464) (862) 248

Cumulative effect of accountingchange

—

—

—

(69) —

—

Net income (loss)

$ 342

$ 1,751

$ (2,835) $ (2,533) $ (862) $ 248

Earnings (loss) per common share:

Basic

$ 1.30

$ 20.03

$ (32.48) $ (29.36) $ (10.32) $ 2.75

Diluted

$ 1.30

$ 14.28

$ (32.48) $ (29.36) $ (10.32) $ 2.62

Successor

Predecessor

December 31,

December 31

2007

2006

2005

2004

2003

Balance Sheets

Cash, cash equivalents and unrestrictedshort-term investments

$ 3,034

$ 2,058

$ 1,262

$ 2,459

$ 2,757

Total assets

24,517

13,215

13,083

14,042

14,008

Long-term debt, including currentmaturities

6,961

4,112

1,159

8,411

7,866

Long-term obligations under capitalleases, including current obligations

127

—

11

361

419

Long-term pension and postretirementhealth care benefits, includingcurrent obligations

3,720

185

264

4,095

3,756

Liabilities subject to compromise

—

13,572

14,328

—

—

Preferred redeemable stock subject tocompromise

—

277

280

263

236

Common stockholders’ equity (deficit)

7,377

(7,991) (5,628) (3,087) (2,011) “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. ConsolidatedFinancial Statements and Supplementary Data” are integral to understanding the selected financial data presented in the table above.

22


NORTHWEST AIRLINES CORPORATION


2007

2006

2005

2004

2003

Operating Statistics

Scheduled service - Consolidated: (1)

Available seat miles (ASM) (millions)

93,328

92,944

100,461

98,591

94,211

Revenue passenger miles (RPM) (millions)

78,320

78,044

81,914

78,130

72,032

Passenger load factor

83.9% 84.0% 81.5% 79.2% 76.5%Revenue passengers (millions)

66.4

67.6

70.3

67.2

62.1

Passenger revenue per RPM (yield)

13.83¢ 13.62¢ 12.50¢ 12.18¢ 11.79¢Passenger revenue per scheduled ASM (RASM)

11.61¢ 11.44¢ 10.19¢ 9.65¢ 9.01¢

Fuel gallons consumed - Consolidated (millions) (1)

1,720

1,780

1,976

1,958

1,842

Scheduled service - Mainline: (2)

Available seat miles (ASM) (millions)

86,142

85,603

91,775

91,378

88,593

Revenue passenger miles (RPM) (millions)

72,924

72,606

75,820

73,312

68,476


84.7% 84.8% 82.6% 80.2% 77.3%Revenue passengers (millions)

53.7

54.8

56.5

55.4

51.9

Passenger revenue per RPM (yield)

12.93¢ 12.71¢ 11.74¢ 11.50¢ 11.15¢Passenger revenue per scheduled ASM (RASM)

10.94¢ 10.78¢ 9.70¢ 9.23¢ 8.61¢

Fuel gallons consumed - Mainline (millions) (2)

1,545

1,593

1,745

1,766

1,752

(1) Consolidated statistics include Northwest Airlink regional carriers.(2) Mainline statistics exclude Northwest Airlink regional carriers, which is consistent with how the Company reports statistics to

the DOT. “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. ConsolidatedFinancial Statements and Supplementary Data” are integral to understanding the selected financial data presented in the table above.

23




2007

2006

2005

2004

2003

Mainline Operating Statistical Results (1)

Total available seat miles (ASM) (millions)

86,310

85,738

91,937

91,531

89,158

Passenger service operating expense per

total ASM (2)(3)(4)

10.75¢ 10.95¢ 11.53¢ 10.62¢ 9.87¢Aircraft impairment, curtailment charge,

severance expense and other per total ASM(4)

—¢ 0.03¢ 0.14¢ 0.31¢ 0.11¢

Mainline fuel expense per ASM

3.41¢ 3.43¢ 2.99¢ 2.14¢ 1.53¢ Mark-to-market gains (losses) per total ASM

related to fuel derivative contracts that settlein future periods

0.02¢ —¢ —¢ —¢ —¢

Mainline fuel expense per total ASM, excluding

mark-to-market gains (losses) related to fuelderivative contracts that settle in futureperiods

3.43¢ 3.43¢ 2.99¢ 2.14¢ 1.53¢

Cargo ton miles (millions)

2,067

2,269

2,397

2,338

2,184

Cargo revenue per ton mile

40.65¢ 41.71¢ 39.51¢ 35.48¢ 34.42¢ Fuel gallons consumed (millions)

1,545

1,593

1,745

1,766

1,752

Average fuel cost per gallon, excluding taxes

205.41¢ 202.47¢ 170.73¢ 118.17¢ 80.68¢ Mark-to-market gains (losses) per fuel gallons

consumed related to fuel derivative contractsthat settle in future periods

1.18¢ (0.17)¢ —¢ —¢ —¢

Average fuel cost per gallon, excluding fuel

taxes and mark-to-market gains (losses)related to fuel derivative contracts that settlein future periods

206.59¢ 202.30¢ 170.73¢ 118.17¢ 80.68¢

Number of operating aircraft at year end

356

371

379

435

430

Full-time equivalent employees at year end

30,306

30,484

32,460

39,342

39,100

(1) Mainline statistics exclude Northwest Airlink regional carriers, which is consistent with how the Company reports statistics tothe DOT.

(2) This financial measure excludes non-passenger service expenses. The Company believes that providing financial measures

directly related to passenger service operations allows investors to evaluate and compare the Company’s core operating resultsto those of the industry.

(3) Passenger service operating expense excludes the following items unrelated to passenger service operations:

(In millions)

2007

2006

2005

2004

2003

Regional carrier expenses

$ 1,259

$ 1,406

$ 1,576

$ 1,210

$ 822

747 Freighter operations

654

804

791

608

497

MLT Inc. - net of intercompany eliminations

177

193

193

192

197

Other

56

43

43

56

26

(4) Passenger service operating expense per ASM includes the following items:

(In millions)

2007

2006

2005

2004

2003

Aircraft and aircraft related write-downs

$ —

$ —

$ 48

$ 203

$ 21

Curtailment charges

—

—

82

—

58

Severance expenses

—

23

—

—

20


Other

—

—

—

77

—

“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. ConsolidatedFinancial Statements and Supplementary Data” are integral to understanding the selected financial data presented in the table above.

24


Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS Overview

NWA Corp. is a holding company whose operating subsidiary is Northwest. The Consolidated Financial Statements include theaccounts of NWA Corp. and all consolidated subsidiaries. Substantially all of the Company’s results of operations are attributable toits operating subsidiary, Northwest, which accounted for approximately 99% of the Company’s 2007 consolidated operating revenuesand expenses. The Company’s results of operations also include other subsidiaries of which MLT is the most significant. Thefollowing discussion pertains primarily to Northwest and, where indicated, MLT.

On September 14, 2005 (the “Petition Date”), NWA Corp. and 12 of its direct and indirect subsidiaries (collectively, the“Debtors”) filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code with the United StatesBankruptcy Court for the Southern District of New York (the “Bankruptcy Court”). Subsequently, on September 30, 2005, NWAAircraft Finance, Inc., an indirect subsidiary of NWA Corp., also filed a voluntary petition for relief under Chapter 11. On May 18,2007, the Bankruptcy Court entered an order approving and confirming the Debtors’ First Amended Joint and Consolidated Plan ofReorganization Under Chapter 11 of the Bankruptcy Code (as confirmed, the “Plan” or “Plan of Reorganization”). The Plan becameeffective and the Debtors emerged from bankruptcy protection on May 31, 2007 (the “Effective Date”).

On the Effective Date, the Company implemented fresh-start reporting in accordance with SOP 90-7. Thus the consolidated

financial statements prior to June 1, 2007 reflect results based upon the historical cost basis of the Company while the post-emergenceconsolidated financial statements reflect the new basis of accounting incorporating the fair value adjustments made in recording theeffects of fresh-start reporting. Therefore, the post-emergence periods are not comparable to the pre-emergence periods. However,for discussions on the results of operations, the Company has combined the results for the five months ended May 31, 2007 with theseven months ended December 31, 2007. The combined period has been compared to the twelve months ended December 31, 2006. The Company believes that the combined financial results provide management and investors a better perspective of the Company’score business and on-going operational financial performance and trends for comparative purposes.

Full Year 2007 Results

The Company reported net income applicable to common stockholders of $2.1 billion for the combined year ended December 31,2007, compared to a net loss applicable to common stockholders of $2.8 billion in 2006. In 2007, the Company reported operatingincome of $1.1 billion, compared with operating income of $740 million in 2006.

Operating revenues for the full year 2007 decreased 0.3 percent versus 2006 to $12.5 billion. System consolidated passenger

revenue increased 1.9 percent to more than $10.8 billion on 0.4 percent additional available seat miles (“ASMs”), resulting in a 1.5percent increase in unit revenue. Excluding the impact of fresh-start reporting, system consolidated passenger revenue increased 2.8percent due to a 2.4 percent improvement in unit revenue.

Operating expenses decreased 3.4 percent year-over-year to $11.4 billion, resulting in a 2.0 percent decrease in mainline unit

costs, excluding fuel and unusual items. Full year 2007 results included $1.5 billion of net unusual and reorganization related gains. Unusual non-operating items

consisted of a $14 million loss on the sale of Pinnacle Airlines Corp. common stock and $1.6 billion of reorganization related gains.See “Item 8. Consolidated Financial Statements and Supplementary Data, Note 7 — Reorganization Related Items” for furtherinformation related to the Company’s reorganization items.

Full year 2006 results included $3.2 billion of net unusual and reorganization related losses. Operating expenses included $23

million in severance charges related to the Company’s ratified contract agreement with AMFA. Reorganization expenses recordedduring 2006 totaled $3.2 billion. See “Item 8. Consolidated Financial Statements Supplementary Data, Note 7 — ReorganizationRelated Items” for further information related to the Company’s reorganization items.

Full year 2005 results included $1.2 billion of net unusual and reorganization related losses. Operating expenses included $130

million of unusual items related to pension curtailment charges and aircraft and aircraft related write-downs. Unusual non-operatingitems consisted of an $18 million loss on the sale of the Company’s Pinnacle Airlines note to Pinnacle Airlines Corp. and a gain of$102 million from the sale of the Prudential Financial Inc. Common Stock received in conjunction with Prudential’s demutualization. Reorganization expenses recorded during 2005 totaled $1.1 billion. The Company also recorded a cumulative effect of accountingchange in the amount of $69 million during 2005.

25


Results of Operations—2007 Compared to 2006

Operating Revenues. Operating revenues decreased 0.3% ($40 million), as a result of reductions in cargo revenue and otherrevenue, partially offset by higher system passenger revenue and regional carrier revenue.

System Passenger Revenues. In the following analysis by region, mainline statistics exclude Northwest Airlink regional carriers,

which is consistent with how the Company reports statistics to the DOT. On the Effective Date, in conjunction with implementingfresh-start reporting, the Company changed its policies pertaining to the accounting for frequent flyer obligations and breakage ofpassenger tickets. Frequent flyer obligations are now recognized on a deferred revenue method versus an incremental cost method. The impact of the changes to accounting for frequent flyer obligations on the Successor Company was a reduction of $58.9 million inmainline passenger revenue and an increase of $9.5 million in regional carrier revenue for the seven months ended December 31,2007. Adjustments to air traffic liability are now recognized as revenue based on the delayed recognition approach, when the validityperiod of the ticket has expired, versus the use of historical trends and estimates. The overall impact of this change on passengerrevenue was a reduction of $44.7 million for the seven months ended December 31, 2007. The following analysis by region outlinesthe Company’s year-over-year performance as reported and excluding fresh-start related changes:

Mainline

Total

Domestic

Pacific

Atlantic

Mainline

Consolidated

As reported:

2007

Passenger revenues (in millions)

$ 5,867

$ 2,186

$ 1,375

$ 9,428

$ 10,833

Increase (Decrease) from 2006:


$ (123) $ 121

$ 200

$ 198

$ 204

Percent

(2.1)% 5.9% 17.0% 2.1% 1.9%

Scheduled service ASMs (capacity)

(2.3)% 1.6% 11.0% 0.6% 0.4%Scheduled service RPMs (traffic)

(1.3)% 0.3% 7.4% 0.4% 0.4%


0.9pts. (1.1)pts. (2.9)pts. (0.1)pts. (0.1)pts.Yield

(0.8)% 5.6% 8.9% 1.7% 1.5%

Passenger RASM

0.3% 4.2% 5.5% 1.5% 1.5% Excluding fresh-start related changes:

2007


$ 5,952

$ 2,213

$ 1,367

$ 9,532

$ 10,927



$ (38) $ 148

$ 192

$ 302

$ 298

Percent

(0.6)% 7.2% 16.3% 3.3% 2.8%

Yield

0.6% 6.9% 8.4% 2.8% 2.4%Passenger RASM

1.7% 5.5% 4.8% 2.6% 2.4%

Regional Carrier Revenues. Regional carrier revenues increased 0.4% ($6 million) to $1.4 billion, primarily due to a 1.2% yield

improvement on a 2.1% capacity reduction. Cargo Revenues. Cargo revenues decreased 11.2% ($106 million) to $840 million due to an 8.9% reduction in cargo ton miles

and a 2.5% reduction in yield. Cargo revenues consisted of freight and mail carried on passenger aircraft and the Company’sdedicated fleet of Boeing 747-200 freighter aircraft.

Other Revenues. Other Revenues, the principal components of which are MLT, other transportation fees, partner revenues, and

charter revenues, decreased 13.9% ($138 million). The year-over-year decrease was due to the change in presentation of regionalcarrier related revenue and expense items, as described in “Items 8. Consolidated Financial Statements and Supplementary Data, Note3 — Summary of Significant Accounting Policies,” partially offset by the portion of payments received for frequent flyer miles that isnow recorded in Other Revenues.

26


Operating Expenses. Operating expenses decreased 3.4% ($404 million) for 2007. As a result of the adoption of fresh-start

reporting, the Company’s financial statements on or after June 1, 2007 are not comparable with its pre-emergence financial statementsbecause they are, in effect, those of a new entity. In addition to the fair value adjustments required for fresh-start reporting, theCompany changed its policies pertaining to the accounting for frequent flyer obligations and breakage of passenger tickets. Theeffects of fresh-start reporting, the policy changes and the impact of exit-related stock compensation expense on the Company’sConsolidated Statements of Operations are itemized in column (1). On April 24, 2007, Mesaba Aviation, Inc. was acquired by theCompany and became a wholly-owned consolidated subsidiary, the impact of which is itemized in column (2). In conjunction withthe Amended Airline Services Agreement with Pinnacle and the Stock Purchase and Reorganization Agreement with Mesaba, theCompany changed its presentation of certain regional carrier related revenue and expense items effective January 1, 2007. Thischange in presentation had no impact on the Company’s operating income for the year ended December 31, 2007 and is itemized incolumn (3). Excluding the items described above, the comparable year-over-year operating performance variances are itemized incolumn (4). The following table and notes present operating expenses for the years ended December 31, 2007 and 2006 and describesignificant year-over-year variances:

Increase (Decrease) Due To:

Year Ended (1) (2) (3) (4)

Fresh-Start/

Combined Exit-Related Mesaba Regional Total %

December 31, December 31, Stk Comp Net of Carrier Incr (Decr) Incr

(In millions) 2007 2006 Exp Elim Reclass Operations from 2006 (Decr)

OPERATINGEXPENSES

Aircraft fuel and taxes

$ 3,378

$ 3,386

$ —

$ 11

—

$ (19) A $ (8) (0.2)%Salaries, wages and

benefits

2,568

2,662

20

79

—

(193) B (94) (3.5)Aircraft maintenance

materials and repairs

811

796

—

20

—

(5) C 15

1.9

Selling and marketing

751

759

(11 ) —

—

3

C (8) (1.1)Other rentals and landing

fees

539

562

—

10

—

(33) D (23) (4.1)Depreciation and

amortization

495

519

(5) 7

3

(29) E (24) (4.6)Aircraft rentals

378

226

—

—

188

(36) F 152

67.3


776

1,406

—

(138) (400) (92) G (630) (44.8)Other

1,728

1,512

—

32

—

184) H 216

14.3

Total operatingexpenses

$ 11,424

$ 11,828

$ 4

$ 21

$ (209) $ (220)

$ (404) (3.4)%

A. Aircraft fuel and taxes decreased primarily due to gains related to fuel derivative contracts and a reduction in fuel gallonsconsumed, partially offset by higher fuel prices. During 2007, we recognized $112.9 million of fuel derivative net gains asreductions to fuel expense, including $18.7 million of unrealized gains related to fuel derivative contracts that will settle in 2008. During 2006, we recognized $39.3 million of fuel derivative net losses as additional fuel expense. Total mainline gallonsconsumed decreased 3.0 percent, while the average fuel price per gallon increased 1.5 percent.

B. Salaries, wages and benefits were lower year-over-year primarily due to reductions in employee benefit costs, outsourcing of

certain station operations, and severance charges recorded in 2006 for a ratified contract agreement with AMFA, partially offsetby increases related to employee profit sharing and performance incentive plans.

C. Aircraft maintenance materials and repairs and selling and marketing expenses were relatively flat year-over-year. D. Other rentals and landing fees decreased due to a favorable settlement with the Metropolitan Airports Commission and fewer

overall landings. E. Depreciation and amortization expense reductions were largely due to the retirement of the DC10 fleet and reductions in the DC9

fleet, partially offset by incremental deliveries of A330, CRJ900 and Embraer 175 aircraft. F. Aircraft rentals expense decreased primarily due to restructured and rejected aircraft leases. G. Regional carrier expense decreased year-over-year primarily due to the reduction in regional carrier capacity and restructured

agreements with our regional airline affiliates. In addition, the Company recorded fuel and fuel related expenses for itswholly-owned subsidiaries, Compass and Mesaba, in Aircraft Fuel and Taxes and Other in 2007.

H. Other expenses (which include MLT operating expenses, outside services, insurance, passenger food, personnel expenses,

communication expenses and supplies) were higher versus prior year due largely to an increase in outside services with the shiftto third party vendors versus internally staffed station operations which is offset in salaries, wages and benefits. Increasedpassenger claims, professional fees, and personnel expenses also contributed to the variance.

27


Other Income and Expense. Non-operating expense decreased $4.8 billion primarily due to a $1.8 billion gain on debt discharge,

$1.3 billion in net gains associated with revaluing our assets and liabilities at fresh-start, and a $1.7 billion year-over-year reduction inother reorganization-related expenses. See “Item 8. Consolidated Financial Statements and Supplementary Data, Note 7 —Reorganization Related Items” for additional information related to the Company’s reorganization items.

Tax Expense (Benefit). Given recent loss experience, the Company provides a valuation allowance against tax benefits,

principally for net operating losses in excess of its deferred tax liability. It is more likely than not that future deferred tax assets willrequire a valuation allowance to be recorded to fully reserve against the uncertainty that those assets would be realized. See “Item 8.Consolidated Financial Statements and Supplementary Data, Note 13 — Income Taxes” for additional discussion of the Company’stax accounts.

Results of Operations—2006 Compared to 2005

Operating Revenues. Operating revenues increased 2.3% ($282 million), the result of higher system passenger and regional

carrier revenue. System Passenger Revenues. In the following analysis by region, mainline statistics exclude Northwest Airlink regional carriers,

which is consistent with how the Company reports statistics to the DOT.

Mainline

Total

Domestic

Pacific

Atlantic

Mainline

Consolidated

2006


$ 5,990

$ 2,065

$ 1,175

$ 9,230

$ 10,629



$ 216

$ 78

$ 34

$ 328

$ 392

Percent

3.8% 3.9% 3.0% 3.7% 3.8%

Scheduled service ASMs (capacity)

(7.9)% (3.8)% (7.0)% (6.7)% (7.5)%Scheduled service RPMs (traffic)

(4.3)% (3.3)% (5.5)% (4.2)% (4.7)%


3.1pts. 0.4pts. 1.5pts. 2.2pts. 2.5pts.Yield

8.4% 7.4% 8.9% 8.3% 9.0%

Passenger RASM

12.6% 7.9% 10.7% 11.1% 12.3%

Regional Carrier Revenues. Regional carrier revenues increased 4.8% ($64 million) to $1.4 billion, primarily due to improvedyield on a 15.5% capacity reduction.

Cargo Revenues. Cargo revenues decreased 0.1% ($1 million) to $946 million due to a 5.3% reduction in cargo ton miles,

partially offset by a 5.6% improvement in yield. Cargo revenues consisted of freight and mail carried on passenger aircraft and theCompany’s dedicated fleet of Boeing 747-200 freighter aircraft.

Other Revenues. Other revenues, the principal components of which are MLT, other transportation fees, partner revenues, charter

and rental revenues, decreased 9.9% ($109 million). The year-over-year decrease was due primarily to a reduction in KLM relatedrevenue.

28


Operating Expenses. Operating expenses decreased 10.4% ($1.4 billion) for 2006. The following table and notes present

operating expenses for the years ended December 31, 2006 and 2005 and describe significant year-over-year variances (in millions):

Year Ended

Increase

December 31

(Decrease)

Percent

2006

2005

from 2005

Change

Note

Operating Expenses


$ 3,386

$ 3,132

$ 254

8.1% A

Salaries, wages and benefits

2,662

3,721

(1,059) (28.5) B

Aircraft maintenance materials and repairs

796

703

93

13.2

C


759

811

(52) (6.4) D

Other rentals and landing fees

562

627

(65) (10.4) E

Depreciation and amortization

519

552

(33) (6.0) F

Aircraft rentals

226

429

(203) (47.3) G


1,406

1,576

(170) (10.8) H

Other

1,512

1,654

(142) (8.6) I

Total operating expenses

$ 11,828

$ 13,205

$ (1,377) (10.4)%

A. Aircraft fuel and taxes were driven by higher fuel prices, partially offset by a reduction in total gallons consumed due to capacityreductions. The average fuel price per gallon increased 18.6% to $2.02, while total mainline gallons consumed decreased 8.7%.During 2006, we recognized $39.3 million of fuel derivative net losses as additional fuel expense, including $2.7 million ofunrealized losses related to fuel derivative contracts that will settle in 2007. During 2005, we recognized $20.9 million of fuelderivative net gains as a reduction to fuel expense.

B. Salaries, wages and benefits decreased primarily due to consensually agreed upon CBAs, wage reductions imposed under

Section 1113, reduced mechanic pay and headcount, the reduced level of flying, the freezing of the pension plans, and curtailmentcharges recorded as pension expense in 2005. Pension curtailment charges in 2006 were recorded as reorganization expense andnot included in operating expense.

C. The increase in aircraft maintenance materials and repairs expense was largely due to the shift to third party maintenance vendors

versus internally completed maintenance work. D. Selling and marketing expense decreases were primarily due to a decline in enplanements, a shift in the volume of bookings made

by travel agents through computer reservation systems (“CRS”) to nwa.com, and lower booking fee rates. E. Other rentals and landing fees increased due to reduced facility rents and fewer overall landings. F. Depreciation and amortization expense is lower as a result of owned aircraft, and related inventory and equipment, permanently

removed from service. G. Aircraft rentals expense decreased primarily due to restructured and rejected aircraft leases. H. The decrease in regional carrier expenses was due primarily to the reduction in regional carrier capacity which drove decreases in

payments to regional carriers and fuel requirements of $147 million and $23 million, respectively. I. Other expenses (which include MLT operating expenses, outside services, insurance, passenger food, personnel expenses,

communication expenses and supplies) decreased primarily due to volume reductions.

Other Income and Expense. Non-operating expense increased $2.1 billion primarily due to reorganization expenses. See “Item 8.Consolidated Financial Statements and Supplementary Data, Note 7 — Reorganization Related Items” for additional informationrelated to the Company’s reorganization items.

Tax Expense (Benefit). Given recent loss experience, the Company provides a valuation allowance against tax benefits,principally for net operating losses in excess of its deferred tax liability. It is more likely than not that future deferred tax assets willrequire a valuation allowance to be recorded to fully reserve against the uncertainty that those assets would be realized. In 2006, theCompany decreased its income tax reserves by $37 million to reflect the current status of the Company’s federal income tax appeal forthe tax years 1996-2002. See “Item 8. Consolidated Financial Statements and Supplementary Data, Note 13 - Income Taxes” foradditional discussion of the Company’s tax accounts.

29


Liquidity and Capital Resources

At December 31, 2007, the Company had cash and cash equivalents of $2.9 billion, unrestricted short-term investments of $95million, and borrowing capacity under an undrawn credit facility of $101 million, providing total available liquidity of $3.1 billion.This amount excludes $725 million of restricted short-term investments (which may include amounts held as cash). Liquidityincreased by $1.1 billion during the year ended December 31, 2007. Significant Liquidity Events

In May, as part of the Company’s Plan of Reorganization, the Company raised net proceeds of $728 million in capital through thesale of new common stock pursuant to the Rights Offering and an Equity Commitment Agreement.

In June, the Company reclassified $325 million of deposits and holdbacks from restricted to unrestricted cash. Such amounts

were previously held by certain vendors under contracts entitling the vendors to retain cash to secure obligations under those contracts. In November, the Company closed on an accounts receivable financing facility. The facility size is $150 million and as of

December 31, 2007, the facility was undrawn. The new facility replaces an existing receivables facility that was terminated inNovember. The facility that was replaced was undrawn upon termination as the Company prepaid, in full, $106 million of debt underthat facility in May 2007.

The Company sold certain assets throughout 2007 including 57 aircraft, the Company’s remaining equity investment in Pinnacle

Airlines Corp. common stock, and the liquidation of its holdings in Aeronautical Radio, Inc. (“ARINC”). Proceeds from the sales ofthe aircraft, which included DC9, A319, DC10, and Boeing 747-200 aircraft, and investments totaled $279 million and $130 million,respectively. Proceeds from the sale of the A319 aircraft were primarily used to pre-pay debt originally issued to finance the aircraft.

In August, the Company deposited into an escrow account $213 million related to Northwest’s pending investment in Midwest

Air Group, LLC, a company formed by Northwest, TPG Midwest US V, LLC, and TPG Midwest International V, LLC for purposesof acquiring Midwest Air Group, Inc. The deposit was classified as restricted cash as of December 31, 2007 and was subsequentlywithdrawn upon the closing of the transaction in January 2008.

Cash Flow Activities Operating Activities. Net cash provided by operating activities for the year ended December 31, 2007 totaled $1.4 billion, a $0.2billion increase from the $1.2 billion of cash provided by operating activities for the year ended December 31, 2006. The increase innet cash provided by operations was primarily due to an increased net profit, excluding reorganization items, in 2007. Reorganizationexpenses are comprised of mainly non-cash items.

Investing Activities. Investing activities during 2007 included the purchase of eight A330-300, 13 CRJ900, and nine Embraer 175aircraft, proceeds from the sale of Pinnacle Airlines Corp. common stock and ARINC, and other related costs. Other related costsinclude engine purchases, costs to commission aircraft before entering revenue service, deposits on ordered aircraft, facilityimprovements and ground equipment purchases.

Financing Activities. Financing activities during 2007 consisted primarily of $728 million in net proceeds from the Rights

Offering, the financing of two A330-300, 13 CRJ900, and nine Embraer 175 aircraft with long-term debt, and the financing of Boeing787 aircraft pre-delivery deposits, partially offset by debt payments and debt prepayments.

Non-Cash Flow Transactions and Leasing Activities. The Company also financed the delivery of six Airbus A330-300 aircraft

during 2007 through non-cash transactions with the manufacturer, which are reflected as long-term debt on the Company’sConsolidated Balance Sheet, but are not classified as a cash flow activity. In connection with the acquisition of these aircraft, theCompany entered into long-term debt arrangements. Under these arrangements, the aggregate amount of debt incurred totaledapproximately $502 million.

30


Investing activities affecting cash flows and non-cash flow transactions and leasing activities related to the initial acquisition of

aircraft consisted of the following for the year ended December 31, 2007:

Investing Activities

Non-cash Transactions

Affecting Cash Flows

and Leasing Activities

Airbus A330-300

2

6

Embraer 175

9

—

CRJ900

13

—

24

6

For further discussion related to the Company’s long-term debt and capital lease obligations, see “Item 8. Consolidated Financial

Statements and Supplementary Data, Note 8 — Long-Term Debt and Short-Term Borrowings and Note 9 - Leases,” for additionalinformation.

Prior Years’ Cash Flow Activities As of December 31, 2006, the Company’s total liquidity, consisting of unrestricted balance sheet cash, cash equivalents and

short-term investments, was $2.06 billion. This amount excludes $424 million of restricted short-term investments (which mayinclude amounts held as cash). Liquidity increased by $0.8 billion during the year ended December 31, 2006.

Operating Activities. Net cash provided by operating activities for the year ended December 31, 2006 totaled $1.2 billion, a $1.7billion increase from the $437 million of cash used in operating activities for the year ended December 31, 2005. This increase in netcash provided by operations was primarily due to a net profit, excluding reorganization items and other non-cash expenses in 2006.Reorganization expenses are comprised of mainly non-cash items.

Investing Activities. Investing activities during 2006 consisted primarily of aircraft capital expenditures and other related costs. Other related costs include engine purchases, costs to commission aircraft before entering revenue service, deposits on orderedaircraft, facility improvements and ground equipment purchases.

Investing activities during 2006 also included a $153 million reduction to a cash collateral account, which decreased the

Company’s restricted cash, cash equivalents and short-term investment balance and increased the Company’s unrestricted cashbalance.

Financing Activities. Financing activities during 2006 consisted primarily of proceeds from debt issuances and payments on

debt. Proceeds from the debt included; the issuance of the DIP/Exit facility for $1.225 billion; proceeds of $779 million from theA330 Financing that refinanced three A330-300, seven A330-200, one A319, and one A320 aircraft and financed one A330-300aircraft; $145 million in proceeds from financing two A330-200 aircraft with a manufacturer; and $127 million of proceeds drawndown under an accounts receivable term loan that previously had been paid off. Significant payments of debt included: a $100 millionredemption of EETC notes on six B757-200 aircraft, representing a 42% discount off the outstanding balance of the notes; as part of arefinancing, a pre-payment of $127 million on a term loan secured by certain accounts receivable; a $50 million pre-payment on aterm loan secured by the Company’s investment in its regional carriers; payoff of the existing $975 million Bank Term Loan in orderto issue the DIP/Exit facility; and $1.1 billion of other debt and capital lease payments, including the payoff of debt on the threeA330-300 and seven A330-200 aircraft in connection with the A330 Financing.

Non-Cash Flow Transactions and Leasing Activities. In addition to the refinancing of 12 Airbus aircraft of various types and the

financing of three Airbus A330 aircraft with debt and manufacturer proceeds discussed above, the Company also took delivery of oneAirbus A330-300 and two Airbus A330-200 aircraft during 2006 which were acquired largely through non-cash transactions with themanufacturer and are not classified as cash flow activities.

31


Contractual Obligations. The following table summarizes the Company’s commitments to make long-term debt and minimum

lease payments, aircraft purchases, and certain other obligations for the years ending December 31.

(In millions)

2008

2009

2010

2011

2012

Thereafter

Total

Long-term debt (1)

$ 953

$ 1,080

$ 895

$ 1,028

$ 822

$ 5,949

$ 10,727

Capital leases (2)

10

14

9

9

8

203

253

Operating leases: (3)

Aircraft

385

382

393

339

303

1,902

3,704

Non-aircraft

184

176

154

128

115

902

1,659

Aircraft commitments (4)

1,205

1,167

770

79

97

—

3,318

Other purchase obligations (5)

28

20

13

12

11

19

103

Total (6)

$ 2,765

$ 2,839

$ 2,234

$ 1,595

$ 1,356

$ 8,975

$ 19,764

(1) Amounts represent principal and interest for long-term debt. Interest on variable rate debt was estimated based on the current ratein effect at December 31, 2007. See “Item 8. Consolidated Financial Statements and Supplementary Data, Note 8 — Long-TermDebt and Short-Term Borrowings” for additional information.

The above table also includes principal and interest obligations related to $454 million of aircraft enhanced equipment trustcertificates (“2007-1 EETC”) issued on October 10, 2007. The 2007-1 EETC proceeds were placed in escrow to pre-fund thefinancing of 27 new Embraer 175 aircraft expected to be delivered in 2008. Interest on the Certificates will be payablesemiannually on May 1 and November 1 of each year, beginning on May 1, 2008. The 2007-1 EETC proceeds will financeaircraft deliveries in 2008 and are, therefore, not included in “Item 8. Consolidated Financial Statements and Supplementary Data,Note 8 — Long-Term Debt and Short-Term Borrowings.”

(2) Amounts represent principal and interest for capital leases. See “Item 8. Consolidated Financial Statements and SupplementaryData, Note 9 — Leases” for information related to the Company’s overall lease commitments.

(3) Amounts represent minimum lease payments for non-cancelable operating leases with initial or remaining terms of more than one

year. See “Item 8. Consolidated Financial Statements and Supplementary Data, Note 9 — Leases” for information related tothese amounts and the Company’s overall lease commitments.

(4) The amounts presented represent contractual commitments for firm-order aircraft and are net of previously paid purchase

deposits. See “Item 8. Consolidated Financial Statements and Supplementary Data, Note 14 — Commitments” for a discussion ofthese purchase commitments.

(5) Amounts represent non-cancelable commitments to purchase goods and services, including such items as software

communications and information technology support. In addition to the contractual cash obligations and commitments includedin the table, the Company will in the ordinary course spend significant amounts of cash to operate its business. For example, theCompany will pay wages as required under its various CBAs and will be obligated to make contributions to the pension plansbenefiting its employees (as discussed below); the Company will purchase capacity from its regional airline affiliates (in returnfor which Northwest generally retains all revenues from tickets sold in respect of that purchased capacity); and the Company willpay, among other items, credit card processing fees, CRS fees and outside services related to information technology support andengine and airframe maintenance. While these and other expenditures may be covered by legally binding agreements, the actualpayment amounts will depend on volume and other factors that cannot be predicted with any degree of certainty, and accordinglythey are not included in the table.

(6) Purchase orders made in the ordinary course of business are excluded from the table. Any amounts for which the Company is

liable under purchase orders are reflected in the consolidated balance sheets as accounts payable and accrued liabilities.

Off-Balance Sheet Arrangements. The SEC requires registrants to disclose “off-balance sheet arrangements.” As defined by theSEC, an off-balance sheet arrangement includes any contractual obligation, agreement or transaction involving an unconsolidatedentity under which a company (1) has made guarantees, (2) has retained a contingent interest in transferred assets, (3) has anobligation under derivative instruments classified as equity, or (4) has any obligation arising out of a material variable interest in anunconsolidated entity that provides financing, liquidity, market risk or credit risk support to the Company, or that engages in leasing,hedging or research and development services with the Company.

The Company has examined the structures of its contractual obligations potentially impacted by this disclosure requirement andhas concluded that no arrangements of the types described above exist that may have a material current or future effect on its financialcondition, liquidity or results of operations.

32


Pension Funding Obligations.The Company has several defined benefit plans and defined contribution 401(k)-type plans

covering substantially all of its employees. Northwest froze future benefit accruals for its defined benefit Pension Plans for SalariedEmployees, Pilot Employees, and Contract Employees effective August 31, 2005, January 31, 2006, and September 30, 2006,respectively. Replacement pension coverage is provided for these employees through 401(k)-type defined contribution plans or in thecase of IAM represented employees, the IAM National Multi-Employer Plan. See “Item 8. Consolidated Financial Statements andSupplementary Data, Note 16 — Pension and Other Postretirement Health Care Benefits” for additional discussion of actuarialassumptions used in determining pension liability and expense.

The Pension Protection Act of 2006 (“2006 Pension Act”) was signed into law on August 17, 2006. The 2006 Pension Act

allows commercial airlines to elect special funding rules for defined benefit plans that are frozen. The unfunded liability for a frozendefined benefit plan may be amortized over a fixed 17-year period. The unfunded liability is defined as the actuarial liabilitycalculated using an 8.85% interest rate minus the fair market value of plan assets. Northwest elected the special funding rules forfrozen defined benefit plans under the 2006 Pension Act effective October 1, 2006. As a result of this election (1) the funding waiversthat Northwest received for the 2003 plan year contributions were deemed satisfied under the 2006 Pension Act, and (2) the fundingstandard account for each Plan had no deficiency as of September 30, 2006. New contributions that came due under the 2006 PensionAct funding rules were paid while Northwest was in bankruptcy and must continue to be paid going forward. If the new contributionsare not paid, the future funding deficiency that would develop will be based on the regular funding rules rather than the specialfunding rules.

It is Northwest’s policy to fund annually at least the minimum contribution as required by the Employee Retirement Income

Security Act of 1974, as amended (“ERISA”). Northwest’s 2007 calendar year contributions to its frozen defined benefit plans underthe provisions of the 2006 Pension Act and the replacement plans were approximately $130 million. In 2008, Northwest’s calendaryear contributions to its frozen defined benefit plans under the provisions of the 2006 Pension Act and the replacement plans willapproximate $140 million.

Critical Accounting Estimates

The discussion and analysis of the Company’s financial condition and results of operations are based upon the consolidated

financial statements, which have been prepared in accordance with GAAP. The preparation of the consolidated financial statementsrequires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, andrelated disclosure of contingent assets and liabilities at the date of the financial statements. Actual results may differ from theseestimates under different assumptions or conditions.

Critical accounting estimates are defined as those that are reflective of significant judgments and uncertainties and could

potentially reflect materially different results under different assumptions and conditions. See “Item 8. Consolidated FinancialStatements and Supplementary Data, Note 3 — Summary of Significant Accounting Policies” for additional discussion of theapplication of these estimates and other accounting policies. The Company’s management discussed the development of the estimatesand disclosures related to each of these matters with the Audit Committee of the Company’s Board of Directors.

Fresh-Start Reporting. Upon emergence from its Chapter 11 proceedings on May 31, 2007, the Company adopted fresh-startreporting in accordance with SOP 90-7. The Company’s emergence from Chapter 11 resulted in a new reporting entity with noretained earnings or accumulated deficit. Accordingly, the Company’s consolidated financial statements for periods prior to June 1,2007 are not comparable to consolidated financial statements presented on or after June 1, 2007.

Fresh-start reporting reflects the value of the Company as determined in the confirmed Plan of Reorganization. Under fresh-startreporting, the Company’s asset values were remeasured and allocated in conformity with SFAS No. 141. The excess of reorganizationvalue over the fair value of net tangible and identifiable intangible assets was recorded as goodwill in the accompanying ConsolidatedBalance Sheet. In addition, fresh-start reporting also required that all liabilities, other than deferred taxes and pension and otherpostretirement benefit obligations, be stated at fair value or at the present values of the amounts to be paid using appropriate marketinterest rates. Deferred taxes were determined in conformity with SFAS No. 109, Accounting for Income Taxes (“SFAS No. 109”). Inestimating fair value, we based our estimates and assumptions on the guidance prescribed by SFAS No. 157, Fair ValueMeasurements (“SFAS No. 157”), which we adopted in conjunction with our emergence from bankruptcy and adoption of fresh-startreporting. SFAS No. 157, among other things, defines fair value, establishes a framework for measuring fair value and expandsdisclosure about fair value measurements.

Estimates of fair value represent the Company’s best estimates based on its valuation models, which incorporated industry data

and trends and relevant market rates and transactions. The estimates and assumptions are inherently subject to significantuncertainties and contingencies beyond the control of the Company. Accordingly, we cannot provide assurance that the estimates,assumptions, and values reflected in the valuations will be realized, and actual results could vary materially. See “Item 8.Consolidated Financial Statements and Supplementary Data, Note 4 — Fair Value Measurements” for additional informationregarding assets and liabilities remeasured at fair value on the Effective Date.

33


To facilitate the calculation of the enterprise value of the Successor Company, Northwest’s financial advisors assistedmanagement in the preparation of a valuation analysis for the Successor Company’s common stock to be distributed as of theEffective Date to the unsecured creditors. The enterprise valuation included (i) a 40% weighting towards a comparable companyanalysis based on financial ratios and multiples of comparable companies, which were then applied to the financial projectionsdeveloped by the Company to arrive at an enterprise value; and (ii) a 60% weighting towards a discounted cash flow analysis whichmeasures the projected multi-year, unlevered free cash flows of the Company to arrive at an enterprise value.

The estimated enterprise value and corresponding equity value are highly dependent upon achieving the future financial results setforth in the five-year financial projections included in the Company’s Plan of Reorganization, as well as the realization of certain otherassumptions. The equity value of the Company was calculated to be a range of approximately $6.45 billion to $7.55 billion. Based onclaims trading prior to the Company’s Effective Date and the trading value of the Company’s common stock post emergence, theequity value of the Company was estimated to be $6.45 billion for purposes of preparing the Company’s financial statements. Theestimates and assumptions made in this valuation are inherently subject to significant uncertainties and the resolution of contingenciesbeyond the reasonable control of the Company. Accordingly, there can be no assurance that the estimates, assumptions, and amountsreflected in the valuations will be realized, and actual results could vary materially. Moreover, the market value of the Company’scommon stock may differ materially from the equity valuation.


to retain and increase traveler loyalty by offering incentives to travelers for their continued patronage. Under the WorldPerksprogram, miles are earned by flying on Northwest or its alliance partners and by using the services of program partners for such thingsas credit card use, hotel stays, car rentals and other activities. Northwest sells mileage credits to the program and alliance partners. WorldPerks members accumulate mileage in their accounts and later redeem mileage for free or upgraded travel on Northwest andalliance partners. WorldPerks members that achieve certain mileage thresholds also receive enhanced service benefits fromNorthwest such as special service lines, advance flight boarding and upgrades.

The Company adopted a deferred revenue method to recognize frequent flyer liabilities on the Effective Date. Under this method,

we account for miles earned and sold as separate deliverables in a multiple element arrangement as prescribed by EITF No. 00-21,Revenue Arrangements with Multiple Deliverables (“EITF No. 00-21”). Therefore, mileage credits earned on or after June 1, 2007 arenow deferred based upon the price for which we sell mileage credits to other airlines (“deferred mileage credits”), which we believerepresents the best evidence of their fair value in accordance with EITF No. 00-21. The revenue on deferred frequent flyer miles willbe recognized when the miles are ultimately redeemed through flight, upgrades or other means, or when it becomes remote that themiles will ever be used. Estimating deferred mileage credits that will not be redeemed requires significant management judgment.Based on current program rules and historical redemption trends, the Company records passenger revenue associated with deferredmileage credits if the mile is unredeemed seven years after issuance.

We previously accounted for frequent flyer miles earned on Northwest flights on an incremental cost basis as an accrued liability

and as operating expense, while miles sold to airline and non-airline businesses were accounted for on a deferred revenue basis. Alsoin conjunction with the adoption of the new accounting policy, Northwest began recording a component of the payments receivedfrom non-airline marketing partners in Other Revenue rather than in Passenger Revenue. The component recognized as OtherRevenue is the portion of the payment received that represents the amount paid by the marketing partner in excess of the value of thedeferred mileage credits.

As a result of the application of fresh-start reporting, the WorldPerks frequent flyer obligation was revalued at the Effective Date

to reflect the estimated fair value of miles to be redeemed in the future. Outstanding miles earned by flying Northwest or its partnercarriers were revalued using a weighted average per-mile equivalent ticket value, taking into account such factors as class of serviceand domestic and international ticket itineraries, which can be reflected in awards flown by WorldPerks members. At December 31,2007, the Company had recorded deferred revenue for its frequent flyer program totaling $2.0 billion. At December 31, 2006, theCompany had recorded an incremental cost liability and deferred revenue for its frequent flyer program totaling $412 million. Ahypothetical 1% increase or decrease in the number of outstanding miles would result in a change of approximately $19 million to thedeferred revenue liability.

Operating Revenues. The value of unused passenger tickets, miscellaneous change orders (“MCO’s”) and travel credit vouchers

(“TCV’s”) are included in current liabilities as air traffic liability. Passenger and cargo revenues are recognized when thetransportation is provided or when the ticket expires. Unused domestic passenger tickets generally expire one year from scheduledtravel. Unused international passenger tickets generally expire one year from ticket issuance. On the Effective Date, the Companyrevised the accounting method used to recognize revenue for unused tickets, adopting the delayed recognition approach. Under thedelayed recognition approach, no revenue is recognized on an unused ticket until the validity period has expired and the ticket can nolonger be used; therefore, management estimates are no longer required to recognize breakage revenue. Prior to the Effective Date,the Company recognized breakage associated with unused passenger tickets based on estimates of future breakage based on historicalbreakage trends.

34


Fixed Asset and Definite-Lived Intangible Asset Impairments. The Company evaluates long-lived tangible assets and

definite-lived intangible assets for potential impairments in compliance with SFAS No. 144, Accounting for the Impairment orDisposal of Long-Lived Assets, (“SFAS No. 144”). For fixed assets, these impairment evaluations are primarily initiated by fleet planchanges and therefore predominantly performed on fleet-related assets. For definite-lived intangible assets, impairment evaluationsare initiated based on quarterly reviews of key indicators of impairment. The Company records impairment losses on long-lived assetswhen events and circumstances indicate the assets might be impaired and the undiscounted cash flows estimated to be generated bythose assets are less than their carrying amounts. Impairment losses are measured by comparing the fair value of the assets to theircarrying amounts. In determining the need to record impairment charges, the Company is required to make certain estimatesregarding such things as the current fair market value of the assets and future net cash flows to be generated by the assets. The currentfair market value is determined by valuations or published sales values of similar assets, and the future net cash flows are based onassumptions such as asset utilization, expected remaining useful lives, future market trends and projected salvage values. Impairmentcharges are recorded in depreciation and amortization expense on the Company’s Consolidated Statements of Operations. If there aresubsequent changes in these estimates, or if actual results differ from these estimates, additional impairment charges may be required.

Goodwill and Indefinite-Lived Intangible Assets. The Company accounts for intangible assets in accordance with SFAS No. 142,

Goodwill and Other Intangible Assets (“SFAS No. 142”). SFAS No. 142 requires that companies test goodwill and indefinite-livedintangible assets for impairment on an annual basis rather than amortize such assets. The Company tests the balance for impairmentannually as of October 1 and/or when an impairment indicator exists.

Impairment testing is performed in accordance with SFAS No. 142. The Company’s impairment testing of goodwill is based on

the fair value of the enterprise considering both the market and income valuation approaches. The Company is annually required tocomplete Step 1 (determining and comparing the fair value of the Company’s reporting unit to its carrying value) of the impairmenttest. Step 2 is required to be completed if Step 1 indicates that the carrying value of the reporting unit exceeds the fair value andinvolves the calculation of the implied fair value of goodwill. The Company completed Step 1 of the impairment assessment at itsannual impairment testing date in 2007. Based upon the Company’s valuation procedures, the Company determined that the fair valueof the enterprise exceeded its carrying value. As such, the Company was not required to complete Step 2 of the impairment test andno impairment loss was recognized.

The Company tests its indefinite-lived intangible assets for impairment by remeasuring those assets at fair value using the

Company’s forecasts and estimates, market information on comparable assets, when available, and discount rates calculated fromindustry-wide information. Based upon the Company’s valuation procedures, we determined that the fair values of each category ofindefinite-lived intangible assets exceeded its carrying value; as such, no impairment was recorded on these assets.

The determination of fair value requires significant management judgment including the identification and computation of

multiples of comparable companies, computation of control premiums, future capacity, passenger yield, passenger traffic, jet fuel andother operating costs, changes in working capital, capital investments, the selection for the appropriate discount rates and otherrelevant factors.

The Company’s forecasts and estimates were based on assumptions that are consistent with the plans and estimates the Company

is using to manage its business. Changes in these estimates could change the Company’s conclusion regarding an impairment ofgoodwill or other intangible assets and potentially result in a non-cash impairment in a future period. Fuel costs and general economicconditions significantly impact our business and, thus, long-term assumptions related to these items materially impact the computationof our fair value. If the expected future price of fuel does not decrease from the record levels experienced during late 2007 or if theCompany is unable to pass this commodity price increase on to its passengers or if general economic conditions experience a material,negative change, the Company may be required to book an impairment sometime during 2008.

Pension Liability and Expense. The Company has several defined benefit pension plans and defined contribution 401(k)-type

plans covering substantially all of its employees. The Company accounts for its defined benefit pension plans in accordance withSFAS No. 87, Employers’ Accounting for Pensions, (“SFAS No. 87”), which requires that amounts recognized in financial statementsbe determined on an actuarial basis that includes estimates relating to expected return on plan assets, discount rate, and employeecompensation. Northwest froze future benefit accruals for its defined benefit Pension Plans for Salaried Employees, Pilot Employees,and Contract Employees effective August 31, 2005, January 31, 2006, and September 30, 2006, respectively. Replacement pensioncoverage was provided for these employees through 401(k)-type defined contribution plans or in the case of IAM representedemployees, the IAM National Multi-Employer Plan. See “Item 8. Consolidated Financial Statements and Supplementary Data, Note16 — Pension and Other Postretirement Health Care Benefits” for additional discussion of actuarial assumptions used in determiningpension liability and expense.

35


During the second quarter of 2005, the Company changed its method of recognizing certain pension plan administrative expenses

associated with the Company’s defined benefit pension plans and now includes them as a service cost component of net periodicpension cost. These expenses include trustee fees, other administrative expenses and insurance premiums paid to the Pension BenefitGuaranty Corporation (“PBGC”), all of which were previously reflected as a reduction in the market value of plan assets and thereforeamortized with other asset gains and losses. The Company believes the change is preferable because it more appropriately ascribesthe expenses to the period in which they are incurred. The cumulative effect of applying this change to net periodic pension expensein prior years is $69.1 million, which was retroactively recorded as of January 1, 2005, and was included in the Company’sConsolidated Statements of Operations for the twelve months ended December 31, 2005.

A significant element in determining the Company’s pension expense is the expected return on plan assets, which is based in part

on historical results for similar allocations among asset classes. The difference between the expected return and the actual return onplan assets is deferred and, under certain circumstances, amortized over the average life expectancy of plan participants. Therefore,the net deferral of past asset gains (losses) ultimately affects future pension expense.

In developing the expected long-term rate of return assumption, the Company examines projected returns by asset category with

its pension investment advisors. Projected returns are based primarily on broad, publicly traded equity and fixed-income indices. Theadvisors’ asset category return assumptions are based in part on a review of historical asset returns, but also emphasize current marketconditions to develop estimates of future risk and return. Current market conditions include the yield-to-maturity and credit spreads ona broad bond market benchmark in the case of fixed income asset classes, and current prices as well as earnings and dividend growthrates in the case of equity asset classes. The assumptions are also adjusted to account for the value of active management the fundshave provided historically. The Company’s expected long-term rate of return for 2008 is based on target asset allocations of 35%equities with an expected rate of return of 8.75%; 25% international equities with an expected rate of return of 8.75%; 10% privatemarkets with an expected rate of return of 11.75%; 15% long-duration bonds with an expected rate of return of 6.0%; 5% high yieldbonds with an expected rate of return of 7.50%; and 10% real estate equities with an expected rate of return of 6.75%. Theseassumptions result in a weighted geometric average rate of return of 8.75%. The Company historically weighted these assumptionsbased on an arithmetic average. Beginning in 2006, the Company weighted the above category rate-of-return assumptions based on ageometric average. The Company believes this change from arithmetic to geometric is preferable to its prior method in that itincorporates the underlying volatility of various asset category rate-of-return trends. The Company’s expected long-term rate of returnon plan assets was 9.0% for calendar year 2007 and 2006.

Plan assets for the Company’s pension plans are managed by external investment management organizations. These investment

management firms are prohibited by the investment policies of the plan from investing in Company securities, other than as part of amarket index fund that could have a diminutive proportion of such securities.

The Company also determines the discount rate used to measure plan liabilities. The discount rate reflects the current rate at

which the pension liabilities could be effectively settled at the end of the year. In estimating this rate, the Company looks to rates ofreturn on fixed-income investments of similar duration to the liabilities in the plans that hold high, investment grade ratings byrecognized ratings agencies. By applying this methodology, the Company determined a weighted-average discount rate of 6.31% tobe appropriate at December 31, 2007, versus the 5.93% discount rate used at December 31, 2006.

For the year ended December 31, 2007, accounting for the changes related to the Company’s pension plans resulted in a loss of

$199 million in accumulated other comprehensive income on a pre-tax basis. The impact on accumulated other comprehensiveincome from May 31, 2007 was principally due to a 4.9% decrease in the fair value of the plan assets offset by a 1.5% decrease inbenefit obligations driven by a 0.14% increase in the discount rate from 6.17% to 6.31%. The impact of a 0.25% change in theweighted average discount rate is shown in the table below. See the “Recent Accounting Pronouncements” section for additionalinformation related to the Company’s adoption of SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and OtherPostretirement Plans, (“SFAS No. 158”).

As of February 1, 2006 the majority of the Company’s qualified pension plans whose benefits were in part impacted by projected

rate of future compensation increases were frozen. Compensation increases assumption for remaining plans does not materially impactthe Company’s pension expense.

36


For the year ended December 31, 2007, the Company recognized consolidated pension expense of $58 million, including

replacement defined contribution requirements, compared to $335 million in 2006. The impact of a 0.50% change in the expectedlong-term rate of return on plan assets is shown in the table below.

Effect on Accrued

Effect on 2008

Pension Liability at

Change in Assumption

Pension Expense

December 31, 20070.25% decrease in discount rate

- 5 million

+278 million

0.25% increase in discount rate

+5 million

-262 million0.50% decrease in expected return on assets

+32 million

n/a

0.50% increase in expected return on assets

-32 million

n/a

Deferred Tax Asset. The Company accounts for income taxes utilizing the liability method. Deferred income taxes are primarilyrecorded to reflect the tax consequences of differences between the tax and financial reporting bases of assets and liabilities. Underthe provisions of SFAS No. 109, the realization of the future tax benefits of a deferred tax asset is dependent on future taxable incomeagainst which such tax benefits can be applied. All available evidence must be considered in the determination of whether sufficientfuture taxable income will exist. Such evidence includes, but is not limited to, the company’s financial performance, the marketenvironment in which the company operates, the utilization of past tax credits, and the length of relevant carryback and carryforwardperiods. Sufficient negative evidence, such as cumulative net losses during a three-year period that includes the current year and theprior two years, may require that a valuation allowance be established with respect to existing and future deferred tax assets. As aresult, it is more likely than not that future deferred tax assets will require a valuation allowance to be recorded to fully reserve againstthe uncertainty that those assets would be realized.

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. Thisstatement is effective for fiscal years beginning after December 15, 2008 and provides guidance for the classification and disclosure ofnoncontrolling interests (formerly called minority interests), as well as deconsolidation of subsidiaries. The Company is currentlyevaluating the impact of this statement on its financial statements.

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations (“SFAS No. 141R”). This statement

is effective for fiscal years beginning after December 15, 2008 and adjusts certain guidance related to recording nearly all transactionswhere one company gains control of another. The statement revises the measurement principle to require fair value measurements onthe acquisition date for recording acquired assets and liabilities. It also changes the requirements for recording acquisition-relatedcosts and liabilities. Additionally, the statement revises the treatment of valuation allowance adjustments related to income taxbenefits in existence prior to a business combination. The current standard, SFAS No. 141, requires that adjustments to thesevaluation allowances be recorded as adjustments to goodwill, while the new standard will require companies to adjust current incometax expense. The Company is currently evaluating the impact of this statement on its financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS

No. 159”). This statement permits all entities to elect to measure eligible financial instruments at fair value on a recurring basis. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, and may not be applied retrospectively to prior fiscalyears. The Successor Company did not elect to measure any eligible financial instruments at fair value under this guidance.

In September 2006, the FASB issued SFAS No. 158, which amends SFAS No. 87 and SFAS No. 106, Employers’ Accounting for

Postretirement Benefits Other Than Pensions (“SFAS No. 106”) to require recognition of the overfunded or underfunded status ofpension and other postretirement benefit plans on the balance sheet. Under SFAS No. 158, gains and losses, prior service costs andcredits, and any remaining transition amounts under SFAS No. 87 and SFAS No. 106 that have not yet been recognized through netperiodic benefit cost will be recognized in accumulated other comprehensive income, net of tax effects. The measurement date, thedate at which the benefit obligation and plan assets are measured, is required to be the company’s fiscal year end. The Companyhistorically had and continues to utilize a fiscal year-end measurement date. SFAS No. 158 was effective for publicly-held companiesfor fiscal years ending after December 15, 2006, except for the measurement date provisions, which are effective for fiscal yearsending after December 15, 2008. The adoption of SFAS No. 158 increased the Company’s long-term pension and other postretirementbenefit liabilities, as well as the Predecessor Company’s equity deficit by $224 million as of December 31, 2006. SFAS No. 158 doesnot affect the results of operations.

37


In September 2006, the FASB issued SFAS No. 157. This statement provides a single definition of fair value, a framework for

measuring fair value, and expanded disclosures concerning fair value. Previously, different definitions of fair value were contained invarious accounting pronouncements creating inconsistencies in measurement and disclosures. SFAS No. 157 applies to thosepreviously issued pronouncements that prescribe fair value as the relevant measure of value, except SFAS No. 123 (Revised 2004),Share-Based Payment (“SFAS No. 123R”) and related interpretations and pronouncements that require or permit measurement similarto fair value but are not intended to measure fair value. The Company adopted this statement on the Effective Date. See “Item 8.Consolidated Financial Statements and Supplementary Data, Note 4 — Fair Value Measurements” for additional information.

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), which clarifies

SFAS No. 109. FIN 48 prescribes a consistent recognition threshold and criteria for measurement of uncertain tax positions forfinancial statement purposes. FIN 48 requires the financial statement recognition of an income tax benefit when the Companydetermines that it is “more likely than not” the tax position will be ultimately sustained. FIN 48 also requires expanded disclosurewith respect to the uncertainty in income taxes. The Company adopted FIN 48 as of January 1, 2007, and no change was required toits reserve for uncertain income tax positions under FIN 48.

38


Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The risks inherent in the Company’s market-sensitive instruments and positions are the potential losses arising from adversechanges in the price of fuel, foreign currency exchange rates and interest rates, as discussed below. The sensitivity analyses presenteddo not consider the effects that such adverse changes may have on overall economic activity nor do they consider additional actionsmanagement may take to mitigate its exposure to such changes. Actual results may differ from the outcomes estimated in the analysesdue to factors beyond the Company’s control. See “Item 8. Consolidated Financial Statements and Supplementary Data, Note 17 —Risk Management” for related accounting policies and additional information.

Aircraft Fuel. The Company’s earnings are affected by changes in the price and availability of aircraft fuel. From time to time,

the Company manages the price risk of fuel costs by utilizing futures contracts traded on regulated futures exchanges, swapagreements and options. Excluding the impact of fuel hedges, a hypothetical 10% increase in the December 31, 2007 cost per gallonof fuel, assuming projected 2008 mainline and regional aircraft fuel usage, would result in an increase to aircraft fuel expense ofapproximately $369 million in 2008, compared to an estimated $357 million for 2007 measured at December 31, 2006. TheCompany, as of February 29, 2008, had hedged the price of approximately 45% and 18% of 2008 first quarter and full year fuelrequirements, respectively. As of February 28, 2007, the Company had hedged approximately 40% of its estimated 2007 fuelrequirements.

Foreign Currency. The Company is exposed to the effect of foreign exchange rate fluctuations on the U.S. dollar value of foreign

currency-denominated operating revenues and expenses. The Company’s largest exposure comes from the Japanese yen, and fromtime to time, the Company uses financial instruments to hedge its exposure to the Japanese yen and other foreign currencies. Theresult of a uniform 10% strengthening in the value of the U.S. dollar from December 31, 2007 levels relative to each of the currenciesin which the Company’s revenues and expenses are denominated would result in a decrease in operating income of approximately $66million for the year ending December 31, 2008, compared to an estimated decrease of $131 million for 2007 measured atDecember 31, 2006. This sensitivity analysis was prepared based upon projected foreign currency-denominated revenues andexpenses as of December 31, 2007 and 2006, respectively. The variance is due to the Company’s foreign currency-denominatedrevenues exceeding its foreign currency-denominated expenses.

The Company also has foreign currency exposure as a result of changes to balance sheet items. The Company is currently in a net

liability position, as its foreign currency-denominated liabilities exceed its foreign currency-denominated assets. The result of a 10%weakening in the value of the U.S. dollar would result in a decrease to other income of an estimated $9 million in 2008, caused by theremeasurement of net foreign currency-denominated liabilities as of December 31, 2007. In comparison, the Company was in a netasset position in 2006, as its foreign currency-denominated assets exceeded its foreign currency-denominated liabilities. The result ofa 10% strengthening in the value of the U.S. dollar would have resulted in a decrease to other income of an estimated $2 million in2007, caused by the remeasurement of net foreign currency-denominated assets as of December 31, 2006. This sensitivity analysiswas prepared based upon foreign currency-denominated assets and liabilities as of December 31, 2007 and 2006, respectively.

The Company’s operating income in 2007 was unfavorably impacted by a net $50 million due to the average yen being weaker in

2007 compared to 2006 and unfavorably impacted in 2006 by $107 million due to the average yen being weaker in 2006 compared to2005. In 2007, the Company’s yen-denominated net cash inflow was approximately 86 billion yen (approximately $726 million) andits yen-denominated liabilities exceeded its yen-denominated assets by an average of 10 billion yen (approximately $87 million). In2006, the Company’s yen-denominated net cash inflow was approximately 86 billion yen (approximately $747 million) and itsyen-denominated liabilities exceeded its yen-denominated assets by an average of three billion yen (approximately $24 million). Ingeneral, each time the yen weakens, the Company’s operating income is unfavorably impacted due to net yen-denominated revenuesexceeding expenses. Additionally, a weakening yen results in recognition of a non-operating foreign currency gain due to theremeasurement of net yen-denominated liabilities.

As a result of the Company not having any yen hedges in place during 2007, the average yen to U.S. dollar exchange rate for the

year ending December 31, 2007 was 118. Excluding the impact of hedging activities, the average yen to U.S. dollar exchange rate forthe years ending December 31, 2006 and 2005 was 117 and 110, respectively. Including the impact of hedge activities, the averageyen to U.S. dollar exchange rate for the years ending December 31, 2006 and 2005 was 115 and 108, respectively. The Japanese yenfinancial instruments utilized to hedge net yen-denominated sales resulted in a gain of $8.6 million and $10.9 million in 2006 and2005, respectively. As of December 31, 2007, the Company had hedged approximately 42.6% of its anticipated 2008yen-denominated sales. The 2008 Japanese yen hedges consist of forward contracts which hedge approximately 32.7% ofyen-denominated sales at an average rate of 109.3 yen per U.S. dollar and collar options which hedge approximately 9.9% ofyen-denominated sales with a rate range between 102.4 and 116.4 yen per U.S. dollar. As of December 31, 2006, the Company hadno hedges in place for its anticipated 2007 yen-denominated sales.

39


The Company’s operating income in 2007 was favorably impacted by a net $4 million due to the average Canadian dollar being

stronger in 2007 compared to 2006 and favorably impacted in 2006 by $15 million due to the average Canadian dollar being strongerin 2006 compared to 2005. In 2007, the Company’s Canadian dollar-denominated net cash inflow was approximately C$484 million(approximately $453 million) and its Canadian dollar-denominated assets exceeded its Canadian dollar-denominated liabilities by anaverage of C$10 million (approximately $10 million). In general, each time the Canadian dollar strengthens, the Company’s operatingincome is favorably impacted due to net Canadian dollar-denominated revenues exceeding expenses. Additionally, a weakeningCanadian dollar results in recognition of a non-operating foreign currency loss due to the remeasurement of net Canadiandollar-denominated assets.

The average Canadian dollar to U.S. dollar exchange rate for the years ending December 31, 2007, 2006 and 2005 was 1.07, 1.13

and 1.21, respectively. The Company did not hedge any of its Canadian dollar-denominated sales in 2007, 2006 or 2005. As ofDecember 31, 2007, the Company had hedged approximately 66.4% of its 2008 anticipated Canadian dollar denominated sales withforward contracts at an average rate of 1.0008 Canadian dollars per U.S. dollar.

Interest Rates. The Company’s earnings are also affected by changes in interest rates due to the impact those changes have on its

interest income from cash equivalents and short-term investments and its interest expense from floating rate debt instruments. If short-term interest rates were to increase by 100 basis points for a full year, based on the Company’s cash balance at

December 31, 2007 and December 31, 2006, the Company’s interest income from cash equivalents and short-term investments wouldincrease by approximately $38 million and $24 million, respectively. These amounts are determined by considering the impact of thehypothetical interest rate increase on the Company’s cash equivalent and short-term investment balances at December 31, 2007 and2006.

The Company’s floating rate indebtedness was approximately 70% of its total long-term debt and capital lease obligations as of

December 31, 2007. If short-term interest rates were to increase by 100 basis points throughout 2008 as measured at December 31,2007, the Company’s interest expense would increase by approximately $49 million. This amount is determined by considering theimpact of the hypothetical interest rate increase on the Company’s floating rate indebtedness as of December 31, 2007. As ofDecember 31, 2007 the Company had entered into individual interest rate cap hedges related to three floating rate debt instruments,with a total cumulative notional amount of $429 million. The objective of the interest rate cap hedges is to protect the anticipatedpayments of interest (cash flows) on the designated debt instruments from adverse market interest rate changes.

Subsequent to its Chapter 11 filing, the Predecessor Company recorded or accrued post-petition interest expense on pre-petition

obligations only to the extent it believed the interest would be paid during the bankruptcy proceeding or that it was probable that theinterest would be an allowed claim. The Predecessor Company’s floating rate indebtedness was approximately 67% of its totallong-term debt and capital lease obligations that were accruing interest as of December 31, 2006. If short-term interest rates wouldhave increased by 100 basis points throughout 2007 as measured at December 31, 2006, the Company’s interest expense would haveincreased by approximately $46 million. These amounts are determined by considering the impact of the hypothetical interest rateincrease on the Predecessor Company’s floating rate indebtedness, including debt obligations subject to compromise that continued toaccrue interest as of December 31, 2006.

Market risk for fixed-rate indebtedness is estimated as the potential decrease in fair value resulting from a hypothetical 100 basis

point increase in interest rates and amounts to approximately $96 million measured at December 31, 2007. This compares to anestimated $35 million measured at December 31, 2006.

40


Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm The Board of Directors and StockholdersNorthwest Airlines Corporation We have audited the accompanying consolidated balance sheets of Northwest Airlines Corporation (the Company) as of December 31,2007 (Successor) and as of December 31, 2006 (Predecessor), and the related consolidated statements of operations, commonstockholders’ equity (deficit), and cash flows for the seven months ended December 31, 2007 (Successor), and for the five monthsended May 31, 2007 (Predecessor), and for each of the two years in the period ended December 31, 2006 (Predecessor). Our audit alsoincluded the financial statement schedules of the Successor Company and the Predecessor Company for the periods as listed in theindex at item 15. These financial statements are the responsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position ofNorthwest Airlines Corporation as of December 31, 2007 (Successor) and 2006 (Predecessor), and the consolidated results of itsoperations and its cash flows for the seven-month period ended December 31, 2007 (Successor), five-month period ended May 31,2007 (Predecessor), and each of the two years in the period ended December 31, 2006 (Predecessor), in conformity with U.S.generally accepted accounting principles. Also, in our opinion, such Successor Company financial statement schedule and PredecessorCompany financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole,present fairly, in all material respects, the information set forth therein. As discussed in Note 1 to the consolidated financial statements, on May 18, 2007, the Bankruptcy Court entered an order confirmingthe plan of reorganization which became effective on May 31, 2007. Accordingly, the accompanying consolidated financial statementshave been prepared in conformity with AICPA Statement of Position 90-7, Financial Reporting by Entities in Reorganization Underthe Bankruptcy Code, for the Successor Company as a new entity with assets, liabilities, and a capital structure having carrying valuesnot comparable with prior periods as described in Note 1. As discussed in Notes 3, 4, 11, 13, and 16 to the consolidated financial statements, the Company adopted the provisions of theFinancial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004),Share-Based Payment, and SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans— anamendment of FASB Statements No. 87, 88, 106, and 132(R), in 2006 and adopted the provisions of FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes— an interpretation of FASB Statement No. 109, and SFAS No. 157, Fair ValueMeasurements, in 2007. As discussed in Note 5 to the financial statements, in 2005 the Company changed its method of recognizing certain pension planadministrative expenses associated with the Company’s defined benefit pension plans. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),Northwest Airlines Corporation’s internal control over financial reporting as of December 31, 2007, based on criteria established inInternal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission andour report dated February 28, 2008, expressed an unqualified opinion thereon.

February 28, 2008

41



CONSOLIDATED BALANCE SHEETS

(In millions)

Successor

Predecessor

December 31,

December 31,

2007

2006

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$ 2,939

$ 1,461

Unrestricted short-term investments

95

597

Restricted cash, cash equivalents and short-term investments

725

424

Accounts receivable, less allowance (2007—$4; 2006—$14)

776

638

Flight equipment spare parts, less allowance (2007—$10; 2006—$255)

135

104

Maintenance and operating supplies

180

130

Prepaid expenses and other

187

212

Total current assets

5,037

3,566

PROPERTY AND EQUIPMENT

Flight equipment

7,717

10,424

Less accumulated depreciation

197

2,815

7,520

7,609

Other property and equipment

594

1,674

Less accumulated depreciation

36

1,103

558

571

Total property and equipment

8,078

8,180

FLIGHT EQUIPMENT UNDER CAPITAL LEASES

Flight equipment

9

24

Less accumulated amortization

1

12

Total flight equipment under capital leases

8

12

OTHER ASSETS

Goodwill

6,035

8

International routes, less accumulated amortization (2007—$2; 2006—$334)

2,976

634

Other intangibles, less accumulated amortization (2007—$54; 2006—$11)

2,136

21

Investments in affiliated companies

24

42

Other, less accumulated depreciation and amortization (2007—$8; 2006—$914)

223

752

Total other assets

11,394

1,457

Total Assets

$ 24,517

$ 13,215

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

42



CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

Successor

Predecessor

December 31,

December 31,

2007

2006

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

CURRENT LIABILITIES

Air traffic liability/deferred frequent flyer liability

$ 2,004

$ 1,557

Accrued compensation and benefits

459

301

Accounts payable

706

624

Collections as agent

140

138

Accrued aircraft rent

31

49

Other accrued liabilities

315

329

Current maturities of long-term debt

446

213

Current maturities of capital lease obligations

3

—

Total current liabilities

4,104

3,211

LONG-TERM DEBT

6,515

3,899

LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES

124

—

DEFERRED CREDITS AND OTHER LIABILITIES

Long-term pension and postretirement health care benefits

3,638

86

Deferred frequent flyer liability

1,490

—

Deferred income taxes

1,131

—

Other

138

161

Total deferred credits and other liabilities

6,397

247

LIABILITIES SUBJECT TO COMPROMISE

—

13,572

PREFERRED REDEEMABLE STOCK SUBJECT TO COMPROMISE

—

277

COMMITMENTS AND CONTINGENCIES

COMMON STOCKHOLDERS’ EQUITY (DEFICIT)

Predecessor Company common stock, $.01 par value; sharesauthorized—315,000,000; shares issued—111,374,977 at December 31, 2006

—

1

Successor Company common stock, $.01 par value; sharesauthorized—400,000,000; shares issued—233,187,998 at December 31, 2007

2

—

Additional paid-in capital

7,235

1,505

Retained earnings (accumulated deficit)

342

(7,384)Accumulated other comprehensive income (loss)

(202) (1,100)

Predecessor Company treasury stock—24,024,317 at December 31, 2006

—

(1,013)Successor Company treasury stock—1,684 at December 31, 2007

—

—

Total common stockholders’ equity (deficit)

7,377

(7,991)Total Liabilities and Stockholders’ Equity (Deficit)

$ 24,517

$ 13,215


43



CONSOLIDATED STATEMENTS OF OPERATIONS(In millions, except per share amounts)

Successor

Predecessor

Period From

Period From

June 1 to

January 1 to

Year Ended

Year Ended

December 31,

May 31,

December 31,

December 31,

2007

2007

2006

2005

OPERATING REVENUES

Passenger

$ 5,660

$ 3,768

$ 9,230

$ 8,902

Regional carrier revenues

884

521

1,399

1,335

Cargo

522

318

946

947

Other

538

317

993

1,102


7,604

4,924

12,568

12,286

OPERATING EXPENSES


2,089

1,289

3,386

3,132

Salaries, wages and benefits

1,541

1,027

2,662

3,721

Aircraft maintenance materials and repairs

508

303

796

703


436

315

759

811

Other rentals and landing fees

304

235

562

627


289

206

519

552

Aircraft rentals

218

160

226

429


434

342

1,406

1,576

Other

1,044

684

1,512

1,654

Total operating expenses

6,863

4,561

11,828

13,205

OPERATING INCOME (LOSS)

741

363

740

(919) OTHER INCOME (EXPENSE)

Interest expense

(282) (225) (565) (610)Interest capitalized

9

6

10

10

Investment income

105

56

109

80

Earnings of affiliated companies

2

—

1

(14)Reorganization items, net

—

1,551

(3,165) (1,081)

Other, net

(9) (2) 6

77

Total other income (expense)

(175) 1,386

(3,604) (1,538) INCOME (LOSS) BEFORE INCOME TAXES AND

CUMULATIVE EFFECT OF ACCOUNTING CHANGE

566

1,749

(2,864) (2,457)

Income tax expense (benefit)

224

(2) (29) 7

NET INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF

ACCOUNTING CHANGE

342

1,751

(2,835) (2,464)

Cumulative effect of accounting change

—

—

—

(69) NET INCOME (LOSS)

342

1,751

(2,835) (2,533)

Preferred stock requirements

—

—

—

(22)

NET INCOME (LOSS) APPLICABLE TO COMMON

STOCKHOLDERS

$ 342

$ 1,751

$ (2,835) $ (2,555) EARNINGS (LOSS) PER COMMON SHARE:

Basic

Income (loss) applicable to common stockholders beforecumulative effect of accounting change

$ 1.30

$ 20.03

$ (32.48) $ (28.57)


—

—

—

(0.79)Net Income (loss) applicable to common stockholders

$ 1.30

$ 20.03

$ (32.48) $ (29.36)

Diluted


Income (loss) applicable to common stockholders beforecumulative effect of accounting change

$ 1.30

$ 14.28

$ (32.48) $ (28.57)


—

—

—

(0.79)Net Income (loss) applicable to common stockholders

$ 1.30

$ 14.28

$ (32.48) $ (29.36)


44



CONSOLIDATED STATEMENTS OF CASH FLOWS(In millions)

Successor

Predecessor

Period From

Period From

June 1 to

January 1 to

Year Ended

Year Ended

December 31,

May 31,

December 31,

December 31,

2007

2007

2006

2005

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

$ 342

$ 1,751

$ (2,835) $ (2,533)Adjustments to reconcile net income (loss) to net cash provided by

operating activities:

Reorganization items, net

—

(1,551) 3,165

1,081


289

206

519

552

Income tax expense (benefit)

224

(2) (29) 7

Net receipts (payments) of income taxes

(1) —

2

(3)Pension and other postretirement benefit contributions (greater) less

than expense

(13) (2) 261

457

Stock-based compensation

76

—

2

13

Net loss (earnings) of affiliates

(2) —

(1) 14

Net loss (gain) on disposition of property, equipment and other

10

4

16

(80)Increase (decrease) in cash flows from operating assets and

liabilities, excluding the effects of the acquisition of MesabaAviation, Inc.:

Post-emergence reorganization payments

(164) —

—

—

Changes in certain assets and liabilities:

Decrease (increase) in accounts receivable

(176) 16

(3) (102)Decrease (increase) in flight equipment spare parts

(10) 3

23

(3)

Decrease (increase) in vendor deposits/holdbacks

162

163

(35) (290)Decrease (increase) in supplies, prepaid expenses and other

(74) 28

67

(34)

Increase (decrease) in air traffic liability/deferred frequent flyerliability

(317) 448

(33) 144

Increase (decrease) in accounts payable

(21) 19

287

206

Increase (decrease) in other liabilities

(1) (51) (164) 127

Other, net

1

14

(18) 7

Net cash provided by (used in) operating activities

325

1,046

1,224

(437) NET CASH PROVIDED BY (USED IN) REORGANIZATION

ACTIVITIES

—

5

21

1

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures

(739) (312) (527) (359)Purchases of short-term investments

—

(44) (21) (301)

Proceeds from sales of short-term investments

542

15

28

1,606

Proceeds from sale of investment in affiliates

130

—

—

—

Decrease (increase) in restricted cash, cash equivalents and short-terminvestments

(196) (74) 176

(444)

Cash and cash equivalents acquired in acquisition of

Mesaba Aviation, Inc.

—

16

—

—

Proceeds from sale of property, equipment and other assets

264

—

7

6

Proceeds from sale of Pinnacle note receivable

—

—

—

102

Investments in affiliated companies and other, net

1

1

9

(1)Net cash provided by (used in) investing activities

2

(398) (328) 609

CASH FLOWS FROM FINANCING ACTIVITIES

Payment of long-term debt

(645) (609) (2,372) (606)Proceeds from long-term debt

710

326

2,281

448

Payment of capital lease obligations

(1) (1) (14) (16)Payment of short-term borrowings

—

—

—

(14)

Proceeds from equity rights offering

750

—

—

—

Payments related to equity rights offering

—

(22) —

—

Other, net

(9) (1) (35) (8)Net cash provided by (used in) financing activities

805

(307) (140) (196)


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

1,132

346

777

(23)

Cash and cash equivalents at beginning of period

1,807

1,461

684

707

Cash and cash equivalents at end of period

$ 2,939

$ 1,807

$ 1,461

$ 684

Available to be borrowed under credit facilities

$ 101

$ 127

$ —

$ —

Cash and cash equivalents and unrestricted short-term investments at

end of period

$ 3,034

$ 2,445

$ 2,058

$ 1,262

Supplemental Cash Flow Information:

Interest paid

$ 304

$ 208

$ 569

$ 529

Investing and Financing Activities Not Affecting Cash:

Manufacturer financing of aircraft and other non-cash transactions

$ 335

$ 167

$ 280

$ 344


45



CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS’ EQUITY (DEFICIT)(In millions)

Retained

Accumulated

Additional

Earnings

Other

Common Stock

Paid-In

(Accumulated

Comprehensive

Treasury

Shares

Amount

Capital

Deficit)

Income (Loss)

Stock

Total

Balance at January 1, 2005

111.1

$ 1

$ 1,471

$ (1,999) $ (1,547) $ (1,013) $ (3,087)(Predecessor Company)

Net income (loss)

—

—

—

(2,533) —

—

(2,533)

Other comprehensive income (loss)

Foreign currency

—

—

—

—

(7) —

(7)Deferred gain/(loss) from hedging

activities

—

—

—

—

11

—

11

Unrealized gain/(loss) on investments

—

—

—

—

(9) —

(9)Pension, other postretirement, and

long-term disability benefits

—

—

—

—

(16) —

(16)Total

(2,554)

Series C Preferred Stock dividends accrued

—

—

—

(22) —

—

(22)

Series C Preferred Stock converted toCommon Stock

0.2

—

16

—

—

—

16

Stock options expensing

—

—

13

—

—

—

13

Issuance of Treasury Stock

—

—

—

6

—

—

6

Balance at December 31, 2005

111.3

1

1,500

(4,548) (1,568) (1,013) (5,628)

(Predecessor Company)

Net income (loss)

—

—

—

(2,835) —

—

(2,835)


Deferred gain/(loss) from hedgingactivities

—

—

—

—

(10) —

(10)

Unrealized gain/(loss) on investments

—

—

—

—

3

—

3

Pension, other postretirement, andlong-term disability benefits

—

—

—

—

699

—

699

Total

(2,143) Series C Preferred Stock converted to

Common Stock

0.1

—

3

—

—

—

3

Stock options expensing

—

—

2

—

—

—

2

Other

—

—

—

(1) —

—

(1)Adjustment to Adopt SFAS No. 158

—

—

—

—

(224) —

(224)


111.4

1

1,505

(7,384) (1,100) (1,013) (7,991)

(Predecessor Company)

Series C Preferred Stock converted to

Common Stock

—

—

2

—

—

—

2

Net income (loss) from January 1 to

May 31, 2007

—

—

—

1,751

—

—

1,751


Foreign currency

—

—

—

—

(1) —

(1)Unrealized gain/(loss) on investments

—

—

—

—

1

—

1

Total

—

Balance at May 31, 2007

111.4

1

1,507

(5,633) (1,100) (1,013) (6,238)(Predecessor Company)

Fresh start adjustments:

Cancellation of the Predecessor Company’spreferred and common stock

(111.4 ) (1) (1,507) —

—

1,013

(495)


Elimination of the Predecessor Company’s

accumulated deficit and accumulatedother comprehensive income

—

—

—

5,633

1,100

—

6,733

Reorganization value ascribed to the

Successor Company

167.4

2

6,448

—

—

—

6,450

Issuance of new equity interests in

connection with emergence from Chapter11

27.8

—

728

—

—

—

728

Balance at June 1, 2007

195.2

2

7,176

—

—

—

7,178

(Successor Company)

Net income from June 1 to December 31,

2007

—

—

—

342

—

—

342


Deferred gain/(loss) from hedgingactivities

—

—

—

—

(3) —

(3)

Pension, other postretirement, andlong-term disability benefits

—

—

—

—

(199) —

(199)

Total

(202) Compensation expense associated with

equity awards

—

—

59

—

—

—

59

Acquisition of Treasury Stock

—

—

—

—

—

—

—

Equity distributions - claims

38

—

—

—

—

—

—


233.2

$ 2

$ 7,235

$ 342

$ (202) $ —

$ 7,377


46


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Voluntary Reorganization Under Chapter 11 Proceedings

Background and General Bankruptcy Matters. The following discussion provides general background information regarding theCompany’s Chapter 11 cases, and is not intended to be an exhaustive summary. Detailed information pertaining to the bankruptcyfilings may be obtained at http://www.nwa-restructuring.com. Information contained on the Company’s Web site is not incorporatedinto these financial statements.

On September 14, 2005 (the “Petition Date”), NWA Corp. and 12 of its direct and indirect subsidiaries (collectively, the

“Debtors”) filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code with the United StatesBankruptcy Court for the Southern District of New York (the “Bankruptcy Court”). Subsequently, on September 30, 2005, NWAAircraft Finance, Inc., an indirect subsidiary of NWA Corp., also filed a voluntary petition for relief under Chapter 11. On May 18,2007, the Bankruptcy Court entered an order approving and confirming the Debtors’ First Amended Joint and Consolidated Plan ofReorganization Under Chapter 11 of the Bankruptcy Code (as confirmed, the “Plan” or “Plan of Reorganization”). The Plan becameeffective and the Debtors emerged from bankruptcy protection on May 31, 2007 (the “Effective Date”). On the Effective Date, theCompany implemented fresh-start reporting in accordance with the American Institute of Certified Public Accountants Statement ofPosition 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code (“SOP 90-7”).

As a result of the application of fresh-start reporting in accordance with SOP 90-7 upon the Company’s emergence from

bankruptcy on May 31, 2007, the financial statements prior to June 1, 2007 are not comparable with the financial statements forperiods on or after June 1, 2007. References to “Successor Company” refer to the Company on or after June 1, 2007, after givingeffect to the application of fresh-start reporting. References to “Predecessor Company” refer to the Company prior to June 1, 2007.See “Note 2 — Fresh-Start Reporting” for further details.

The Plan generally provided for the full payment or reinstatement of allowed administrative claims, priority claims, and secured

claims, and the distribution of new common stock of the Successor Company to the Debtors’ creditors, employees and others insatisfaction of allowed unsecured claims. The Plan contemplates the issuance of approximately 277 million shares of new commonstock by the Successor Company (out of the 400 million shares of new common stock authorized under its amended and restatedcertificate of incorporation), as follows:


and• 15.2 million shares of common stock are subject to awards under a management equity plan. The new common stock is listed on the New York Stock Exchange (the “NYSE”) and began trading under the symbol “NWA” on

May 31, 2007. Pursuant to the Plan of Reorganization, stockholders of NWA Corp. prior to the Effective Date received nodistributions and their stock was cancelled.

In connection with the consummation of the Plan of Reorganization, on the Effective Date, the Company’s existing $1.225 billion

Senior Corporate Credit Facility (“Bank Credit Facility”) was converted into exit financing in accordance with its terms. See “Note 8— Long-Term Debt and Short-Term Borrowings” for additional information.

Stockholder Rights Plan. Pursuant to the Stockholder Rights Plan (the “Rights Plan”), each share of common stock has attached

to it a right and, until the rights expire or are redeemed, each new share of common stock issued by NWA Corp., will include oneright. Once exercisable, each right entitles the holder (other than the acquiring person or group) to purchase one one-hundredth of ashare of Series A Junior Participating Preferred Stock at an exercise price of $120, subject to adjustment. The rights becomeexercisable upon the occurrence of certain events, including the acquisition by any air carrier with passenger revenues in excess ofapproximately $1 billion per year (as such amount may be increased based on increases in the Consumer Price Index from 2000) (a“Major Carrier”), a holding company of a Major Carrier or any of their respective affiliates acquires beneficial ownership of 20% ormore of NWA Corp.’s outstanding common stock or commences a tender or exchange offer that would result in such person or groupacquiring beneficial ownership of 20% or more of NWA Corp.’s outstanding common stock. The rights expire on May 31, 2017, andmay be redeemed by NWA Corp. at a price of $.01 per right prior to the time they become exercisable.

Equity Commitment Agreement. On March 27, 2007, the Bankruptcy Court approved the Equity Commitment Agreement dated

February 12, 2007 among NWA Corp., together with Northwest, as guarantor, and JP Morgan Securities Inc. (“JP Morgan”), pursuantto which, among other things, JP Morgan agreed to backstop the rights offering (the “Rights Offering”) to creditors of NWA Corp.,Northwest and the Debtors. The Company raised net proceeds of $728 million in new capital through the sale of 27,777,778 shares ofnew common stock pursuant to the Rights Offering and JP Morgan’s commitments under the Equity Commitment Agreement.

47


Restrictions on the Transfer of Common Stock. To reduce the risk of a limitation under Section 382 of the Internal Revenue Code

on the Company’s ability to use its net operating loss carryforwards (“NOLs”), the Amended and Restated Certificate of Incorporationrestricts certain transfers of common stock for two years after the Company’s emergence from bankruptcy. Such restrictions can beextended thereafter for three consecutive one year periods (to June 2012) upon, each time, the affirmative vote of the Company’sstockholders. During the two year period, these restrictions generally provide that any attempted transfer of common stock prior to theexpiration of the term of the transfer restrictions will be prohibited and void if such transfer would cause the transferee’s ownershipinterest in the Company to increase to 4.95% or above, including an increase in a transferee’s ownership interest from 4.95% or aboveto a greater ownership interest, unless approved by the Board of Directors on the basis that the transfer does not increase the risk of anownership change. In the event that these restrictions are extended beyond the two year period, the Board of Directors will approveproposed transfers that, taking into account all prior transfers, do not result in an aggregate owner shift under Section 382 of more than30%. If the aggregate owner shift as of any date after the two year period exceeds 30%, the Board of Directors has the discretion toapprove any subsequent transfers subject to the standards applicable during the two year period until the earlier of the date on whichthe aggregate owner shift no longer exceeds 30%, or the restriction is no longer in effect.

The Predecessor Company’s common stock ceased trading on the NASDAQ stock market on September 26, 2005 and began

trading in the “over-the-counter” market under the symbol NWACQ.PK. Upon the Effective Date of the Plan, the outstandingcommon and preferred stock of the Predecessor Company was cancelled for no consideration and the Predecessor Company’sstockholders no longer have any interest as stockholders in the Successor Company by virtue of their ownership of the PredecessorCompany’s common or preferred stock prior to emergence from bankruptcy.

Claims Resolution Process. Pursuant to terms of the Plan of Reorganization, approximately 225.8 million shares of the Successor

Company’s common stock will be issued to holders of allowed general unsecured claims and 8.6 million shares will be issued toholders who also held a guaranty claim from the Debtors. Once a claim is allowed consistent with the claims resolution process asprovided in the Plan, the claimant is entitled to a distribution of new common stock. Approximately 199.6 million shares of newcommon stock were issued and distributed on or about May 31, 2007, July 16, 2007, October 1, 2007 and January 2, 2008 as part ofthe initial distributions in respect of valid unsecured claims totaling $7.8 billion. Additionally, approximately 7.9 million shares ofnew common stock were distributed in respect of valid unsecured guaranty claims. In total, there are approximately 27.0 millionremaining shares of new common stock held in reserve under the terms of the Plan of Reorganization. Of these shares, approximately26.3 million are being held in reserve relating to disputed unsecured claims totaling $1.0 billion, and 0.7 million are being held inreserve relating to unsecured guaranty claims totaling $295 million.

The Company estimates that the probable range of unsecured claims to be allowed will be between $8.0 and $8.4 billion.

Differences between claim amounts filed and the Company’s estimates are being investigated and will be resolved in connection withthe claims resolution process. However, there will be no further financial impact to the Company associated with the settlement ofsuch unsecured claims, as the holders of all allowed unsecured claims against the Predecessor Company will receive under the Plan ofReorganization only their pro rata share of the distribution of the newly issued Common Stock of the Successor Company. Securedclaims were deemed unimpaired under the Plan and were satisfied upon either reinstatement of the obligations in the SuccessorCompany, surrendering the collateral to the secured party, or by making full payment in cash.

Note 2 — Fresh-Start Reporting Upon emergence from its Chapter 11 proceedings on May 31, 2007, the Company adopted fresh-start reporting in accordancewith SOP 90-7. The Company’s emergence from Chapter 11 resulted in a new reporting entity with no retained earnings oraccumulated deficit. Accordingly, the Company’s consolidated financial statements for periods prior to June 1, 2007 are notcomparable to consolidated financial statements presented on or after June 1, 2007. Fresh-start reporting reflects the value of the Company as determined in the confirmed Plan of Reorganization. Under fresh-startreporting, the Company’s asset values were remeasured and allocated in conformity with Statement of Financial AccountingStandards (“SFAS”) No. 141, Business Combinations (“SFAS No. 141”). The excess of reorganization value over the fair value of nettangible and identifiable intangible assets was recorded as goodwill in the accompanying Consolidated Balance Sheet. In addition,fresh-start reporting also required that all liabilities, other than deferred taxes and pension and other postretirement benefit obligations,be stated at fair value or at the present values of the amounts to be paid using appropriate market interest rates. Deferred taxes aredetermined in conformity with SFAS No. 109, Accounting for Income Taxes (“SFAS No. 109”). Estimates of fair value represent the Company’s best estimates based on its valuation models, which incorporated industry dataand trends and relevant market rates and transactions. The estimates and assumptions are inherently subject to significantuncertainties and contingencies beyond the control of the Company. Accordingly, we cannot provide assurance that the estimates,assumptions, and values reflected in the valuations will be realized, and actual results could vary materially.

48


To facilitate the calculation of the enterprise value of the Successor Company, Northwest’s financial advisors assistedmanagement in the preparation of a valuation analysis for the Successor Company’s common stock to be distributed as of theEffective Date to the unsecured creditors. The enterprise valuation included (i) a 40% weighting towards a comparable companyanalysis based on financial ratios and multiples of comparable companies, which were then applied to the financial projectionsdeveloped by the Company to arrive at an enterprise value; and (ii) a 60% weighting towards a discounted cash flow analysis whichmeasures the projected multi-year, un-levered free cash flows of the Company to arrive at an enterprise value. The estimated enterprise value and corresponding equity value are highly dependent upon achieving the future financial resultsset forth in the five-year financial projections included in the Company’s Plan of Reorganization, as well as the realization of certainother assumptions. The equity value of the Company was calculated to be a range of approximately $6.45 billion to $7.55 billion. Based on claims trading prior to the Company’s Effective Date and the trading value of the Company’s common stock postemergence, the equity value of the Company was estimated to be $6.45 billion for purposes of preparing the Company’s financialstatements. The estimates and assumptions made in this valuation are inherently subject to significant uncertainties and the resolutionof contingencies beyond the reasonable control of the Company. Accordingly, there can be no assurance that the estimates,assumptions, and amounts reflected in the valuations will be realized, and actual results could vary materially. Moreover, the marketvalue of the Company’s common stock may differ materially from the equity valuation. As part of the provisions of SOP 90-7, on June 1, 2007 we were required to adopt all accounting guidance that would be effectivewithin the subsequent twelve-month period. See “Note 4 — Fair Value Measurements” for additional information. The following Fresh-Start Condensed Consolidated Balance Sheet illustrates the financial effects on the Company resulting fromthe implementation of the Plan of Reorganization and the adoption of fresh-start reporting. This Fresh-Start Condensed ConsolidatedBalance Sheet reflects the effect of consummating the transactions contemplated in the Plan of Reorganization, including settlement ofvarious liabilities, issuance of certain securities, incurrence of new indebtedness, repayment of old indebtedness, and other cashpayments.

49


The effects of the Plan of Reorganization and fresh-start reporting on the Company’s Condensed Consolidated Balance Sheet are

as follows:

(a)

(b)

(c)

(d)

New Credit

Facility

New

(Successor)

(Predecessor)

Debt Discharge &

Financing

Equity

Fresh-Start

Reorganized

(In millions)

May 31, 2007

Reclassification

Transactions

Issued

Adjustments

June 1, 2007

ASSETS

CURRENT ASSETS

Cash, cash equivalents and unrestricted short-terminvestments

$ 2,465

$ (20) $ —

$ 750

$ —

$ 3,195

Restricted cash, cash equivalents and short-terminvestments

974

—

—

—

170

1,144

Accounts receivable, less allowance

587

—

—

—

(9) 578

Flight equipment spare parts and maintenance andoperating supplies

217

—

—

—

31

248

Prepaid expenses and other

254

—

—

(22) (51) 181

Total current assets

4,497

(20) —

728

141

5,346

PROPERTY AND EQUIPMENT

Net flight equipment and net flight equipment undercapital lease

7,767

—

—

—

(1,068) 6,699

Other property and equipment, net

477

—

—

—

69

546

Total property and equipment, net

8,244

—

—

—

(999) 7,245

OTHER ASSETS

Goodwill

18

—

—

—

6,239

6,257

International routes and other intangible assets

653

—

—

—

4,513

5,166

Investments in affiliated companies

22

—

—

—

143

165

Other

739

—

—

—

(267) 472

Total other assets

1,432

—

—

—

10,628

12,060

Total Assets

$ 14,173

$ (20) $ —

$ 728

$ 9,770

$ 24,651

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Air traffic liability/deferred frequent flyer liability

$ 2,006

$ —

$ —

$ —

$ 274

$ 2,280

Accrued compensation and benefits

445

4

—

—

(20) 429

Accounts payable

1,538

179

—

—

5

1,722

Current maturities of long-term debt and capitallease obligations

218

305

(10) —

—

513

Current maturities of long-term debt - exit financing

—

—

10

—

—

10

Other

87

—

—

—

(49) 38

Total current liabilities

4,294

488

—

—

210

4,992

LONG-TERM OBLIGATIONS

Long-term debt and obligations under capital leases

4,149

1,993

(1,215) —

22

4,949

Exit financing

—

—

1,215

—

—

1,215

Total long-term obligations

4,149

1,993

—

—

22

6,164

DEFERRED CREDITS AND OTHER

LIABILITIES

Long-term pension and postretirement health carebenefits

86

3,786

—

—

(426) 3,446

Deferred frequent flyer liability

—

—

—

—

1,549

1,549

Deferred income taxes

4

—

—

—

1,127

1,131

Other

275

125

—

—

(209) 191

Total deferred credits and other liabilities

365

3,911

—

—

2,041

6,317

LIABILITIES SUBJECT TO COMPROMISE

14,350

(14,350) —

—

—

—

PREFERRED REDEEMABLE STOCK SUBJECT

TO COMPROMISE

275

(275) —

—

—

—

COMMON STOCKHOLDERS’ EQUITY

(DEFICIT)

Predecessor Company common stock,additionalpaid-in capital and treasury stock

495

—

—

—

(495) —

Retained earnings (accumulated deficit)

(8,655) 1,763

—

—

6,892

—

Accumulated other comprehensiveincome (loss)

(1,100) —

—

—

1,100

—

Successor Company common stock andadditionalpaid-in capital

—

6,450

—

728

—

7,178

Total common stockholders’ equity (deficit)

(9,260) 8,213

—

728

7,497

7,178


Total Liabilities and Stockholders’ Equity (Deficit)

$ 14,173

$ (20) $ —

$ 728

$ 9,770

$ 24,651

50


(a) Debt Discharge and Reclassification. This column reflects the discharge of $8.2 billion of liabilities subject to compromisepursuant to the terms of the Plan of Reorganization. Pursuant to the Plan, the holders of general unsecured claims and guarantyclaims together will receive approximately 234 million common shares of the Successor Company in satisfaction of such claims.

This column also reflects the Successor Company’s reinstatement of $6.4 billion of secured liabilities which had been classifiedas liabilities subject to compromise on the Predecessor Company’s balance sheet, consisting of the following:• $3.8 billion represents the reinstatement of pension and other post-retirement benefit plan liabilities;• $2.3 billion reflects the reinstatement of secured debt, including accrued interest; and• $0.3 billion is associated with accruals for priority payments and other payments required under the Plan.

Additionally, this column reflects the payment of $20 million for cash cures and convenience class payments to certain unsecuredcreditors pursuant to the Plan, and the reclassification of $125 million of pre-petition deferred liabilities and credits that werereclassified out of liabilities subject to compromise, and subsequently written off as part of the fresh-start adjustments.

(b) New Credit Facility Financing Transactions. In connection with the consummation of the Plan of Reorganization, on theEffective Date, the Company’s existing $1.225 billion Bank Credit Facility was converted into the exit financing in accordancewith its terms. See “Note 8 - Long-Term Debt and Short-Term Borrowings” for further details.

(c) New Equity Issued. This column reflects $728 million in net proceeds received on the Effective Date from the Company’s Rights

Offering. (d) Fresh-Start Adjustments. Fresh-start adjustments were recorded on the Effective Date to reflect asset values at their estimated fair

values and liabilities at their estimated fair value or the present value of amounts to be paid, including the following:• $4.5 billion of incremental intangible assets were recorded in conjunction with the estimated fair value of the Company’s

international route authorities, slots and other intangible assets;• $1.5 billion was recorded to recognize the additional estimated fair value of the Company’s frequent flyer liability;• The balance of the Company’s flight equipment was decreased by $1.1 billion to its estimated fair value;• The Company’s deferred tax liability balance was increased by $1.1 billion in conjunction with recording the estimated fair

value of certain indefinite-lived intangible assets;• The pension and other postretirement benefits liability balances were reduced by $0.4 billion due to the required

remeasurement at emergence. The weighted-average discount rate used in our remeasurement was 6.17% at May 31, 2007,compared with a weighted-average discount rate of 5.93% as of our December 31, 2006 remeasurement date.

• The Company’s air traffic liability balance was increased by $0.3 billion to its estimated fair value; and• Entries were recorded to eliminate the Predecessor Company’s equity balances and establish the opening equity balances of

the Successor Company. Additionally, goodwill of $6.2 billion was recorded to reflect the excess of the Successor Company’s reorganization value overthe value of tangible and identifiable intangible assets. Additional changes in the fair values of these assets and liabilities fromthe current estimated values, as well as changes in other assumptions, could significantly impact the reported value of goodwill. Accordingly, there can be no assurance that the estimates, assumptions, and values reflected in the valuations will be realized, andactual results could vary materially. Moreover, the market value of the Company’s common stock may differ materially from theequity valuation.

Note 3 — Summary of Significant Accounting Policies

Business. Northwest’s operations account for approximately 99% of the Company’s consolidated operating revenues andexpenses. Northwest is a major air carrier engaged principally in the commercial transportation of passengers and cargo, directlyserving as many as 239 cities in 21 countries in North America, Asia and Europe. Northwest’s global airline network includesdomestic hubs at Detroit, Minneapolis/St. Paul and Memphis, an extensive Pacific route system with a hub in Tokyo, a transatlanticjoint venture with KLM, which operates through a hub in Amsterdam, a domestic and international alliance with Continental andDelta, membership in SkyTeam, a global airline alliance with KLM, Continental, Delta, Air France, Aeroflot, Aeromexico, Alitalia,China Southern, CSA Czech Airlines, and Korean Air, exclusive marketing agreements with three domestic regional carriers,Pinnacle, Mesaba and Compass, which operate as Northwest Airlink carriers, and a cargo business that includes a dedicated fleet offreighter aircraft that operate through hubs in Anchorage and Tokyo.

51


Financial Statement Presentation. The Company’s financial statements after the Effective Date are not comparable to those prior

to the Effective Date. The Company’s consolidated financial statements have been prepared in accordance with Generally AcceptedAccounting Principles (“GAAP”), which contemplates the realization of assets and the satisfaction of liabilities in the normal courseof business. Upon emergence from bankruptcy, we adopted fresh-start reporting in accordance with the SOP 90-7, which resulted inour becoming a new entity for financial reporting purposes. The adoption of fresh-start reporting had a material impact on theconsolidated financial statements of the new financial reporting entity. See “Note 2 — Fresh-Start Reporting” for additionalinformation.

Basis of Consolidation. NWA Corp. is a holding company whose operating subsidiary is Northwest. The consolidated financialstatements include the accounts of NWA Corp. and all consolidated subsidiaries. All significant intercompany transactions have beeneliminated.

Cash and Cash Equivalents. Cash equivalents are carried at cost and consist primarily of cash and unrestricted money market

funds. These highly liquid instruments approximate fair value due to their short maturities. The Company classifies investments witha maturity of more than three months as short-term investments.

Restricted Cash. The Company in the ordinary course of business collects funds from passengers and withholdings from

employees that are required to be paid to various taxing authorities, in addition to certain taxes that are self assessed. Thesecollections include U.S. transportation taxes, passenger facility charges, and fuel taxes, which are collected in the capacity of an agentand are presented on a net basis. Withholdings include the employee portion of payroll taxes, among others. The Company has alsoestablished an irrevocable tax trust and a VEBA trust; cash held in these trusts is included in restricted cash.

Various taxes and fees assessed on the sale of tickets to end customers are collected by the Company as an agent and remitted to

the respective taxing authority. These taxes and fees have been presented on a net basis in the accompanying consolidated statementsof operations, and recorded as a liability until remitted to the respective taxing authority.

During 2007 the restricted cash balance increased $301 million to $725 million as of December 31, 2007 from $424 million as of

December 31, 2006. The increase was primarily due to a $213 million deposit in an escrow account related to Northwest’s pendinginvestment in Midwest Air Group, LLC, a company formed by Northwest, TPG Midwest US V, LLC, and TPG Midwest InternationalV, LLC for purposes of acquiring Midwest Air Group, Inc. The deposit was classified as restricted cash as of December 31, 2007 andwas subsequently withdrawn upon the closing of the transaction in January 2008. In addition, the Company’s irrevocable trust fundbalance increased $45 million and other restricted cash items increased $43 million.

Use of Estimates. The preparation of consolidated financial statements in conformity with GAAP requires management to make

estimates and assumptions that affect the amounts reported in its consolidated financial statements and accompanying notes. Actualresults could differ from those estimates.

Under fresh-start reporting, the Company’s asset values were remeasured using fair value, which was allocated in conformity with

SFAS No. 141. In addition, fresh-start reporting also requires that all liabilities, other than deferred taxes and pension and otherpostretirement benefit obligations, be reported at fair value or the present values of the amounts to be paid using appropriate marketinterest rates. Deferred taxes are reported in conformity with SFAS No. 109.

Estimates of fair value represent the Company’s best estimates based on its valuation models, which incorporated industry data

and trends and relevant market rates and transactions. The estimates and assumptions are inherently subject to significantuncertainties and contingencies beyond the control of the Company. Accordingly, we cannot provide assurance that the estimates,assumptions, and values reflected in the valuations will be realized, and actual results could vary materially.

Presentation of Regional Carrier Related Revenue and Expense Items. Compass Airlines, Inc. (“Compass”) has been a

wholly-owned consolidated subsidiary of the Company since its inception in 2006. Mesaba Aviation, Inc. (“Mesaba”) was acquiredby the Company on April 24, 2007 and became a wholly-owned consolidated subsidiary. Northwest and Pinnacle Airlines, Inc.(“Pinnacle”), an unconsolidated regional carrier, have entered into an airline services agreement (“ASA”), under which Northwestdetermines Pinnacle’s commuter aircraft scheduling. This agreement is structured as a capacity purchase agreement wherebyNorthwest pays Pinnacle to operate the flights on Northwest’s behalf and Northwest is entitled to all revenues associated with thoseflights. Ticket revenues generated on flights operated by Compass, Mesaba and Pinnacle are recorded in Regional Carrier Revenue. Since the inception of Compass and the acquisition of Mesaba, operating expenses of these subsidiaries have been presented on theapplicable lines of the Consolidated Statements of Operations. Amounts presented in Regional Carrier Expenses represent ASApayments to Pinnacle and other Pinnacle-related expenses. In conjunction with the effectiveness of the Amended Pinnacle ASA andthe Stock Purchase and Reorganization Agreement with Mesaba, the Company changed its presentation of certain regional carrierrelated revenue and expense items effective January 1, 2007. This change in presentation had no impact on the Company’s 2007operating income.

52


If this change in presentation was retroactively applied to prior year financial statements for the year ended December 31, 2006,

Other Operating Revenues would have decreased $209 million, Depreciation and Amortization Expense would have increased by $3million, Aircraft Rentals Expense would have increased $188 million, Regional Carrier Expenses would have decreased $400 million,and the Operating Income would have been unchanged.

Operating Revenues. The value of unused passenger tickets, miscellaneous change orders (“MCO’s”) and travel credit vouchers

(“TCV’s”) are included in current liabilities as air traffic liability. Passenger and cargo revenues are recognized when thetransportation is provided or when the ticket expires. Unused domestic passenger tickets generally expire one year from scheduledtravel. Unused international passenger tickets generally expire one year from ticket issuance. On the Effective Date, the Companyrevised the accounting method used to recognize revenue for unused tickets, adopting the delayed recognition approach. Under thedelayed recognition approach, no revenue is recognized on an unused ticket until the validity period has expired and the ticket can nolonger be used. Prior to the Effective Date, the Company recognized breakage associated with unused passenger tickets based onestimates of future breakage developed using historical breakage trends.


to retain and increase traveler loyalty by offering incentives to travelers for their continued patronage. Under the WorldPerksprogram, miles are earned by flying on Northwest or its alliance partners and by using the services of program partners for such thingsas credit card use, hotel stays, car rentals and other activities. Northwest sells mileage credits to the program and alliance partners. WorldPerks members accumulate mileage in their accounts and later redeem mileage for free or upgraded travel on Northwest andalliance partners. WorldPerks members that achieve certain mileage thresholds also receive enhanced service benefits fromNorthwest such as special service lines, advance flight boarding and upgrades.

The Company adopted a deferred revenue method to recognize frequent flyer revenues on the Effective Date. Under this method,

we account for miles earned and sold as separate deliverables in a multiple element arrangement as prescribed by EITF No. 00-21,Revenue Arrangements with Multiple Deliverables (“EITF No. 00-21”). Therefore, mileage credits earned on or after June 1, 2007 arenow deferred based upon the price for which we sell mileage credits to other airlines (“deferred mileage credits”), which we believerepresents the best evidence of their fair value in accordance with EITF No. 00-21. The revenue on deferred frequent flyer miles willbe recognized when the miles are ultimately redeemed through flight, upgrades or other means, or when it becomes remote that themiles will ever be used. Estimating deferred mileage credits that will not be redeemed requires significant management judgment.Based on current program rules and historical redemption trends, the Company records passenger revenue associated with deferredmileage credits if the mile is unredeemed seven years after issuance. The amounts expected to be recognized in the next year based onhistorical redemption patterns are recorded as a component of current liabilities, while the remaining amount expected to be redeemedin years two through seven are recorded in Deferred Credits and Other Liabilities.

We previously accounted for frequent flyer miles earned on Northwest flights on an incremental cost basis as an accrued liability

and as operating expense, while miles sold to airline and non-airline businesses were accounted for on a deferred revenue basis. Alsoin conjunction with the adoption of the new accounting policy, Northwest began recording a component of the payments receivedfrom non-airline marketing partners in Other Revenue rather than in Passenger Revenue. The component recognized as OtherRevenue is the portion of the payment received that represents the amount paid by the marketing partner in excess of the value of thedeferred mileage credits.

As a result of the application of fresh-start reporting, the WorldPerks frequent flyer obligation was revalued at the Effective Date

to reflect the estimated fair value of miles to be redeemed in the future. Outstanding miles earned by flying Northwest or its partnercarriers were revalued using a weighted-average per-mile equivalent ticket value, taking into account such factors as class of serviceand domestic and international ticket itineraries, which can be reflected in awards flown by WorldPerks members. The Companyrecorded deferred revenue for its frequent flyer program of $2.0 billion as of December 31, 2007. At December 31, 2006, theCompany had recorded an incremental cost liability and deferred revenue for its frequent flyer program totaling $412 million.

Property, Equipment and Depreciation. Owned operating property and equipment and equipment under capital leases used in

operations were remeasured at fair values in accordance with SFAS No. 141, as of the Effective Date. The Company records additionsto property and equipment at cost when acquired. Property and equipment under capital lease, and related obligations for future leasepayments, are recorded at amounts equal to the initial present value of those lease payments.

Depreciation is based on the straight-line method over assets’ estimated useful lives. Leasehold improvements are amortized over

the remaining term of the lease, including estimated renewal options when renewal is reasonably assured, or the estimated useful lifeof the related asset, whichever is less. On the Effective Date, the Successor Company increased the depreciable lives of certainwide-body aircraft to better reflect the period over which those assets will be used. Future purchases of aircraft will be depreciated toestimated salvage values, over lives of 20 to 30 years; buildings and leasehold improvements will be depreciated up to 31.5 years; andother property and equipment will be depreciated over lives of three to 20 years.

53


The Company accounts for certain airport leases under EITF Issue No. 99-13, Application of EITF Issue No. 97-10, The Effect of

Lessee Involvement in Asset Construction, and FASB Interpretation No. 23, Leases of Certain Property Owned by a Government Unitor Authority to Entities that Enter into Leases with Government Entities, which requires the financing related to certain guaranteedairport construction projects committed to after September 23, 1999, be recorded on the balance sheet. Capitalized expenditures of$89.4 million at December 31, 2007 which relate to airport improvements at Memphis, Knoxville and Seattle were recorded in otherproperty and equipment, with the corresponding obligations included in long-term obligations under capital leases. Capitalexpenditures associated with a construction project at the Detroit airport were also reflected in other property and equipment with acorresponding liability on the balance sheet. This amount totaled $18.2 million at December 31, 2007. Upon completion of theproject, the corresponding asset and obligation will be removed from the balance sheet and will be accounted for as an operating lease.

Impairment of Long-Lived Assets. The Company evaluates long-lived tangible assets and definite-lived intangible assets for

potential impairments incompliance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, (“SFASNo. 144”). The Company records impairment losses on long-lived assets when events and circumstances indicate the assets might beimpaired and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. Impairmentlosses are measured by comparing the fair value of the assets to their carrying amounts. In determining the need to record impairmentcharges, the Company is required to make certain estimates regarding such things as the current fair market value of the assets andfuture net cash flows to be generated by the assets. The current fair market value is determined by valuations or published sales valuesof similar assets and the future net cash flows are based on assumptions such as asset utilization, expected remaining useful lives,future market trends and projected salvage values. Impairment charges are recorded in depreciation and amortization expense. Ifthere are subsequent changes in these estimates, or if actual results differ from these estimates, additional impairment charges may berecognized.

In the fourth quarter of 2006, the Company recorded $33.5 million as additional reorganization expense for the impairment of

certain Boeing 747-200 passenger and freighter aircraft and DC9-30 aircraft. See “Note 7 — Reorganization Related Items.” Also inthe fourth quarter of 2006, the Company recorded an aircraft impairment of $5.8 million as additional depreciation expense for oneDC9-30.

In the second quarter of 2006, the Company recorded $28 million related to the impairment of six owned aircraft and related

inventory and equipment, which were permanently removed from service. These charges reflect the Company’s decision to acceleratethe retirement of its DC10 aircraft and to permanently park three DC9 aircraft. The impairment charges were recorded asreorganization expenses and are included in “Note 7 — Reorganization Related Items.”

In December 2005, as part of the implementation of its restructuring driven fleet plan, the Company removed 18 DC9-30 aircraft

from operations and determined that the AVRO RJ85 fleet would be removed from service by the end of 2006. As a result, theCompany recorded, as reorganization expense, impairment charges of $153 million for the DC9-30 aircraft and the 10 owned AVRORJ85 aircraft in the fourth quarter of 2005.

In June 2005, the Company recorded $48 million for the impairment and other charges related to nine owned and two leased

aircraft of various types that it did not intend to return to service. Of the $48 million recorded, approximately $40 million related toacceleration of aircraft rent expense and other charges on the two leased aircraft and $8 million was attributable to aircraftimpairments on the nine owned aircraft.

Flight Equipment Spare Parts. On the Effective Date, flight equipment spare parts were remeasured at current replacement cost

in accordance with SFAS No. 141. Inventories are expensed when consumed in operations or scrapped. An allowance forobsolescence is provided based on calculations defined by the type of spare part. This obsolescence reserve is recorded over theuseful life of the associated aircraft.

Airframe and Engine Maintenance. Routine maintenance, airframe and engine overhauls are charged to expense as incurred or

accrued when a contractual obligation exists, such as induction of an asset at a vendor for service or on the basis of hours flown forcertain costs covered by power-by-the-hour type agreements. Modifications that enhance the operating performance or extend theuseful lives of airframes or engines are capitalized and amortized over the remaining estimated useful life of the asset.

Goodwill and Intangibles. Goodwill represents the excess of the reorganization value of the Successor Company over the fair

value of tangible assets and identifiable intangible assets resulting from the application of SOP 90-7. Northwest’s goodwill mainlyconsists of three components:

• A valuation allowance recorded against our net deferred tax assets, as required by SFAS No. 109; this valuation allowancewill be reversed against goodwill when the Company reports income in future periods.

• Revenue-generating intangibles that do not meet the contractual or separable criteria of SFAS No. 141, including our flightnetwork and international routes to open skies countries.

• The value inherent in future customer relationships due to Northwest’s ability to attract new customers.

54


Identifiable intangible assets consist primarily of international route authorities, trade names, the WorldPerks customer database,airport slots/airport operating rights, certain partner contracts and other items. International route authorities, certain airportslots/airport operating rights and trade-names are indefinite-lived and, as such, are not amortized. The Company’s definite-livedintangible assets are amortized on a straight-line basis over the estimated lives of the related assets, which span periods of four to 30years.

The following table presents information about our intangible assets, including goodwill, at December 31, 2007 and 2006:

Successor December 31, 2007

Predecessor December 31, 2006

Asset

Gross Carrying

Accumulated

Gross Carrying

Accumulated

(In thousands)

Life

Amount

Amortization

Amount

Amortization

SkyTeam alliance & other code sharepartners

30

$ 461,900

$ (8,981) $ —

$ —

England routes

5

16,000

(1,867) —

—

NWA customer relationships

9

530,000

(34,352) —

—

WorldPerks affinity card contract

15

195,700

(8,843) —

—

WorldPerks marketing partnerrelationships

22

43,000

(652) —

—

Visa contract

4

11,900

(992) —

—

Gates

—

—

90,675

(78,326) Pacific routes and Narita slots/airport

operating rights

Indefinite

2,961,700

—

967,639

(333,679)NWA trade name and other

Indefinite

663,625

—

1,690

(190)

Slots/airport operating rights

Indefinite

283,300

—

30,457

(11,248)Goodwill

Indefinite

6,034,609

—

7,740

—

$ 11,201,734

$ (55,687) $ 1,098,201

$ (423,443)

Total amortization expense recognized was approximately $0.6 million for the five month period ended May 31, 2007, $55.7

million for the seven month period ended December 31, 2007, and $1.5 million and $4.1 million for the years ended December 31,2006 and 2005, respectively. We expect to record amortization expense of $95.5 million per year from 2008 through 2010, $93.7million in 2011 and $90.6 million in 2012.

In accordance with SOP 90-7, a reduction in the valuation allowance associated with the realization of pre-emergence deferred tax

assets will sequentially reduce the value of recorded goodwill followed by other indefinite-lived assets until the net carrying cost ofthese assets is zero. In the seven months ended December 31, 2007, goodwill decreased $224 million due to the use of tax netoperating losses and increased $20 million due to receipt of additional information to finalize certain valuations performed atemergence.

The Company tests the carrying amount of goodwill and other indefinite-lived intangible assets annually as of October 1 or

whenever events or circumstances indicate that an impairment may have occurred. Impairment testing is performed in accordancewith SFAS No. 142 Goodwill and Other Intangible Assets (“SFAS No. 142”). The Company’s impairment testing of goodwill isbased on the fair value of the enterprise considering both the market and income valuation approaches. The Company is annuallyrequired to complete Step 1 (determining and comparing the fair value of the Company’s reporting unit to its carrying value) of theimpairment test. Step 2 is required to be completed if Step 1 indicates that the carrying value of the reporting unit exceeds the fairvalue and involves the calculation of the implied fair value of goodwill. The Company completed Step 1 of the impairmentassessment at its annual impairment testing date in 2007. Based upon the Company’s valuation procedures, the Company determinedthat the fair value of the enterprise exceeded its carrying value. As such, the Company was not required to complete Step 2 of theimpairment test and no impairment loss was recognized.

The Company tests its indefinite-lived intangible assets for impairment by remeasuring those assets at fair value using the

Company’s forecasts and estimates, market information on comparable assets, when available, and discount rates calculated fromindustry-wide information. Based upon the Company’s valuation procedures, we determined that the fair values of each category ofindefinite-lived intangible assets exceeded its carrying value; as such, no impairment was recorded on these assets.

The determination of fair value requires significant management judgment including the identification and computation of

multiples of comparable companies, computation of control premiums, future capacity, passenger yield, passenger traffic, jet fuel andother operating costs, changes in working capital, capital investments, the selection for the appropriate discount rates and otherrelevant factors.

55


The Company’s forecasts and estimates were based on assumptions that are consistent with the plans and estimates the Company

is using to manage its business. Changes in these estimates could change the Company’s conclusion regarding an impairment ofgoodwill or other intangible assets and potentially result in a non-cash impairment in a future period. Fuel costs and general economicconditions significantly impact our business and, thus, long-term assumptions related to these items materially impact the computationof our fair value. If the expected future price of fuel does not decrease from the record levels experienced during late 2007 or if theCompany is unable to pass this commodity price increase on to its passengers or if general economic conditions experience a material,negative change, the Company may be required to book an impairment sometime during 2008.

Advertising. Advertising costs, included in selling and marketing expenses, are expensed as incurred and were $70 million, $62

million, and $63 million in 2007, 2006 and 2005, respectively. Stock-Based Compensation. Prior to the Effective Date, the Company maintained stock incentive plans for officers and key

employees of the Company (the “Prior Management Plans”) and a stock option plan for pilot employees (the “Pilot Plan”). On theEffective Date, outstanding awards under the Prior Management Plans and Pilot Plan were cancelled in accordance with the terms ofthe Plan of Reorganization. On the Effective Date, the Management Equity Plan of the Successor Company provided for in the Planof Reorganization became effective. See “Note 11 — Stock-Based Compensation” for additional information. The Company adoptedSFAS No. 123 (Revised 2004), Share-Based Payment (“SFAS No. 123R”), using the modified-prospective transition method,effective January 1, 2006. Under SFAS No. 123R, non-cash compensation expense for equity awards is recognized over the vestingperiod, generally the required service period. The Company uses straight-line recognition for awards subject to graded vesting. SFASNo. 123R also requires the Company to estimate forfeitures of stock compensation awards as of the grant date of the award.

Foreign Currency. Assets and liabilities denominated in foreign currency are remeasured at current exchange rates with resulting

gains and losses included in net income. Deferred Tax Assets. The Company accounts for income taxes utilizing the liability method. Deferred income taxes are primarily

recorded to reflect the tax consequences of differences between the tax and financial reporting bases of assets and liabilities. Underthe provisions of SFAS No. 109, the realization of the future tax benefits of a deferred tax asset is dependent on future taxable incomeagainst which such tax benefits can be applied. All available evidence must be considered in the determination of whether sufficientfuture taxable income will exist. Such evidence includes, but is not limited to, the Company’s financial performance, the marketenvironment in which the company operates, the utilization of past tax credits, and the length of relevant carryback and carryforwardperiods. Sufficient negative evidence, such as cumulative net losses during a three-year period that includes the current year and theprior two years, may require that a valuation allowance be established with respect to existing and future deferred tax assets. As aresult, it is more likely than not that future deferred tax assets will require a valuation allowance to be recorded to fully reserve againstthe uncertainty that those assets would be realized. On the Effective Date, the Company restated deferred taxes based on theremeasured values of the Successor Company and in accordance with SFAS No. 109. Use of net operating losses from thePredecessor Company that require valuation allowances under SFAS No. 109 are recognized as an adjustment to goodwill when usedby the Successor Company.

56


Note 4 — Fair Value Measurements

SOP 90-7 requires that the Company adopt new accounting standards that have been issued and will become effective withintwelve months of emergence from bankruptcy. In accordance with this guidance, the Company adopted SFAS No. 157, Fair ValueMeasurements (“SFAS No. 157”), on the Effective Date. SFAS No. 157 defines fair value, establishes a consistent framework formeasuring fair value and expands disclosure requirements about fair value measurements. SFAS No. 157 requires, among otherthings, the Company’s valuation techniques used to measure fair value to maximize the use of observable inputs and minimize the useof unobservable inputs. This standard was applied prospectively to the valuation of assets and liabilities on and after the EffectiveDate.

There are three general valuation techniques that may be used to measure fair value, as described below:

(A) Market approach — Uses prices and other relevant information generated by market transactions involving identical orcomparable assets or liabilities;

(B) Cost approach — Based on the amount that currently would be required to replace the service capacity of an asset (replacementcost); and

(C) Income approach — Uses valuation techniques to convert future amounts to a single present amount based on current marketexpectations about the future amounts (includes present value techniques, option-pricing models, and the excess earningsmethod). Net present value is an income approach where a stream of expected cash flows is discounted at an appropriate marketinterest rate. The excess earnings method is a variation of the income approach where the value of a specific asset is isolatedfrom its contributory assets.

For assets and liabilities measured at fair value on a recurring basis during the period, SFAS No. 157 requires quantitative

disclosures about the fair value measurements separately for each major category of assets and liabilities. These assets are allmeasured using a market approach and there were no changes in the valuation techniques used to measure the fair values of assetsmeasured on a recurring basis during the period. SFAS No. 107, Disclosures about Fair Values of Financial Instruments (“SFASNo. 107”), requires disclosure of the fair values of financial instruments. For assets and liabilities measured at fair value on arecurring basis, the SFAS No. 107 and SFAS No. 157 disclosures are combined in the table below. Assets measured at fair value on arecurring basis during the period included:

Successor

Predecessor

Quoted Prices in

Quoted Prices in

As of

Active Markets for

As of

Active Markets for

December 31,

Identical Assets

December 31,

Identical Assets

Valuation

(In millions)

2007

(Level 1)

2006

(Level 1)

Technique

ASSETS

Cash and cash equivalents

$ 2,939

$ 2,939

$ 1,461

$ 1,461

(A)

Unrestricted short-terminvestments

95

95

597

597

(A)

Restricted cash, cash equivalents,and short-term investments

725

725

424

424

(A)

Derivatives

57

57

8

8

(A),(B)

Total

$ 3,816

$ 3,816

$ 2,490

$ 2,490

The financial statement carrying values equal the fair values of the Company’s cash, cash equivalents, short-term investments and

derivatives. Cash equivalents are carried at cost and consisted primarily of unrestricted money market funds as of December 31, 2007. These instruments approximate fair value due to their short maturity. The Company classifies investments with a remaining maturityof more than three months on their acquisition date and those temporarily restricted as short-term investments.

The financial statement carrying values and estimated fair values of the Company’s financial instruments, including current

maturities, as of December 31 were:

2007

2006

Carrying

Fair

Carrying

Fair

(In millions)

Value

Value

Value

Value

Long-term debt

$ 6,961

$ 6,836

$ 4,112

$ 4,150(1)

(1) In 2006, the Company only estimated the fair value of long-term debt classified as not subject to compromise. The fair value of the Company’s debt was estimated using quoted market prices, where available. For long-term debt not actively

traded, fair values were estimated using discounted cash flow analyses based on the Company’s current incremental borrowing ratesfor similar types of securities.

57


Fair value information for each major category of assets and liabilities measured on a nonrecurring basis during the period is

listed in the following table. The Company remeasured its assets and liabilities at fair value on the Effective Date as required by SOP90-7 using the guidance for measurement found in SFAS No. 141. The gains and losses related to these fair value adjustments wererecorded on the Predecessor Company. Where two valuation techniques are noted below, either individual assets were valued usingone technique, while other assets in the same category were valued using a different technique, or a combination of the two techniqueswas used to measure individual assets within the category. No material adjustments were recorded based on fair value measurementssince the Effective Date. Assets and liabilities measured at fair value on a nonrecurring basis during the period included:

Successor

Quoted Pricesin Active

Markets for

SignificantOther

Observable

SignificantUnobservable

As of June 1,

Identical Assets

Inputs

Inputs

Total Gains

Valuation

(In millions)

2007

(Level 1)

(Level 2)

(Level 3)

(Losses)

Technique

ASSETS

Flight equipment

$ 6,699

$ —

$ 6,699

$ —

$ (1,068) (A),(B)

Goodwill (1)

6,257

—

—

6,257

—

(C)

International routes and otherintangible assets (2)

5,166

—

947

4,220

4,513

(B),(C)

Other property and equipment

546

—

546

—

69

(A),(B)

Non-operating flight equipmentandproperty leased to others

282

—

282

—

(47) (A),(B)

Flight equipment spare parts andmaintenance and operatingsupplies

248

—

248

—

31

(A),(B)

Equity investments

124

—

124

—

111

(A),(C)

Computer software

120

—

120

—

46

(B)

Other

147

—

147

—

21

(A)

Prepaid rents and deferred costs

37

—

37

—

(56) (A)

$ 3,620

Successor

Quoted Prices

Significant

in Active

Other

Significant

As of

Markets for

Observable

Unobservable

June 1,

Identical Assets

Inputs

Inputs

Total Gains

Valuation

(In millions)

2007

(Level 1)

(Level 2)

(Level 3)

(Losses)

Technique

LIABILITIES

Debt and obligations undercapitalleases

$ 6,687

$ —

$ 6,687

$ —

$ (22) (C)

Deferred frequent flyer liability(3)

1,972

—

—

1,972

(1,559) (C)

Air traffic liability

1,857

—

1,857

—

(259) (A)

Deferred credits and otherliabilities

125

—

125

—

158

(A)

$ (1,682)

(1) Goodwill represents the excess of the fair value of the Company’s assets over the allocated values of the identifiable assets asdetermined under the guidance of SFAS No. 141. Northwest’s financial advisors assisted management in the preparation of avaluation analysis for the Successor Company’s common stock to be distributed to Unsecured Creditors under the Plan. In itsvaluation analysis, Northwest’s financial advisors estimated the fair value of the Successor Company’s Common Stock as of theEffective Date.

(2) Other Intangible Assets are identified by type in “Note 3 — Summary of Significant Accounting Policies.” With the exception of

the value of Northwest’s trademarks and trade names, these valuations included significant unobservable inputs (Level 3), whichgenerally included the Company’s five-year Business Plan, 12-months of historical revenues and expenses by city pair, andCompany projections of available seat miles, revenue passenger miles, load factors, and operating costs per available seat mile. The valuations also included market verifiable sources, such as licensing information, royalty rates and macroeconomic factors.

(3) The frequent flyer liability was measured at fair value based on an analysis of how a hypothetical transaction to transfer this

liability might be negotiated in the market. Assumptions used in this measurement include the price of a frequent flyer mile basedon actual ticket prices for similarly restricted tickets, estimates about the number of miles that will never be used by customers,and projections of the timing when the miles will be used.


58


Note 5 — Change in Accounting for Certain Pension Plan Administrative Expenses

During the second quarter of 2005, the Company changed its method of recognizing certain pension plan administrative expensesassociated with the Company’s defined benefit pension plans and now includes them as a service cost component of net periodicpension cost. These expenses include trustee fees, other administrative expenses and insurance premiums paid to the Pension BenefitGuaranty Corporation (“PBGC”), all of which previously were reflected as a reduction in the market value of plan assets and thereforeamortized with other asset gains and losses. The Company believes this change is preferable because it more appropriately ascribesthe expenses to the period in which they are incurred. The cumulative effect of applying this change to net periodic pension expensein prior years was $69.1 million, which was retroactively recorded as of January 1, 2005, and was included in the Company’sConsolidated Statements of Operations for the year ended December 31, 2005. The impact of this change on the year endedDecember 31, 2005, was an increase in net periodic benefit cost of $37.7 million.

Note 6 — Earnings (Loss) Per Share Data

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

Successor

Predecessor

Period From

Period From

Twelve Months

Twelve Months

June 1 to

January 1 to

Ended

Ended

December 31,

May 31,

December 31,

December 31,

(In millions, except per share data)

2007

2007

2006

2005

Numerator:

Net income (loss) before cumulative effect of accountingchanges

$ 342

$ 1,751

$ (2,835) $ (2,464)

Cumulative effect of accounting changes

—

—

—

(69)Preferred stock requirements

—

—

—

(22)

Adjusted net income (loss) applicable to commonstockholders

$ 342

$ 1,751

$ (2,835) $ (2,555)

Effect of dilutive securities:

Gain on discharge of convertible debt

—

(82) —

—

Gain on discharge of Series C Preferred Stock

—

(60) —

—

Adjusted net income for diluted earnings (loss) per share

$ 342

$ 1,609

$ (2,835) $ (2,555) Denominator:

Weighted-average shares outstanding for basic anddiluted earnings (loss) per share

262.2

87.4

87.3

87.0

Effect of dilutive securities:

Contingently convertible debt

—

19.1

—

—

Restricted stock units and stock options

0.2

—

—

—

Series C Preferred Stock

—

6.2

—

—

Adjusted weighted-average shares outstanding andassumed conversions for diluted earnings (loss) pershare

262.4

112.7

87.3

87.0

Basic earnings (loss) per common share:

Net income (loss) before cumulative effect of accountingchange

$ 1.30

$ 20.03

$ (32.48) $ (28.32)


—

—

—

(0.79)Preferred stock requirements

—

—

—

(0.25)

Net income (loss) applicable to common stockholders

$ 1.30

$ 20.03

$ (32.48) $ (29.36) Diluted earnings (loss) per common share:


$ 1.30

$ 14.28

$ (32.48) $ (29.36) Successor EPS.The Plan contemplates the issuance of approximately 277 million shares of new common stock by the SuccessorCompany (out of the 400 million shares of new common stock authorized under its amended and restated certificate of incorporation),as follows:




The new common stock is listed on the New York Stock Exchange (the “NYSE”) and began trading under the symbol “NWA” on

May 31, 2007. In accordance with SFAS No. 128, Earnings per Share (“SFAS No. 128”), basic and diluted earnings per share were computed by

dividing net income by the weighted-average number of shares of common stock outstanding for the seven months endedDecember 31, 2007. SFAS No. 128 requires that the entire 234 million shares to be issued to holders of unsecured and guarantyclaims be considered outstanding for purposes of calculating earnings per share as these shares will ultimately be issued to unsecuredcreditors once the allocation of disputed unsecured claims is completed.

59


At December 31, 2007, approximately 16 million restricted stock units and stock options to purchase shares of the Successor

Company’s common stock were outstanding but excluded from the computation of diluted earnings per share because the effect ofincluding the shares would have been anti-dilutive.

Predecessor EPS. Predecessor basic earnings per share was computed based on the Predecessor’s final weighted-average shares

outstanding. At May 31, 2007, stock options to purchase approximately 7 million shares of common stock were outstanding but excluded from

the computation of diluted earnings per share because the effect of including the shares would have been anti-dilutive. For the years ended December 31, 2006 and 2005, approximately 19 million incremental shares related to dilutive securities were

not included in the diluted earnings per share calculation because the Company reported a net loss for these periods. Additionally, approximately 6 million shares of Series C Preferred Stock were excluded from the effect of dilutive securities for

the years ended December 31, 2006 and 2005 because the Company reported a net loss for these periods. Total employee stock options outstanding of approximately 7 million and 8 million as of December 31, 2006 and 2005,

respectively, were not included in diluted securities because the Company reported a net loss for the years ended December 31, 2006and 2005.

Note 7 — Reorganization Related Items

In accordance with SOP 90-7, the financial statements for the Predecessor periods distinguish transactions and events that are

directly associated with the reorganization from the ongoing operations of the Company. In connection with our bankruptcyproceedings, implementation of our Plan of Reorganization and adoption of fresh-start reporting, the Company recorded the followinglargely non-cash reorganization income/(expense) items:

Net reorganization items, as shown on the Consolidated Statements of Operations, consist of the following:

Predecessor

Period From

January 1 to

Year Ended

Year Ended

May 31,

December 31,

December 31,

(In millions)

2007

2006

2005

Discharge of unsecured claims and liabilities (a)

$ 1,763

$ —

$ —

Revaluation of frequent flyer obligations (b)

(1,559) —

—

Revaluation of other assets and liabilities (c)

2,816

—

—

Employee-related charges (d)

(312) (1,362) (136)Abandonment of aircraft and buildings (d)

(323) (129) (133)

Restructured aircraft lease/debt charges (d)

(74) (1,598) (641)Professional fees

(60) (63) (23)

Other (d)

(700) (13) (148)Reorganization items, net

$ 1,551

$ (3,165) $ (1,081)

(a) The gain on discharge of unsecured claims and liabilities relates to the Company’s unsecured claims as of the Petition Dateand the discharge of unsecured claims established as part of the bankruptcy process. In accordance with the Plan ofReorganization, the Company discharged its estimated $8.2 billion in unsecured creditor obligations in exchange for thedistribution of approximately 234 million common shares of the Successor Company valued at emergence at $6.45 billion. Accordingly, the Company recognized a non-cash reorganization gain of approximately $1.8 billion.

(b) The Company revalued its frequent flyer miles to estimated fair value as a result of fresh-start reporting, which resulted in a

$1.6 billion non-cash reorganization charge. (c) In accordance with fresh-start reporting, the Company revalued its assets at their estimated fair value and revalued its

liabilities at estimated fair value or the present value of amounts to be paid. This resulted in a non-cash reorganization gainof $2.8 billion, primarily as a result of newly recognized intangible assets, offset partially by reductions in the fair value oftangible property and equipment.

60


(d) Prior to emergence, the Company recorded its final provisions for allowed or projected unsecured claims including

employee-related Association of Flight Attendants — Communication Workers of America (“AFA-CWA”) contract relatedclaims, other employee related claims, claims associated with restructured aircraft lease/debt, and municipal bond obligationrelated settlements.

Reorganization items recorded during the twelve months ended December 31, 2006, largely consisted of aircraftrestructurings, employee claims, pension plan curtailment charges and aircraft rejection charges. Reorganization itemsrecorded from the commencement of the Chapter 11 case through December 31, 2005, largely consisted of aircraftrestructuring, aircraft rejection charges and pension plan curtailment charges.

Note 8 — Long-Term Debt and Short-Term Borrowings

Long-term debt as of December 31, 2007 consisted of the following (with interest rates as of December 31, 2007):

Successor

Predecessor

(In millions)

2007

2006

Aircraft enhanced equipment trust certificates due through 2022, 6.6% weighted-average rate (1)

$ 1,421

$ 168

Aircraft secured loans due through 2025, 7.1% weighted-average rate (2)

3,743

2,215

Bank Credit Facility due through 2013, 7.0% weighted-average rate (3)

1,214

1,225

Other secured debt & equipment financing due through 2020, 7.2% weighted-average rate (4)

451

376

Real estate and land notes due through 2031, 3.1% weighted-average rate

134

128

Total secured debt

6,963

4,112

Add net unamortized valuation premium (discount)

(2) —

Total debt

6,961

4,112

Less current maturities

446

213

Total Long-term debt

$ 6,515

$ 3,899

(1) At December 31, 2007, direct obligations of Northwest included the $1.4 billion of equipment notes underlying thepass-through trust certificates issued for 62 aircraft. Interest on the pass-through trust certificates is payable quarterly orsemi-annually.

The above table does not include principal obligations related to $454 million of aircraft enhanced equipment trust certificates

(“2007-1 EETC”) issued on October 10, 2007. The 2007-1 EETC proceeds were placed in escrow to pre-fund the financingof 27 new Embraer 175 aircraft expected to be delivered in 2008. Interest on the Certificates will be payable semiannually onMay 1 and November 1 of each year, beginning on May 1, 2008.

(2) The Company took delivery of and financed eight Airbus A330-300, 13 CRJ900 and nine Embraer 175 aircraft during the

twelve months ended December 31, 2007, resulting in an increase of $1.1 billion in aircraft secured loans. At December 31,2007, 125 aircraft collateralized $3.7 billion of secured loans.

On May 14, 2007, the Company closed on a refinancing of three A330-300 aircraft through the issuance of $221 million of

debt. The aircraft were delivered to the Company in 2007 with original debt proceeds reflected in the above mentioned $1.1billion increase in aircraft secured loans.

On July 11, 2007, the Company executed a $176.7 million refinancing of loans through a private placement of senior secured

loans. Proceeds of the financing were used to refinance 15 A320 aircraft.

61


(3) On August 21, 2006, the Predecessor Company entered into a $1.225 billion Senior Corporate Credit Facility (“Bank Credit

Facility”), formerly called the DIP/Exit Facility, consisting of a $1.05 billion term loan facility and a $175 million revolvingcredit facility which has been fully drawn. The final maturity date of the Bank Credit Facility is August 21, 2013. Principalon the term loan portion of the Bank Credit Facility will be repaid at 1.0% per year with the balance (94%) due at maturity. The first such principal repayment was made on August 21, 2007. Loans drawn under the $175 million revolving creditfacility may be borrowed and repaid at the Company’s discretion. Up to $75 million of the revolving credit facility may beutilized by the Company as a letter of credit facility. As amended in March 2007, both loan facilities under the Bank CreditFacility bear interest at LIBOR plus 2.00%. Letter of credit fees will be charged at the same credit spread as on theborrowings plus 12.5 basis points. To the extent that the revolving credit facility is not utilized, the Company is required topay an undrawn commitment fee of 50 basis points per annum. The Bank Credit Facility received a credit rating of BB fromStandard & Poor’s Rating Services (“S&P”) and a Ba3 from Moody’s Investors Service, Inc. (“Moody’s”) and is secured bya first lien on the Company’s Pacific Route authorities. The March 2007 amendment also allowed the Company to grant apari-passu lien in the Pacific Route authorities to secure up to $150 million of exposure arising from hedging trades enteredinto with Bank Credit Facility lenders. The interest rate as of December 31, 2007 was 6.97% on both the term loan facilityand the revolving credit facility.

The Bank Credit Facility requires ongoing compliance with financial covenants requiring the Company to maintain

unrestricted cash of at least $750 million, a collateral coverage ratio of at least 1.50 to 1.0 and a minimum ratio of EBITDARto consolidated fixed charges of 1.50 to 1.00. For purposes of calculating this ratio, EBITDAR is defined as operating incomeadjusted to exclude the effects of depreciation, amortization and aircraft rents and to include the effects of interest incomeand governmental reimbursements for losses resulting from developments affecting the aviation industry. Earnings alsoexclude non-recurring non-cash charges (subject to the inclusion of any cash payments then or thereafter made with respectthereto) and are determined without giving effect to any acceleration of rental expense. Fixed charges are defined as interestexpense and aircraft rents (without giving effect to any acceleration of rental expense).

As of December 31, 2007 the Company was in compliance with all required financial covenants. (4) On November 29, 2007, the Company closed on an accounts receivable financing facility. The facility size is $150 million

and as of December 31, 2007 the facility was undrawn. While any portion of the facility remains undrawn, the Companypays a commitment fee on the undrawn amount.

Debt Maturity Table:

Maturities of long-term debt for the five years subsequent to December 31, 2007 are as follows:

(In millions)

2008

2009

2010

2011

2012

Thereafter

Total

Aircraft enhanced equipment trustcertificates

$ 141

$ 151

$ 103

$ 269

$ 120

$ 637

$ 1,421

Aircraft secured loans

264

250

266

268

297

2,398

3,743

Bank Credit Facility

11

10

11

10

11

1,161

1,214

Other secured debt & equipment financing

35

177

16

60

12

151

451

Real estate and land notes

—

—

36

—

—

98

134

Total secured debt

451

588

432

607

440

4,445

6,963

Add net unamortized valuation premium

(discount)

(5) (4) (1) —

—

8

(2) Total long-term debt

$ 446

$ 584

$ 431

$ 607

$ 440

$ 4,453

$ 6,961

Under some of the debt instruments included above, agreements with the lenders require that the Company meet certain financial

covenants, such as unrestricted cash balances and fixed charges coverage ratios. Assets having an aggregate book value of $10.5billion at December 31, 2007, principally aircraft and route authorities, were pledged under various loan agreements. The Companywas in compliance with the covenants and collateral requirements related to all of its debt agreements as of December 31, 2007. While the Company anticipates that it will remain in compliance with such covenants and collateral requirements, these measures willdepend upon the many factors affecting operating performance and the market values of assets.

As of December 31, 2007, 2006 and 2005 there were no short-term borrowings.

62


Note 9 — Leases

The Company leases aircraft, space in airport terminals, land and buildings at airports, ticket, sales and reservations offices, andother property and equipment, which expire in various years through 2032.

At December 31, 2007, future minimum lease payments for capital leases and non-cancelable operating leases with initial orremaining terms of more than one year are as follows:

Capital

Operating Leases

(In millions)

Leases

Aircraft

Non-aircraft

2008

$ 10

$ 385

$ 184

2009

14

382

176

2010

9

393

154

2011

9

339

128

2012

8

303

115

Thereafter

203

1,902

902

253

3,704

1,659

Less sublease rental income

1,133(1) 21

Total minimum operating lease payments

$ 2,571

$ 1,638

Less amounts representing interest

144

Present value of future minimum capital lease payments

109

Add unamortized valuation premium

18

Total capital leases

127

Less current obligations under capital leases

3

Long-term obligations under capital leases

$ 124

(1) Projected sublease rental income is to be received from Pinnacle. Rental expense for all operating leases consisted of the following:

Successor

Predecessor

Period From

Period From

June 1 to

January 1 to

Year Ended

Year Ended

December 31,

May 31,

December 31,

December 31,

(In millions)

2007

2007

2006

2005

Gross rental expense

$ 379

$ 291

$ 727

$ 991

Sublease rental income

(86)(1) (72)(1) (338) (371)Net rental expense

$ 293

$ 219

$ 389

$ 620

(1) Mesaba was acquired by Northwest Airlines on April 24, 2007 and became a wholly-owned consolidated subsidiary, whichreduced sublease rental income upon consolidating Mesaba for reporting purposes.

At December 31, 2007 the Company leased 115 of the 431 aircraft it operates; of these 115 leases, one was a capital lease and 114

were operating leases. The above table also includes operating leases for 137 aircraft operated by and subleased to Pinnacle. The baseterm lease expiration date is 2009 for aircraft under capital leases, and from 2009 to 2025 for aircraft under operating leases.

The Company’s aircraft leases can generally be renewed for terms ranging from one to eight years at rates based on the aircraft’s

fair market value at the end of the lease term. All 252 aircraft lease agreements provide the Company with purchase options duringthe lease, at the end of the lease, or both.

63


Note 10 — Liabilities Subject to Compromise

At December 31, 2006, the Predecessor Company had liabilities subject to compromise of $13.6 billion, consisting of the

following:

(In millions)

Long-term debt (1)

$ 4,556

Accrued interest on long-term debt

48

Pension, postretirement and other employee-related expenses

3,902

Aircraft-related accruals, deferrals, and claims

2,962

Capital lease obligations, including accrued interest (2)

238

Accounts payable and other liabilities

1,866

Total liabilities subject to compromise

$ 13,572

(1) Long-term debt subject to compromise included pre-petition and post-petition accrued interest and unpaid principal. Referto “Note 8 — Long-Term Debt and Short-Term Borrowings” for information related to the Predecessor Company’s debt notclassified as subject to compromise as of December 31, 2006.

At December 31, 2006, the Predecessor Company’s long-term debt subject to compromise was as follows:

(In millions)

Aircraft enhanced equipment trust certificates

$ 1,554

Aircraft secured loans

784

Other secured notes

220

Other secured debt

1

Unsecured notes

1,313

Convertible unsecured notes

375

Unsecured debt

2

Pre-petition claims

307

Total debt liabilities subject to compromise

$ 4,556

(2) Capital lease obligations subject to compromise included accrued interest and unpaid principal.

Subsequent to its Chapter 11 filing, the Predecessor Company recorded post-petition interest expense on pre-petition obligations

only to the extent it believed the interest would be paid during the bankruptcy proceeding or that it was probable that the interestwould be an allowed claim. Had the Predecessor Company recorded interest expense based on its pre-petition contractual obligations,interest expense would have increased by $178.7 million during the year ended December 31, 2006.

In addition to the $13.6 billion of liabilities subject to compromise itemized above, the Predecessor Company’s $277 million of

Preferred Redeemable Stock was also subject to compromise as of December 31, 2006. This preferred security was not presented as aliability on the Predecessor Company’s December 31, 2006 Consolidated Balance Sheet due to its conversion features, as required bythe provisions of SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.

64


Note 11 — Stock-Based Compensation

Prior to the Effective Date, the Company maintained stock incentive plans for officers and key employees of the Company (the

“Prior Management Plans”) and a stock option plan for pilot employees (the “Pilot Plan”). On the Effective Date, outstanding awardsunder the Prior Management Plans and Pilot Plan were cancelled in accordance with the terms of the Plan. On the Effective Date, theManagement Equity Plan (“the 2007 Plan”) of the Successor Company provided for in the Plan of Reorganization became effective. The 2007 Plan is a stock-based incentive compensation plan, under which the Compensation Committee of the Board of Directors hasthe authority to grant equity-based awards including stock options, stock appreciation rights, restricted stock, restricted stock units,and/or other stock-based awards, including performance-based awards. Each of these awards may be granted alone, in conjunctionwith, or in tandem with other awards under the 2007 Plan. Awards may be to any employee of the Company or its subsidiaries. Thenumber of participants participating in the 2007 Plan will vary from year to year. At its inception, the 2007 Plan provided that 21.33million shares of common stock of the Successor Company were available for issuance under the plan. As of December 31, 2007,approximately 5.99 million shares remained available for new awards to be granted under the 2007 Plan. The Company adopted SFASNo. 123R using the modified-prospective transition method, effective January 1, 2006. Under SFAS No. 123R, non-cashcompensation expense for equity awards is recognized over the vesting period of the awards, generally the required service period. Under the terms of awards granted in connection with the Company’s emergence from bankruptcy, a portion of the shares subject tosuch awards vested immediately with the remaining shares vesting in one year or over four years; in addition, the shares subject toemergence related awards that vest on or before May 2008 are also subject to a disgorgement provision if the participant voluntarilyterminates his or her employment prior to the one year anniversary of the Effective Date. Under SFAS No. 123R, the correspondingexpense is recognized over this implied service period. For awards containing the disgorgement provision, the tables below excludethe portion of such awards that vest prior to May 31, 2008. The Company uses straight-line recognition for awards with installmentvesting. SFAS No. 123R also requires the Company to estimate forfeitures of stock awards as of the grant date of the award.

The compensation expense related to stock options and restricted stock units granted to management employees in connectionwith the Company’s emergence from bankruptcy, which is quantified below, does not represent payments actually made to theseemployees. Rather, the amounts represent the non-cash compensation expense recognized by the Company in connection with theseawards for financial reporting purposes. The actual value of these awards to the recipients will depend on the trading price of theCompany’s stock when the awards vest.

Stock Options. Stock option awards are granted with an exercise price equal to the closing sales price of the Company’s commonstock on the date of grant. Generally, outstanding employee stock option awards vest over four years and have a 10-year term.

The fair value of option awards are estimated on the date of grant using the Black-Scholes option pricing model based on several

assumptions. The risk-free interest rate for periods within the term of the option is based on the U.S. Treasury yield curve in effect atthe time of grant. The dividend yield on our common stock is assumed to be zero since in the past the Company has not paiddividends and has no current plans to do so. The expected market price volatility assumption was developed considering bothhistorical and implied volatilities of the trading prices of other airlines’ stocks. Volatility data was not considered for the Companydue to its bankruptcy. The expected life of the options was developed using Staff Accounting Bulletin (“SAB”) No. 107, Topic 14,Share-Based Payments.

The weighted-average fair value of options granted in connection with the Company’s emergence from bankruptcy was

determined based on the following assumptions:

Seven Months Ended

December 31, 2007

Risk-free interest rate

3.45% - 5.11% Dividend yield

0.0%

Expected market price volatility

53% - 56%

Expected life of options (years)

6

65


A summary of the stock option activity under the 2007 Plan as of December 31, 2007 and changes during the seven months then

ended are as follows:

Weighted-

Weighted-

Average

Average

Remaining

Exercise

Contractual

(Shares in thousands)

Shares

Price

Term

Outstanding at beginning of period

—

$ —

—

Granted

5,878

21.64

Exercised

—

—

Forfeited or expired

(72) 22.00

Outstanding at end of period

5,806

21.63

9.52

Vested or expected to vest at end of period

5,381

21.65

9.42

Exercisable at end of period (1)

28

22.00

0.17

(1) Excludes 1.2 million shares subject to vested options due to the SFAS No. 123R disgorgement provision discussed above.

The weighted-average grant date fair value of options granted in connection with the Company’s emergence from bankruptcy wasapproximately $12.19 per share. There were no options exercised during the seven months ended December 31, 2007. The aggregateintrinsic value of the outstanding options at December 31, 2007 was zero. As of December 31, 2007, the Company had approximately$54.3 million of unrecognized non-cash compensation expense related to non-vested options. The Company expects to recognize thisexpense over a weighted-average period of approximately 1.6 years.

Restricted Stock Units. The fair value of restricted stock units (“RSUs”) is determined based on the closing sales price of the

Company’s common stock on the date of grant. Generally, outstanding RSUs vest in one year or over four years. A summary of the status of the Company’s RSUs as of December 31, 2007, and changes during the seven months then ended, are

presented below:

Weighted-

Weighted-

Average

Average

Remaining

Grant Date

Contractual

(Shares in thousands)

Shares

Fair Value

Term

Unvested at beginning of period

—

$ —

—

Granted

10,298

24.59

Vested (1)

(56) 25.15

Forfeited

(105) 25.15

Unvested at end of period

10,137

24.58

9.5

(1) Excludes 1.8 million shares subject to vested RSUs due to the SFAS No. 123R disgorgement provision discussed above.

As of December 31, 2007, there was $176.8 million of unrecognized non-cash compensation cost related to RSUs granted underthe Plan. The compensation cost is expected to be recognized over a weighted-average period of approximately 1.7 years.

Other Awards. The Company also issued certain awards that are accounted for as a liability because such awards provide for

settlement in cash. During 2007, the Company granted approximately 0.7 million RSUs to be settled in cash and approximately 0.4million stock appreciation rights (“SARs”). Each cash-settled RSU represents the right to receive a cash payment equal to the closingsales price of the Company’s common stock multiplied by the number of shares subject to the award on the applicable vesting date. During the seven months ended December 31, 2007, the Company paid $2.2 million in settlement of stock awards to be settled incash. SARs provide participants the right to receive the excess (if any) of the fair market value of the number of shares of commonstock subject to the award at the time of exercise over the exercise price of the SAR. The cash-settled RSUs vest in one year or overfour years and the SARs vest over a four year period.

66


For the seven months ended December 31, 2007, the total stock-based non-cash compensation expense related to stock awards

and liability awards was approximately $73.2 million and $2.8 million, respectively. There was no corresponding tax benefit in 2007related to the stock-based compensation, as the Company records a full valuation allowance against its deferred tax assets due to theuncertainty regarding the ultimate realization of those assets. See “Note 13 — Income Taxes” for additional information.

Note 12 — Accumulated Other Comprehensive Income (Loss)

The following table sets forth information with respect to accumulated other comprehensive income (loss) (“OCI”):

Pension, Other

Foreign

Deferred

Postretirement

Adjustment

Unrealized

Accumulated

Currency

Gain (Loss)

and Long-Term

to Adopt

Gain (Loss)

Other

Translation

on Hedging

Disability

SFAS

on

Comprehensive

(In millions)

Adjustment

Activities

Benefits

No. 158

Investments

Income (Loss)

Predecessor


$ (4) $ (5) $ (1,541) $ —

$ 3

$ (1,547)

Before tax amount

(7) 11

(16) —

(9) (21)Tax effect

—

—

—

—

—

—

Net-of-tax amount

(7) 11

(16) —

(9) (21) Balance at December 31,2005

(11) 6

(1,557) —

(6) (1,568)

Before tax amount

—

(10) 699

(224) 3

468

Tax effect

—

—

—

—

—

—

Net-of-tax amount

—

(10) 699

(224) 3

468

Balance at December 31,2006

(11) (4) (858) (224) (3) (1,100)

Before tax amount

11

4

858

224

3

1,100

Tax Effect

—

—

—

—

—

—

Net-of-tax amount

11

4

858

224

3

1,100

Balance at May 31, 2007

—

—

—

—

—

—

Successor

Balance at June 1, 2007

—

—

—

—

—

—

Before tax amount

—

(3) (199) —

—

(202)

Tax Effect

—

—

—

—

—

—

Net-of-tax amount

—

(3) (199) —

—

(202) Balance at December 31,2007

$ —

$ (3) $ (199) $ —

$ —

$ (202)

67


Note 13 — Income Taxes

Income tax expense (benefit) consisted of the following:

Successor

Predecessor

Period From

Period From

June 1 to

January 1 to

Year Ended

Year Ended

December 31,

May 31,

December 31,

December 31,

(In millions)

2007

2007

2006

2005

Current:

Federal $ —

$ —

$ —

$ 6

Foreign

2

1

8

—

State

—

—

—

1

2

1

8

7

Deferred:

Federal

208

(3) (37) —

Foreign

(1) —

—

—

State

15

—

—

—

222

(3) (37) —

Total income tax expense (benefit) $ 224

$ (2) $ (29) $ 7

Reconciliations of the statutory rate to the Company’s income tax expense (benefit) are as follows:

Successor

Predecessor

Period From

Period From

June 1 to

January 1 to

Year Ended

Year Ended

December 31,

May 31,

December 31,

December 31,

(In millions)

2007

2007

2006

2005

Statutory rate applied to income (loss) beforeincome taxes

$ 198

$ 612

$ (1,003) $ (860)

Add (deduct):

State income tax expense (benefit) net of federalbenefit

10

28

(45) (39)

Non-deductible expenses

15

25

23

13

Adjustment to valuation allowance and otherincome tax accruals

—

(665) 1,023

883

Other

1

(2) (27) 10

Total income tax expense (benefit) $ 224

$ (2) $ (29) $ 7

The Company accounts for income taxes in accordance with SFAS No. 109 which requires that deferred tax assets and liabilities

be recognized, using enacted tax rates, for the tax effect of temporary differences between the financial reporting and tax bases ofrecorded assets and liabilities. SFAS No. 109 also requires that deferred tax assets be reduced by a valuation allowance if it is morelikely than not that some or all of the deferred tax assets will not be realized. Based on the consideration of all available evidence, theCompany has provided a valuation allowance on its net deferred tax assets recorded beginning in the first quarter 2003. The Companycontinues to maintain a valuation allowance against its net deferred tax assets due to the uncertainty regarding the ultimate realizationof those assets.

68


Significant components of the Company’s deferred tax assets and liabilities as of December 31 are as follows:

Successor

Predecessor

(In millions)

2007

2006

Deferred tax liabilities:

Accounting basis of assets in excess of tax basis

$ 1,710

$ 2,002

Accounting basis of indefinite-lived intangible assets in excess of tax basis

1,424

217

Accounting basis of definite-lived intangible assets in excess of tax basis

437

—

Other

17

71

Total deferred tax liabilities

3,588

2,290

Deferred tax assets:

Expenses not yet deducted for tax purposes

185

253

Reorganization charges not yet deducted for tax purposes

869

1,526

Pension and postretirement benefits

1,395

1,476

Deferred revenue

718

—

Gains from the sale-leaseback of aircraft

—

18

Rent expense

—

(35)Travel award programs

—

104

Net operating loss carryforward

1,316

1,216

Alternative minimum tax credit carryforward

137

134

Other

53

34

Total deferred tax assets

4,673

4,726

Valuation allowance for deferred tax assets

(2,216) (2,436)Net deferred tax assets

2,457

2,290

Net deferred tax liability

$ 1,131

$ —

At December 31, 2007, the Company has certain federal deferred tax assets available for use in the regular tax system and the

alternative minimum tax (“AMT”) system. The deferred tax assets available in the regular tax system include: NOL carryforwards of$3.6 billion, AMT credits of $137 million, general business tax credits of $6 million and foreign tax credits of $19 million. Thedeferred tax assets available in the AMT system are: NOL carryforwards of $3.7 billion and foreign tax credits of $16 million. AMTcredits available in the regular tax system have an unlimited carryforward period and all other deferred tax assets in both systems areavailable for years beyond 2007, expiring in 2008 through 2027.

The Company also has the following deferred tax assets available at December 31, 2007, for use in certain states: NOL

carryforwards with a tax benefit value of approximately $87 million are available for years beyond 2007, expiring in 2008 through2027, and state job tax credits of $7 million are available for years beyond 2007, expiring in 2008 through 2011.

With the adoption of fresh-start reporting, a valuation allowance of $2.4 billion was recorded which, if reversed when the

Company reports income in future periods, will reduce goodwill and then other intangible assets and will generate income taxexpense. Because of its NOL carryforwards, however, the Company expects to pay minimal cash income taxes for the foreseeablefuture.

An ownership change under Internal Revenue Code Section 382 occurred in connection with the Company’s bankruptcy Plan of

Reorganization. However, the Company does not believe that such change has any material impact on the Company’s ability to useits NOL carryforwards and other tax attributes.

69


In June 2006, the FASB issued FIN 48, which clarifies SFAS No. 109. FIN 48 prescribes a consistent recognition threshold and

criteria for measurement of uncertain tax positions for financial statement purposes. FIN 48 requires the financial statementrecognition of an income tax benefit when the Company determines that it is “more likely than not” the tax position will be ultimatelysustained. The Company adopted FIN 48 on January 1, 2007. As of December 31, 2007, the Company had unrecognized tax benefitsof approximately $3 million, which, if recognized, would impact the effective tax rate in future periods. During the quarter endedDecember 31, 2007, the Company increased its reserve for unrecognized tax benefits by approximately $2 million as a result of aresolution of a federal tax controversy. A reconciliation of the beginning and ending amount of unrecognized tax benefits is asfollows:

(In millions)


$ 5

Additions based on tax positions related to the current year

—

Additions for tax positions of prior years

2

Reductions for tax positions of prior years

(2)Settlements

(2)

Lapse of statute of limitations

—


$ 3

Subject to the impact of the Company’s bankruptcy filing, open tax years for federal income tax purposes are 1992 through 2006

and for state income tax purposes generally are 2005 and 2006. The Company’s continuing practice is to recognize interest and penalties related to income tax matters in income tax expense.

The Company had $10 million accrued for interest and nothing accrued for penalties at December 31, 2007.

Note 14 — Commitments

The Company’s firm orders for 25 new aircraft to be operated by Northwest consist of scheduled deliveries for 18 Boeing 787-8aircraft from 2009 through 2010, two Airbus A320 aircraft in 2012 and five Airbus A319 aircraft from 2010 through 2011. As ofDecember 31, 2007, the Company also had firm orders to take delivery of 23 Bombardier CRJ900 aircraft and 27 Embraer 175 aircraftin 2008 related to its regional aircraft operations.

Committed expenditures for these aircraft and related equipment, including estimated amounts for contractual price escalations

and predelivery deposits, will be approximately $1.2 billion in 2008, $1.2 billion in 2009, $770 million in 2010, $79 million in 2011,and $97 million in 2012. Consistent with prior practice, the Company intends to finance its aircraft deliveries through a combinationof internally generated funds, debt and long-term lease financings. Financing commitments or cancellation rights are available to theCompany for all aircraft on firm order.

Note 15 — Contingencies

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

GeneralIndemnifications. The Company is the lessee under many commercial real estate leases. It is common in these

transactions for us, as the lessee, to agree to indemnify the lessor and the lessor’s related parties for tort, environmental and otherliabilities that arise out of, or relate to, our use or occupancy of the leased premises. This type of indemnity would typically make usresponsible to indemnified parties for liabilities arising out of the conduct of, among others, contractors, licensees and, in many cases,invitees at or in connection with the use or occupancy of the leased premises. This indemnity normally excludes any liabilities causedby the gross negligence (or, in some cases, the negligence) and willful misconduct of the indemnified parties.

The Company’s aircraft and other equipment lease and financing agreements typically contain provisions requiring us, as the

lessee or obligor, to indemnify the other parties to those agreements, including certain of those parties’ related persons, againstvirtually any liabilities that might arise from the condition, use or operation of the aircraft or such other equipment. The Companybelieves that its insurance would cover most of the exposure to such liabilities and related indemnities associated with the types oflease and financing agreements described above, including real estate leases. However, the Company’s insurance does not typicallycover environmental liabilities.

70


Certain of our aircraft and other financing transactions include provisions which require us to make payments to preserve an

expected economic return to the lenders if that economic return is diminished due to certain changes in law or regulations. In certainof these financing transactions, the Company also bears the risk of certain changes in tax laws that would subject payments tonon-U.S. lenders to withholding taxes.

The Company obtains letters of credit (“LOCs”) from commercial banks in favor of various parties to secure obligations of the

Company to such parties. As of December 31, 2007, the total outstanding amount of these LOCs was $92.4 million (excluding anadditional $133.4 million of LOCs that were fully secured by the Company’s pledge of cash collateral). The obligations of theCompany with respect to this $92.4 million of LOCs, together with certain other obligations of the Company, are secured by theCompany’s routes, certain aircraft and cash collateral.

Note 16 — Pension and Other Postretirement Health Care Benefits

The Company has several defined benefit pension plans and defined contribution 401(k)-type plans covering substantially all of

its employees. Northwest froze future benefit accruals for its defined benefit Pension Plans for Salaried Employees, Pilot Employees,and Contract Employees effective August 31, 2005, January 31, 2006, and September 30, 2006, respectively. Replacement coveragewas provided for these employees through 401(k)-type defined contribution plans or in the case of IAM represented employees, theIAM National Multi-Employer Plan.

Northwest also sponsors various contributory and noncontributory medical, dental and life insurance benefit plans covering

certain eligible retirees and their dependents. The expected future cost of providing such postretirement benefits is accrued over theservice lives of active employees. Retired employees are not offered Company-paid medical and dental benefits after age 64, with theexception of certain employees who retired prior to 1987 and receive lifetime Company-paid medical and dental benefits. Prior to age65, the retiree share of the cost of medical and dental coverage is based on a combination of years of service and age at retirement. Medical and dental benefit plans are unfunded and costs are paid as incurred. The pilot group is provided Company-paid decreasinglife insurance coverage.

The Pension Protection Act of 2006 (“2006 Pension Act”) was signed into law on August 17, 2006. The 2006 Pension Act allows

commercial airlines to elect special funding rules for defined benefit plans that are frozen. The unfunded liability for a frozen definedbenefit plan may be amortized over a fixed 17-year period. The unfunded liability is defined as the actuarial liability calculated usingan 8.85% interest rate minus the fair market value of plan assets. Northwest elected the special funding rules for frozen definedbenefit plans under the 2006 Pension Act effective October 1, 2006. As a result of this election (1) the funding waivers that Northwestreceived for the 2003 plan year contributions were deemed satisfied under the 2006 Pension Act, and (2) the funding standard accountfor each Plan had no deficiency as of September 30, 2006. New contributions that came due under the 2006 Pension Act fundingrules were paid while Northwest was in bankruptcy and must continue to be paid going forward. If the new contributions are not paid,the future funding deficiency that would develop will be based on the regular funding rules rather than the special funding rules.

It is Northwest’s policy to fund annually at least the minimum contribution as required by the Employee Retirement Income

Security Act of 1974, as amended (“ERISA”). However, as a result of the commencement of Northwest’s Chapter 11 case, Northwestdid not make minimum cash contributions to its defined benefit pension plans that were due after September 14, 2005. Subsequent toNorthwest’s bankruptcy filing and prior to its election under the 2006 Pension Act, Northwest paid the normal cost component of theplans’ minimum funding requirements relating to service rendered post-petition and certain interest payments associated with its 2003Contract Plan and Salaried Plan year waivers. As noted above, effective October 1, 2006, Northwest elected the special fundingrules available to commercial airlines.

As a result of Northwest’s Chapter 11 filing, we appointed an independent fiduciary for all of our tax-qualified defined benefit

pension plans to pursue, on behalf of the plans, claims to recover minimum funding contributions due under federal law, to the extentthat Northwest is not continuing to fund the plans due to bankruptcy prohibitions. The independent fiduciary subsequently withdrewall of the claims that the independent fiduciary filed in our Chapter 11 Case following our election of the special funding rules underthe 2006 Pension Act.

Congress enacted, and the president signed into law on December 13, 2007, a change in the retirement age for pilots from age 60

to 65. Due to this legislative change, the Company has updated its retirement assumptions for pilots and assumes that certain pilotswill continue to work past age 60. This change had an immaterial impact on Northwest’s overall pension benefit and otherpostretirement obligations.

In September 2006, the FASB issued SFAS No. 158, which amends SFAS No. 87 and SFAS No. 106, Employers' Accounting forPostretirement Benefits Other Than Pensions (“SFAS No. 106”) to require recognition of the overfunded or underfunded status ofpension and other postretirement benefit plans on the balance sheet. Under SFAS No. 158, gains and losses, prior service costs andcredits, and any remaining transition amounts under SFAS No. 87 and SFAS No. 106 that have not yet been recognized through netperiodic benefit cost will be recognized in accumulated other comprehensive income, net of tax effects. The measurement date, thedate at which the benefit obligation and plan assets are measured, is required to be the company's fiscal year end. The Companyhistorically had and continues to utilize a fiscal year-end measurement date. SFAS No. 158 was effective for publicly-held companies


for fiscal years ending after December 15, 2006, except for the measurement date provisions, which are effective for fiscal yearsending after December 15, 2008. The adoption of SFAS No. 158 increased the Company’s long-term pension and other postretirementbenefit liabilities, as well as the Predecessor Company’s equity deficit by $224 million as of December 31, 2006. SFAS No. 158 doesnot affect the results of operations.

Northwest’s 2007 calendar year contributions to its frozen defined benefit plans under the provisions of the 2006 Pension Act andthe replacement plans were approximately $130 million. Northwest’s 2008 calendar year contributions to its frozen defined benefitplans under the provisions of the 2006 Pension Act and the replacement plans will approximate $140 million.

71


The following is a reconciliation of the beginning and ending balances of the benefit obligations, the fair value of plan assets,

and the funded status:

Pension Benefits

Other Benefits

Successor

Predecessor

Successor

Predecessor

(In millions)

2007

2006

2007

2006

Change in benefit obligations:

Benefit obligations at beginning of year

$ 9,373

$ 9,472

$ 898

$ 1,051

Service cost

45

116

23

30

Interest cost

553

533

49

59

Plan amendments

—

(3) (119 ) (270)Actuarial loss and other

(299) (265) (27) 91

Transfer of liability out of plan (1)

—

(8) —

—

Benefits paid

(502) (472) (64) (63)Benefit obligations at end of period

9,170

9,373

760

898

Change in plan assets:

Fair value of plan assets at beginning of year

6,278

5,794

5

5

Actual return on plan assets

449

870

—

—

Employer contributions

79

86

63

63

Benefits paid

(502) (472) (64) (63)Fair value of plan assets at end of period

6,304

6,278

4

5

Funded status at end of period - net underfunded

$ (2,866) $ (3,095) $ (756) $ (893)

(1) The Company transferred the liability associated with certain long-term disability benefits previously provided in the NorthwestAirlines Pension Plan for Pilots to a self-funded long-term disability plan that provides substantially similar benefits.

The accumulated benefit obligations for all defined benefit pension plans were $9.1 billion and $9.4 billion at December 31, 2007

and 2006, respectively. The Company’s pension plans with accumulated benefit obligations in excess of plan assets as ofDecember 31 were as follows:

Successor

Predecessor

(In millions)

2007

2006

Projected benefit obligations

$ 9,143

$ 9,352

Accumulated benefit obligations

9,123

9,338

Fair value of plan assets

6,273

6,251

Amounts recognized in the statement of financial position as of December 31 consist of:

Pension Benefits

Other Benefits

Successor

Predecessor

Successor

Predecessor

(In millions)

2007

2006

2007

2006

Assets

Noncurrent assets

$ 3

$ 6

$ —

$ —

Total assets

$ 3

$ 6

$ —

$ —

Liabilities

Current liability

$ (27) $ (28) $ (43) $ (64)Noncurrent liability

(2,842) (3,073) (713) (829)

Total liabilities

$ (2,869) $ (3,101) $ (756) $ (893) Accumulated other comprehensive loss (income),pre-tax

Net loss (gain)

$ 199

$ 1,621

$ 8

$ 619

Prior service cost (credit)

—

(1) —

(333)Total other comprehensive income

$ 199

$ 1,620

$ 8

$ 286

72


Weighted-average assumptions used to determine benefit obligations for pension and other benefits at December 31:

Pension Benefits

Other Benefits

Successor

Predecessor

Successor

Predecessor

(In millions)

2007

2006

2007

2006

Discount rate

6.31% 5.93% 6.24% 5.93%Rate of future compensation increase (1)

3.50% 3.50% n/a

n/a

(1) Not applicable to frozen plans.

Components of net periodic benefit cost of defined benefit plans and defined contribution plan costs:

Pension Benefits

Successor

Predecessor

Period From

Period From

June 1 to

January 1 to

Year Ended

Year Ended

December 31,

May 31,

December 31,

December 31,

(In millions)

2007

2007

2006

2005

Defined benefit plan costs

Service cost $ 26

$ 19

$ 116

$ 278

Interest cost

328

225

533

553

Expected return on plan assets

(337) (207) (484) (518)Amortization of prior service cost

—

—

30

73

Recognized net actuarial loss and other events

—

18

87

170

Net periodic benefit cost

17

55

282

556

Defined contribution plan costs

41

23

53

11

Total benefit cost $ 58

$ 78

$ 335

$ 567

Other Benefits

Successor

Predecessor

Period From

Period From

June 1 to

January 1 to

Year Ended

Year Ended

December 31,

May 31,

December 31,

December 31,

(In millions)

2007

2007

2006

2005

Defined benefit plan costs

Service cost

$ 13

$ 10

$ 30

$ 34

Interest cost

27

22

59

56

Expected return on plan assets

—

—

—

Amortization of prior service cost

—

(15) (21) (10)Recognized net actuarial loss and other events

—

16

38

31

Net periodic benefit cost

40

33

106

111

Defined contribution plan costs

—

—

—

—

Total benefit cost

$ 40

$ 33

$ 106

$ 111

73


Related to the freezing of Northwest’s defined benefit plans covering domestic employees in 2006, Northwest recorded pension

curtailment charges and gains. Curtailment charges and gains have been recorded as a component of net reorganization expense. Northwest has recorded the following pension curtailment amounts:

Successor

Predecessor

Period From

Period From

June 1 to

January 1 to

Year Ended

Year Ended

(In millions)

December 31, 2007

May 31, 2007

December 31, 2006

December 31, 2005

Curtailment charge (gain)

Pilot Plan $ —

$ —

$ (49) $ 127

Salaried Plan

—

—

—

28

Contract Plan

—

—

332

54

Total $ —

$ —

$ 283

$ 209

Estimated amounts that will be amortized from accumulated other comprehensive income into net periodic benefit cost in

2008:

Pension

Other

(In millions)

Benefits

Benefits

Net loss (gain)

$ 1

$ —

Prior service cost (credit)

—

—

$ 1

$ —

Weighted-average assumptions used to determine net periodic pension and other benefit costs for the periods ended

December 31:

Pension Benefits

Other Benefits

Successor

Predecessor

Successor

Predecessor

2007

2006

2007

2006

Discount rate (1)

6.17% 5.71% 6.17% 5.71%Expected long-term return on plan assets

9.00% 9.00% 5.00% 5.00%

Rate of future compensation increase (2)

3.50% 3.50% n/a

n/a

(1) The discount rate used for the period from January 2007 through May 2007 was 5.93%.(2) Not applicable to frozen plans.

The Company has adopted and implemented an investment policy for the defined benefit pension plans that incorporates a

strategic asset allocation mix designed to best meet the Company’s long-term pension obligations. This asset allocation policy mix isreviewed every 2-3 years and, on a regular basis, actual allocations are rebalanced toward the prevailing targets. The following tablesummarizes actual allocations as of December 31, 2007 and 2006:

Plan Assets

Asset Category

Target

2007

2006

Domestic stocks

35.0% 42.7% 47.2%International stocks

25.0% 27.1% 28.1%

Private markets

10.0% 9.0% 5.1%Long-duration bonds

15.0% 15.7% 14.5%

High yield bonds

5.0% 5.1% 5.1%Real estate

10.0% 0.4% n/a

Total

100.0% 100.0% 100.0%

The investment policy also emphasizes the following key objectives: (1) maintain a diversified portfolio among asset classes andinvestment styles; (2) maintain an acceptable level of risk in pursuit of long-term economic benefit; (3) maximize the opportunity forvalue-added returns from active management; (4) capture return opportunities from inefficiencies in nontraditional capital markets;and (5) maintain adequate controls over administrative costs.

74


To meet these objectives, the Company’s investment policy reflects the following major themes: (1) diversify holdings to achieve

broad coverage of both stock and bond markets; (2) utilize market index funds as a core strategy, where appropriate, to ensure broaddiversification, minimal fees, and reduced risk of relative underperformance of the portfolio; (3) use active investment managers withdisciplined, clearly defined strategies, while establishing investment guidelines and monitoring procedures for each investmentmanager to ensure the characteristics of the portfolio are consistent with the original investment mandate; and (4) maintain anallocation to nontraditional investments, where market inefficiencies are greatest, and use these investments primarily to enhance theoverall returns.

The Company reviews its rate of return on plan asset assumptions annually. These assumptions are largely based on the assetcategory rate-of-return assumptions developed annually with the Company’s pension investment advisors. The advisors’ assetcategory return assumptions are based in part on a review of historical asset returns, but also emphasize current market conditions todevelop estimates of future risk and return. Current market conditions include the yield-to-maturity and credit spreads on a broadbond market benchmark in the case of fixed income asset classes, and current prices as well as earnings and dividend growth rates inthe case of equity asset classes. The assumptions are also adjusted to account for the value of active management the funds haveprovided historically. The Company’s expected long-term rate of return is based on target asset allocations of 35% domestic equitieswith an expected rate of return of 8.75%; 25% international equities with an expected rate of return of 8.75%; 10% private marketswith an expected rate of return of 11.75%; 15% long-duration bonds with an expected rate of return of 6.0%; 5% high yield bondswith an expected rate of return of 7.50%; and 10% real estate equities with an expected rate of return of 6.75%. These assumptionsresult in a weighted geometric average rate of return of 8.75% on an annual basis.

For measurement purposes, an 8.0% annual rate of increase in the per capita cost of covered health care benefits was assumed for2008. The rate was assumed to decrease 0.5% per year reaching 5.0% in 2014 and remain at that level thereafter. Assumed healthcare cost trend rates have a significant impact on the amounts reported under other benefits, above, for the health care plans.

A one percent-change in assumed health care cost trend rates would have the following effects:

One Percentage-

One Percentage-

(In millions)

Point Increase

Point Decrease

Effect on total of service and interestcost components (1)

$ 4.4

$ (3.8)

Effect on accumulated postretirementbenefit obligations

65.1

(57.3)

(1) Effect on total of service and interest cost components for the period June through December 2007.

The future benefit payments expected to be made by the pension and other postretirement benefit plans are shown below:

Employer

Provided Other

Pension

Postretirement

(In millions)

Benefits

Benefits

2008

$ 481

$ 47

2009

497

48

2010

520

50

2011

541

52

2012

568

53

Years 2013-2017

3,218

308

Note 17 — Risk Management

The Company recognizes all derivatives on the balance sheet at fair value. The Company uses derivatives as cash flow hedges tomanage the price risk of fuel, its exposure to foreign currency fluctuations, and its exposure to interest rates. For cash flow hedgesthat qualify for special hedge accounting treatment under SFAS No. 133, Accounting for Derivative Instruments and HedgingActivities (“SFAS No. 133”), the effective portion of the derivative’s gain or loss is initially reported as a component of othercomprehensive income (loss) in the equity section of the balance sheet and subsequently reclassified into earnings when the forecastedtransaction affects earnings. Any ineffective portion of the derivative’s gain or loss is reported in earnings immediately. For all otherderivatives, gains and losses are recorded in earnings each period.

75


RiskManagement. The Company principally uses derivative financial instruments to manage specific risks and does not hold or

issue them for trading purposes. The notional amounts of financial instruments summarized below did not represent amountsexchanged between parties and, therefore, are not a measure of the Company’s exposure resulting from its use of derivatives.

ForeignCurrency. The Company is exposed to the effect of foreign exchange rate fluctuations on the U.S. dollar value of foreign

currency-denominated operating revenues and expenses. The Company’s largest exposure comes from the Japanese yen. In 2007, theCompany’s yen-denominated net cash inflow was approximately 86 billion yen ($726 million).

The Company uses forward contracts, collars or put options to hedge a portion of its anticipated yen-denominated sales. The

changes in market value of such instruments have historically been highly effective at offsetting exchange rate fluctuations inyen-denominated sales. As of December 31, 2007, the Company had hedged approximately 42.6% of its anticipated 2008yen-denominated sales. The 2008 Japanese yen hedges consist of forward contracts which hedge approximately 32.7% ofyen-denominated sales at an average rate of 109.3 yen per U.S. dollar and collar options which hedge approximately 9.9% ofyen-denominated sales with a rate range between 102.4 and 116.4 yen per U.S. dollar. As of December 31, 2007, a $0.1 millionunrealized loss was outstanding in accumulated other comprehensive income associated with the Japanese yen hedge contracts. Hedging gains or losses are recorded in revenue when transportation is provided. The Japanese yen financial instruments utilized tohedge yen-denominated cash flows resulted in realized gains of $9 million and $11 million in 2006 and 2005, respectively.

As of December 31, 2007, Company had also hedged approximately 66.4% of its 2008 anticipated Canadian dollar denominated

sales with forward contracts at an average rate of 1.0008 Canadian dollars per U.S. dollar. A $2.9 million unrealized loss wasoutstanding in accumulated other comprehensive income associated with the Canadian dollar hedge contracts, as of December 31,2007.

Counterparties to these financial instruments expose the Company to credit loss in the event of nonperformance, but the Company

does not expect any of the counterparties to fail to meet their obligations. The amount of such credit exposure is generally theunrealized gains, if any, in such contracts. To manage credit risks, the Company selects counterparties based on credit ratings, limitsexposure to any single counterparty and monitors the market position with each counterparty. It is the Company’s practice toparticipate in foreign currency hedging transactions with a maximum span of 24 months.

AircraftFuel. The Company is exposed to the effect of changes in the price and availability of aircraft fuel. In order to provide a

measure of control over price and supply, the Company trades and ships fuel and maintains fuel storage facilities to support its flightoperations. To further manage the price risk of fuel costs, the Company primarily utilizes futures contracts traded on regulated futuresexchanges, swap agreements and options.

As of December 31, 2007, the Company had economically hedged the price of approximately10% of its projected fuel

requirements for 2008, through collar options. Including an additional collar option entered into during January and February 2008,the Company has hedged the price of approximately18% of its projected fuel requirements for 2008. All of the Company’s existingfuel derivative contracts will expire on or before December 31, 2008. The collar options consist of crude oil put options with a pricerange of $63.50 to $85.00 per barrel (average of $78.42), and related call options with a price range of $84.00 to $104.65 per barrel(average $97.38).

The Company currently has no fuel derivative contracts outstanding that are designated for special hedge accounting treatment,

and therefore had no related unrealized gains (losses) in Accumulated Other Comprehensive Income (Loss) as of December 31, 2007.The Company records any changes in the contracts’ values as mark-to-market adjustments through the Consolidated Statement ofOperations on a monthly basis. During 2007, the Company recognized $112.9 million of fuel derivative net gains as reductions in fuelexpense, including $18.7 million of unrealized gains related to fuel derivative contracts that will settle in 2008. Effective June 2007,the Company began allocating mark-to-market adjustments to regional carrier expense for fuel consumed by our non-consolidatedAirlink partners. For the seven months ended December 31, 2007, the Company recognized $10.6 million of fuel derivative net gainsas reductions in regional carrier expense, including $1.7 million of unrealized gains related to fuel derivative contracts that will settlein 2008. During 2006, the Company recognized $39.3 million of fuel derivative net losses as additional fuel expense, including $2.7million of unrealized losses related to fuel derivative contracts that settled in 2007. During 2005, the Company recognized $20.9million of fuel derivative net gains as a reduction to fuel expense.

InterestRates. The Company’s earnings are also affected by changes in interest rates due to the impact those changes have on its

interest expense from floating rate debt instruments. During June 2006, the Company entered into individual interest rate cap hedgesrelated to three floating rate debt instruments, with a total cumulative notional amount of $429 million. The objective of the interestrate cap hedges is to protect the anticipated payments of interest (cash flows) on the designated debt instruments from adverse marketinterest rate changes. The maturity date of each of the interest rate cap hedges corresponds exactly with the maturity dates of the threedesignated debt instruments. As of December 31, 2007, the Company has recorded $0.3 million of unrealized losses in accumulatedother comprehensive income (loss) associated with these hedges.

76


Note 18 —Investment Securities

The amortized cost, gross unrealized gains and losses, and fair value of short-term investment securities classified as

available-for-sale as of December 31 were as follows:

Successor

Predecessor

2007

2006

Gross

Gross

Gross

Gross

(In millions)

Amortized

Unrealized

Unrealized

Amortized

Unrealized

Unrealized

Available-for-sale Securities (1)

Cost

Gains

Losses

Fair Value

Cost

Gains

Losses

Fair Value

Mutual Funds

$ —

$ —

$ —

$ —

$ 146

$ —

$ (2) $ 144

U.S. Treasury securities

—

—

—

—

17

—

—

17

Corporate securities

—

—

—

—

50

1

—

51

Mortgage-backed securities

—

—

—

—

173

1

(2) 172

Asset-backed securities

95

—

—

95

212

—

(1) 211

Other securities andinvestments

—

—

—

—

2

—

—

2

Total available-for-salesecurities

$ 95

$ —

$ —

$ 95

$ 600

$ 2

$ (5) $ 597

(1) Available-for-sale securities are carried at fair value, with unrealized net gains or losses reported within other comprehensiveincome in stockholders’ equity.

As of December 31, 2007, the Company did not hold any available-for-sale securities investments which had been in anunrealized loss position for greater than 12 months. The following table provides information as to the amount of gross gains and losses realized through the sale of available-for-saleinvestment securities for the years ending December 31:

Successor

Predecessor

Period From

Period From

June 1 to

January 1 to

Year Ended

Year Ended

December 31,

May 31,

December 31,

December 31,

(In millions)

2007

2007

2006

2005

Realized gains (1)

$ 19

$ 5

$ —

$ 24

Realized losses (1)

(35) (6) (1) (27)Net realized gains (losses)

$ (16) $ (1) $ (1) $ (3)

(1) Realized gains and losses are identified using the specific identification method.

The contractual maturities of debt securities available-for-sale at December 31, 2007 are shown below. Expected maturities maydiffer from contractual maturities because borrowers may have the right to recall or prepay obligations with or without call orprepayment penalties.

(In millions)

AmortizedCost

Fair Value

Within one year

$ 95

$ 95

Between one and five years

—

—

Between five and ten years

—

—

After ten years

—

—

Total short-term investments

$ 95

$ 95

As of December 31, 2007, all of the Company’s available-for-sale securities investments consisted of student loan backed auction

rate securities whose rate reset dates occur monthly.


Note 19 — Related Party Transactions

Pinnacle. On November 29, 2007, the Company entered into a stock redemption agreement with Pinnacle Airlines Corp.,pursuant to which Pinnacle repurchased the Company’s 11.4% equity interest in Pinnacle common stock for $32.9 million. TheCompany recorded a loss on the sale of common stock of $14.2 million in the fourth quarter 2007. In January 2008, the Company soldthe Preferred Series A share it held in Pinnacle for proceeds of $20 million. The Company no longer holds any equity interests inPinnacle as a result of the common and preferred stock sales.

77


Northwest and Pinnacle have entered into an airline services agreement, under which Northwest determines Pinnacle’s commuter

aircraft scheduling. The agreement is structured as a capacity purchase agreement whereby Northwest pays Pinnacle to operate theflights on Northwest’s behalf and Northwest is entitled to all revenues associated with those flights. Under this agreement, Northwestpaid $533 million, $596 million and $572 million for the years ended December 31, 2007, 2006 and 2005, respectively. TheCompany had payables of $22 million and $131 million to Pinnacle as of December 31, 2007 and 2006, respectively. As ofDecember 31, 2007, the Company has leased 137 CRJ200 aircraft, which are in turn subleased to Pinnacle. As part of its overallrestructuring efforts, the Company evaluated its airline services agreements with its regional carriers, initiated a request for proposalfrom its existing and other regional carrier operators, and obtained Bankruptcy Court approval of an amended and restated AirlineServices Agreement (“Amended Pinnacle ASA”) between the Company and Pinnacle on January 11, 2007.

Aeronautical Radio, Inc. On October 25, 2007 the Company, together with certain other major airlines sold Aeronautical

Radio, Inc. (“ARINC”) to Radio Acquisition Corp., an affiliate of The Carlyle Group. For its 15.75% equity interest in ARINC, theCompany received cash proceeds of $97 million.

Note 20 — Geographic Regions

The Company is managed as one cohesive business unit, of which revenues are derived primarily from the commercialtransportation of passengers and cargo. Operating revenues from flight segments serving a foreign destination are classified into thePacific or Atlantic regions, as appropriate. The following table shows the operating revenues for each region:

Successor

Predecessor

Period From

Period From

June 1 to

January 1 to

Year Ended

Year Ended

December 31,

May 31,

December 31,

December 31,

(In millions)

2007

2007

2006

2005

Domestic

$ 4,925

$ 3,347

$ 8,561

$ 8,274

Pacific, principally Japan

1,683

1,063

2,711

2,639

Atlantic

996

514

1,296

1,373


$ 7,604

$ 4,924

$ 12,568

$ 12,286

The Company’s tangible assets consist primarily of flight equipment, which are utilized across geographic markets and therefore

have not been allocated.

78


Note 21 — Quarterly Financial Data (Unaudited)

Unaudited quarterly results of operations are summarized below:

Predecessor

Successor

Period From

Period From

April 1 to

June 1 to

(In millions, except per share amounts)

1st Quarter

May 31

June 30

3rd Quarter

4th Quarter

2007:

Operating revenues

$ 2,873

$ 2,051

$ 1,130

$ 3,378

$ 3,096


201

162

195

459

87


$ (292) $ 2,043

$ 106

$ 244

$ (8) Basic earnings (loss) per common share

$ (3.34) $ 23.37

$ 0.41

$ 0.93

$ (0.03)

Diluted earnings (loss) per common share

$ (3.34) $ 16.87

$ 0.41

$ 0.93

$ (0.03)

Predecessor

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

2006:

Operating revenues

$ 2,890

$ 3,291

$ 3,407

$ 2,980


(15) 295

366

94


$ (1,104) $ (285) $ (1,179) $ (267)

Basic and diluted earnings (loss) per common share

$ (12.65) $ (3.27) $ (13.50) $ (3.06)

2005:

Operating revenues

$ 2,798

$ 3,195

$ 3,378

$ 2,915


(301) (190) (167) (261)


$ (537) $ (234) $ (475) $ (1,309)

Basic and diluted earnings (loss) per common share

$ (6.19) $ (2.69) $ (5.45) $ (15.01)

79


Unaudited quarterly net income (loss) applicable to common stockholders in the table above includes the following unusual items:

Predecessor

Successor

Period From

Period From

April 1 to

June 1 to

(In millions)

1st Quarter

May 31

June 30

3rd Quarter

4th Quarter

2007:

Gain (loss) on sale of assets

$ —

$ —

$ —

$ —

$ (14)Reorganization items

(393) 1,944

—

—

—

Impact on net income (loss) from unusual items

$ (393) $ 1,944

$ —

$ —

$ (14)

Predecessor

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

2006:

Severance expenses

$ —

$ —

$ —

$ (23)

Reorganization items

(975) (464) (1,431) (295)


$ (975) $ (464) $ (1,431) $ (318)

2005:

Pension curtailment charges

$ —

$ —

$ (82) $ —

Aircraft and aircraft related write-downs

—

(48) —

—

Gain (loss) on sale of assets

(18) 102

—

—

Reorganization items

—

—

(159) (922)


(69) —

—

—


$ (87) $ 54

$ (241) $ (922)

The sum of the quarterly earnings per share amounts may not equal the annual amount reported since per share amounts are

computed independently for each quarter and for the full year are based on respective weighted-average common shares outstandingand other dilutive potential common shares.

Note 22 — Subsequent Events (Unaudited) Sale of Pinnacle Airlines Preferred Share. In January 2008, Northwest sold its Class A Preferred share to Pinnacle for a purchaseprice of $20 million. The Class A Preferred share was marked-to-market upon Northwest’s adoption of fresh-start reporting;therefore, no gain or loss was recognized upon the sale. Midwest Air Partners, LLC. Northwest, TPG Midwest US V, LLC, and TPG Midwest International V, LLC formed Midwest AirPartners, LLC for purposes of acquiring Midwest Air Group, Inc. The acquisition closed on January 31, 2008 and Northwestcontributed $213 million for a minority ownership interest in Midwest Air Partners, LLC. Northwest is a passive investor in MidwestAir Partners, LLC and will not take an active role in its management. Northwest will report its portion of the profits and lossesassociated with its investment in the Midwest Air Partners, LLC on the Other Income line in its Consolidated Statements ofOperations.

80


Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURE

None.

Item 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures —As of December 31, 2007, management performed an evaluation underthe supervision and with the participation of the Company’s President and Chief Executive Officer and Executive Vice President andChief Financial Officer of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Basedon this evaluation, the Company’s President and Chief Executive Officer and Executive Vice President and Chief Financial Officerconcluded that the Company’s disclosure controls and procedures are effective in alerting them in a timely manner to materialinformation required to be disclosed in the Company’s periodic reports filed with the SEC. Management’s Report on Internal Control Over Financial Reporting — The Company’s management is responsible forestablishing and maintaining adequate internal control over the Company’s financial reporting. The Company’s internal controlsystem is designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparationof the Company’s financial statements in accordance with generally accepted accounting principles. Management performed anevaluation under the supervision and with the participation of the President and Chief Executive Officer and Executive Vice Presidentand Chief Financial Officer of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007.In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission in Internal Control-Integrated Framework. Based on this evaluation and those criteria, the Company’s managementconcluded that the Company’s internal control over financial reporting as of December 31, 2007 was effective. The Company’sindependent registered public accounting firm has issued an attestation report on the Company’s internal control over financialreporting. This report appears on page 82.

Changes in Internal Control —There have been no significant changes in the Company’s internal controls or in other factorsthat could significantly affect those controls subsequent to the date of their most recent evaluation.

81


Report of Independent Registered Public Accounting Firm

The Board of Directors and StockholdersNorthwest Airlines Corporation We have audited Northwest Airlines Corporation’s internal control over financial reporting as of December 31, 2007, based on criteriaestablished in Internal Control— Integrated Frameworkissued by the Committee of Sponsoring Organizations of the TreadwayCommission (the COSO criteria). Northwest Airlines Corporation’s management is responsible for maintaining effective internalcontrol over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in theaccompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion onNorthwest Airlines Corporation’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control overfinancial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control overfinancial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness ofinternal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accountingprinciples. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to themaintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effecton the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projectionsof any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes inconditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, Northwest Airlines Corporation maintained, in all material respects, effective internal control over financial reportingas of December 31, 2007, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), theconsolidated balance sheets of Northwest Airlines Corporation as of December 31, 2007 (Successor) and 2006 (Predecessor), and therelated consolidated statements of operations, common stockholders’ equity (deficit), and cash flows for the seven months endedDecember 31, 2007 (Successor), the five-month period ended May 31, 2007 (Predecessor), and for each of the two years in the periodended December 31, 2006 (Predecessor). Our report dated February 28, 2008, expressed an unqualified opinion.

Minneapolis, MinnesotaFebruary 28, 2008

82


Item 9B. OTHER INFORMATION None.

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information required by this item is set forth under the headings “General Information— Section 16(a) Beneficial OwnershipReporting Compliance”, “Information about our Board of Directors”, and “Item 1—Election of Directors—Information ConcerningDirector—Nominees” in our Proxy Statement to be filed with the Commission in connection with our 2008 Annual Meeting ofStockholders (“Proxy Statement”), and is incorporated by reference. Pursuant to instruction 3 to paragraph (b) of Item 401 ofRegistration S-K, certain information about our executive officers is contained in Part I of this report under the caption “ExecutiveOfficers of the Registrant”.

Item 11. EXECUTIVE COMPENSATION

Information required by this item is set forth under the headings “Information about our Board of Directors—Compensation ofDirectors,” “Information about our Board of Directors—Compensation Committee Interlocks and Insider Participation” and“Executive Compensation” in our Proxy Statement and is incorporated by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERS

Information required by this item is set forth under the headings “Beneficial Ownership of Securities” and “Equity CompensationPlan Information” in our Proxy Statement and is incorporated by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Information required by this item is set forth under the headings “Information about our Board of Directors—CompensationCommittee Interlocks and Insider Participation” and “Information about our Board of Directors—Related Party Transactions” in ourProxy Statement and is incorporated by reference.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Information required by this item is set forth under the headings “Audit and Non-Audit Fees” and “Audit CommitteePre-Approval Policy” in our Proxy Statement and is incorporated by reference.

83


PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

15 (a)(1) Financial Statements. The following is an index of the financial statements, related notes, independent auditor’s reportand supplementary data that are included in this Report.

Page

Consolidated Balance Sheets—December 31, 2007 and December 31, 2006 42-43 Consolidated Statements of Operations—For the seven months ended December 31, 2007, the period fromJanuary 1 to May 31, 2007, and for the years ended December 31, 2006 and 2005 44 Consolidated Statements of Cash Flows— For the seven months ended December 31, 2007, the period fromJanuary 1 to May 31, 2007, and for the years ended December 31, 2006 and 2005 45 Consolidated Statements of Common Stockholders’ Equity (Deficit)—For the seven months ended December31, 2007, the period from January 1 to May 31, 2007, and for the years ended December 31, 2006 and 2005 46 Notes to Consolidated Financial Statements 47

15(a)(2) Financial Statement Schedules. The following is a list of the financial schedules that are included in this Report. Schedules not included have been omitted because they are not required or because the information is included in the consolidatedfinancial statements or notes thereto.

Schedule II-Valuation of Qualifying Accounts and Reserves—For the seven months ended December 31, 2007,the period from January 1 to May 31, 2007, and for the years ended December 31, 2006 and 2005 S-1

15(a)(3) Exhibits. The following is an index of the exhibits to this Report. Nothing contained in this Report shall constitute anassumption by NWA Corp. or Northwest (as applicable) of any of these agreements.

3.1

Amended and Restated Certificate of Incorporation of Northwest Airlines Corporation (filed as Exhibit 3.1 toNWA Corp.’s Registration Statement on Form 8-A filed on May 18, 2007 and incorporated herein by reference).

3.2

Amended and Restated Bylaws of Northwest Airlines Corporation (filed as Exhibit 3.2 to NWA Corp.’sRegistration Statement on Form 8-A filed on May 18, 2007 and incorporated herein by reference).

3.3

Restated Certificate of Incorporation of Northwest Airlines, Inc. (filed as Exhibit 3.3 to Northwest’s RegistrationStatement on Form S-3, File No. 33-74772, and incorporated herein by reference).

3.4

Amended and Restated Bylaws of Northwest Airlines, Inc. (filed as Exhibit 3.4 to NWA Corp.’s Annual Report onForm 10-K for the year ended December 31, 2004 and incorporated herein by reference).

4.1

Rights Agreement dated as of May 25, 2007 by and between NWA Corp. and Computershare Trust Company,N.A., as Rights Agent (filed as Exhibit 1 to NWA Corp.’s Registration Statement on Form 8-A filed on May 30,2007 and incorporated herein by reference).

4.2

The registrant hereby agrees to furnish to the Commission, upon request, copies of certain instruments defining therights of holders of long-term debt of the kind described in Item 601 (b) (4) of Regulation S-K.

10.1

Standstill Agreement dated as of November 15, 2000 among Continental Airlines, Inc., Northwest AirlinesCorporation, Northwest Airlines Holdings Corporation and Northwest Airlines, Inc. (filed as Exhibit 10.1 to NWACorp.’s Annual Report on Form 10-K for the year ended December 31, 2004 and incorporated herein byreference).

10.2

Amended and Restated Standstill Agreement dated May 1, 1998 between Koninklijke Luchtvaart MaatschappijN.V. and Northwest Airlines Corporation (filed as Exhibit 10.2 to NWA Corp.’s Annual Report on Form 10-K for


the year ended December 31, 2003 and incorporated herein by reference). 10.3

Airport Use and Lease Agreement dated as of June 1, 2005 between Wayne County Airport Authority andNorthwest Airlines, Inc. (filed as Exhibit 10.3 to NWA Corp.’s Annual Report on Form 10-K for the year endedDecember 31, 2005 and incorporated herein by reference).

10.4

Airline Operating Agreement and Terminal Building Lease Minneapolis-St. Paul International Airport dated as ofJanuary 1, 1999 between the Metropolitan Airports Commission and Northwest Airlines, Inc. (filed as Exhibit 10.4to NWA Corp.’s Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated herein byreference).

10.5

Amendment to Airline Operating Agreement and Terminal Building Lease Minneapolis-St. Paul InternationalAirport dated as of March 29, 2002 between the Metropolitan Airports Commission and Northwest Airlines, Inc.

10.6

Second Amendment to Airline Operating Agreement and Terminal Building Lease Minneapolis-St. PaulInternational Airport dated as of November 15, 2004 between the Metropolitan Airports Commission andNorthwest Airlines, Inc.

10.7

Third Amendment to Airline Operating Agreement and Terminal Building Lease Minneapolis St. PaulInternational Airport dated as of May 9, 2007 by and between the Metropolitan Airports Commission andNorthwest Airlines, Inc.

10.8

A330 Financing Letter Agreement No. 1 dated as of December 21, 2000 between Northwest Airlines, Inc. andAVSA S.A.R.L. (filed as Exhibit 10.19 to NWA Corp.’s Annual Report on Form 10-K for the year endedDecember 31, 2004 and incorporated herein by reference; the Commission has granted confidential treatment forcertain portions of this document).

10.9

Amendment No. 1 to the A330 Financing Letter Agreement No. 1 dated as of December 20, 2002 betweenNorthwest Airlines, Inc. and AVSA S.A.R.L. (filed as Exhibit 10.20 to NWA Corp.’s Annual Report on Form10-K for the year ended December 31, 2004 and incorporated herein by reference; the Commission has grantedconfidential treatment for certain portions of this document).

10.10

Amendment No. 2 to the A330 Financing Letter Agreement No. 1 dated May 26, 2004, between NorthwestAirlines, Inc. and AVSA S.A.R.L. (filed as Exhibit 10.21 to NWA Corp.’s Annual Report on Form 10-K for theyear ended December 31, 2004 and incorporated herein by reference; the Commission has granted confidentialtreatment for certain portions of this document).

10.11

New A330 Financing Letter Agreement No. 1 dated as of January 21, 2005 between Northwest Airlines, Inc. andAVSA S.A.R.L. (filed as Exhibit 10.22 to NWA Corp.’s Annual Report on Form 10-K for the year endedDecember 31, 2004 and incorporated herein by reference; the Commission has granted confidential treatment forcertain portions of this document).

10.12

Form of Credit Agreement to be entered into pursuant to Exhibits 10.10 and 10.13 (filed as Exhibit 10.23 to NWACorp.’s Annual Report on Form 10-K for the year ended December 31, 2004 and incorporated herein by reference;the Commission has granted confidential treatment for certain portions of this document).

10.13

Form of Mortgage to be entered into pursuant to Exhibits 10.10 and 10.13 (filed as Exhibit 10.24 to NWA Corp.’sAnnual Report on Form 10-K for the year ended December 31, 2004 and incorporated herein by reference; theCommission has granted confidential treatment for certain portions of this document).

10.14

A330 Financing Letter Agreement dated as of January 24, 2006 between Northwest Airlines, Inc. and AVSA,S.A.R.L. (filed as Exhibit 10.3 to NWA Corp.’s Quarterly Report on Form 10-Q for the quarter ended March 31,2006 and incorporated herein by reference; the Commission has granted confidential treatment for certain portionsof this document).

10.15

Form of Credit Agreement to be entered into pursuant to Exhibit 10.16 by Northwest Airlines, Inc. and AirbusFinancial Services (filed as Exhibit 10.4 to NWA Corp.’s Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2006 and incorporated herein by reference; the Commission has granted confidential treatment forcertain portions of this document).

10.16

Purchase Agreement No. 2924 dated May 5, 2005 between The Boeing Company and Northwest Airlines, Inc.(filed as Exhibit 10.1 to NWA Corp.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 andincorporated herein by reference; the Commission has granted confidential treatment for certain portions of thisdocument).

10.17

Super Priority Debtor in Possession and Exit Credit and Guarantee Agreement dated as of August 21, 2006 amongNorthwest Airlines Corporation, Northwest Airlines Holdings Corporation, NWA Inc., Northwest Airlines, Inc.


and various lenders and agents (filed as Exhibit 10.1 to NWA Corp.’s Quarterly Report on Form 10-Q for thequarter ended September 30, 2006 and incorporated herein by reference).

10.18

First Amendment dated as of March 9, 2007 to the Super Priority Debtor in Possession and Exit Credit andGuarantee Agreement dated as of August 21, 2006 among Northwest Airlines Corporation, Northwest AirlinesHoldings Corporation, NWA Inc., Northwest Airlines, Inc. and various lenders and agents (filed as Exhibit 10.1 toNWA Corp.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 and incorporated hereinby reference).

10.19

Route Security Agreement dated as of August 21, 2006 between Northwest Airlines, Inc. and Citicorp USA, Inc.,as Collateral Agent (filed as Exhibit 10.2 to NWA Corp.’s Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2006 and incorporated herein by reference).

10.20

Equity Commitment Agreement dated as of February 12, 2007 among Northwest Airlines Corporation, NorthwestAirlines, Inc. and J.P. Morgan Securities Inc. (filed as Exhibit 10.2 to NWA Corp.’s Quarterly Report on Form10-Q for the quarter ended September 30, 2007 and incorporated herein by reference).

*10.21

Description of Compensation for Non-Employee Directors of Northwest Airlines Corporation (filed as Exhibit10.1 to NWA Corp.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 and incorporated hereinby reference).

*10.22

Form of Indemnity Agreement entered into by NWA Corp. with each member of the Board of Directors of NWACorp.

*10.23

Management Compensation Agreement dated as of September 14, 2005 between Northwest Airlines, Inc. andDouglas M. Steenland (filed as Exhibit 10.1 to NWA Corp.’s Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2005 and incorporated herein by reference).

*10.24

Management Compensation Agreement dated as of January 14, 2002 between Northwest Airlines, Inc. and J.Timothy Griffin (filed as Exhibit 10.23 to NWA Corp.’s Annual Report on Form 10-K for the year endedDecember 31, 2006 and incorporated herein by reference).

*10.25

Management Compensation Agreement dated as of May 2, 2005 between Northwest Airlines, Inc. and Neal S.Cohen (filed as Exhibit 10.3 to NWA Corp.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005and incorporated herein by reference).

*10.26

Management Compensation Agreement dated as of April 17, 2002 between Northwest Airlines, Inc. and AndrewC. Roberts (filed as Exhibit 10.30 to NWA Corp.’s Annual Report on Form 10-K for the year ended December 31,2004 and incorporated herein by reference).

*10.27

Northwest Airlines, Inc. Key Employee Annual Cash Incentive Program (filed as Exhibit 10.42 to the registrationstatement on Form S-1, File No. 33-74210, and incorporated herein by reference).

*10.28

Northwest Airlines, Inc. Excess Pension Plan for Salaried Employees (2001 Restatement) (filed as Exhibit 10.28 toNWA Corp.’s Annual Report on Form 10-K for the year ended December 31, 2006 and incorporated herein byreference).

*10.29

First Amendment of Northwest Airlines Excess Pension Plan for Salaried Employees (2001 Restatement) (filed asExhibit 10.3 to NWA Corp.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 andincorporated herein by reference).

*10.30

Northwest Airlines, Inc. Supplemental Executive Retirement Plan (2001 Restatement) (filed as Exhibit 10.30 toNWA Corp.’s Annual Report on Form 10-K for the year ended December 31, 2006 and incorporated herein byreference).

*10.31

First Amendment of Northwest Airlines Supplemental Executive Retirement Plan (2001 Restatement) (filed asExhibit 10.31 to NWA Corp.’s Annual Report on Form 10-K for the year ended December 31, 2006 andincorporated herein by reference).

*10.32

Second Amendment of Northwest Airlines Supplemental Executive Retirement Plan (2001 Restatement) (filed asExhibit 10.32 to NWA Corp.’s Annual Report on Form 10-K for the year ended December 31, 2006 andincorporated herein by reference).

*10.33

Ancillary Agreement to the Northwest Airlines, Inc. Supplemental Executive Retirement Plan dated as ofNovember 7, 2002 between Northwest Airlines, Inc. and Andrew C. Roberts (filed as Exhibit 10.35 to NWACorp.’s Annual Report on Form 10-K for the year ended December 31, 2004 and incorporated herein byreference).


*10.34

Northwest Airlines Excess 401(k) Cash Payments Program (filed as Exhibit 10.1 to Amendment No. 2 to NWACorp.’s Annual Report on Form 10-K for the year ended December 31, 2006 and incorporated herein byreference).

*10.35

Northwest Airlines Corporation E-Commerce Incentive Compensation Program (as amended and restated),including form of Award Agreement (filed as Exhibit 10.4 to NWA Corp.’s Quarterly Report on Form 10-Q forthe quarter ended September 30, 2004 and incorporated herein by reference).

*10.36

Northwest Airlines, Inc. 2003 Long-Term Cash Incentive Plan, including form of Award Agreement (filed asExhibit 10.41 to NWA Corp.’s Annual Report on Form 10-K for the year ended December 31, 2003 andincorporated herein by reference).

*10.37

Ancillary Agreement to the Northwest Airlines, Inc. Supplemental Executive Retirement Plan dated as of April 29,2005 between Northwest Airlines, Inc. and Neal S. Cohen (filed as Exhibit 10.48 to NWA Corp.’s Annual Reporton Form 10-K for the year ended December 31, 2005 and incorporated herein by reference).

*10.38

2007 Stock Incentive Plan (filed as Exhibit 99.2 to NWA Corp.’s Current Report on Form 8-K filed on May 29,2007 and incorporated herein by reference).

*10.39

Form of Award Agreement for Restricted Stock Units (Settled in Stock) Granted to Employees under theNorthwest Airlines Corporation 2007 Stock Incentive Plan (filed as Exhibit 99.3 to NWA Corp.’s Current Reporton Form 8-K filed on May 29, 2007 and incorporated herein by reference).

*10.40

Form of Award Agreement for Restricted Stock Units (Settled in Cash) Granted to Employees under theNorthwest Airlines Corporation 2007 Stock Incentive Plan (filed as Exhibit 99.4 to NWA Corp.’s Current Reporton Form 8-K filed on May 29, 2007 and incorporated herein by reference).

*10.41

Form of Award Agreement for Non-Qualified Stock Options Granted to Employees under the Northwest AirlinesCorporation 2007 Stock Incentive Plan (filed as Exhibit 99.5 to NWA Corp.’s Current Report on Form 8-K filedon May 29, 2007 and incorporated herein by reference).

*10.42

Form of Award Agreement for Stock Appreciation Rights Granted to Employees under the Northwest AirlinesCorporation 2007 Stock Incentive Plan (filed as Exhibit 99.6 to NWA Corp.’s Current Report on Form 8-K filedon May 29, 2007 and incorporated herein by reference).

*10.43

Amendment No. 1 to the Northwest Airlines Corporation 2007 Stock Incentive Plan (filed as Exhibit 10.2 to NWACorp.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 and incorporated herein by reference).

*10.44

Form of Award Agreement for Restricted Stock Units Granted to Directors under the Northwest AirlinesCorporation 2007 Stock Incentive Plan (filed as Exhibit 10.3 to NWA Corp.’s Quarterly Report on Form 10-Q forthe quarter ended June 30, 2007 and incorporated herein by reference).

*10.45

Form of Award Agreement for Non-Qualified Stock Options Granted to Directors under the Northwest AirlinesCorporation 2007 Stock Incentive Plan (filed as Exhibit 10.4 to NWA Corp.’s Quarterly Report on Form 10-Q forthe quarter ended June 30, 2007 and incorporated herein by reference).

12.1

Computation of Ratio of Earnings to Fixed Charges.

12.2

Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Requirements.

21.1

List of Subsidiaries.

23.1

Consent of Ernst & Young LLP.

24.1

Powers of Attorney (included in signature page).

31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Section 1350 Certification of Chief Executive Officer.

32.2

Section 1350 Certification of Chief Financial Officer.

* Compensatory plans in which directors or executive officers of NWA Corp. or Northwest participate.


84


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto duly authorized.


Dated: February 29, 2008 By /s/ ANNA M. SCHAEFER

Anna M. Schaefer

Vice President - Finance and Chief Accounting Officer (principal accounting officer)

Each of the undersigned directors and officers of Northwest Airlines Corporation whose signature appears below herebyconstitutes and appoints Douglas M. Steenland, David M. Davis and Anna M. Schaefer, and each of them individually, his or her trueand lawful attorneys with full power of substitution and resubstitution, for such individual and in such individual’s name, place andstead, in any and all capacities, to act on, sign and file with the Securities and Exchange Commission any and all amendments to thisreport together with all schedules and exhibits thereto and to take any and all actions which may be necessary or appropriate inconnection therewith, and each such individual hereby approves, ratifies and confirms all that such agents, proxies andattorneys-in-fact, any of them or any of his or their substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on the 29th day ofFebruary 2008 by the following persons on behalf of the registrant and in the capacities indicated.

/s/ DOUGLAS M. STEENLAND

/s/ MICKEY FORET

Douglas M. Steenland

Mickey Foret

President and Chief Executive

Director

Officer (principal executive officer)

and Director

/s/ DAVID M. DAVIS

/s/ ROBERT L. FRIEDMAN

David M. Davis

Robert L. Friedman

Executive Vice President & Chief

Director

Financial Officer (principal financial officer)

/s/ ANNA M. SCHAEFER

/s/ DORIS KEARNS GOODWIN

Anna M. Schaefer

Doris Kearns Goodwin

Vice President-Finance and

Director

Chief Accounting Officer (principal

accounting officer)

/s/ ROY J. BOSTOCK

/s/ JEFFREY G. KATZ

Roy J. Bostock

Jeffrey G. Katz

Chairman of the Board

Director

/s/ DAVID BRANDON

/s/ JAMES POSTL

David Brandon

James Postl

Director

Director

/s/ MIKE DURHAM

/s/ RODNEY SLATER

Mike Durham

Rodney Slater

Director

Director

/s/ JOHN M. ENGLER

/s/ WILLIAM S. ZOLLER

John M. Engler

William S. Zoller

Director

Director

85



SCHEDULE II — VALUATION OF QUALIFYING ACCOUNTS AND RESERVES

(In millions)

Col. A

Col. B

Col. C

Col. D

Col. E

Additions

Charged to

Balance at

Charged to

Other

Balance at

Beginning

Costs and

Accounts

Deductions

End

Description

of Period

Expenses

— Describe

— Describe

of Period

Period from June 1, 2007 to December 31, 2007 - Successor Company

Allowances deducted from asset accounts:

Allowance for doubtful accounts

$ 6

$ 5

$ —

$ 7 (1) $ 4

Accumulated allowance for depreciation offlight equipment spare parts

—

10

1 (2) 1 (3) 10

Period from January 1, 2007 to May 31, 2007 - Predecessor Company



$ 14

$ 3

$ —

$ 11 (1) $ 6


255

2

3 (2) 260 (3) —

Year Ended December 31, 2006 - Predecessor Company



$ 12

$ 6

$ —

$ 4 (1) $ 14


243

11

4 (2) 3 (3) 255

Year Ended December 31, 2005 - Predecessor Company



$ 12

$ 10

$ —

$ 10 (1) $ 12


240

9

4 (2) 10 (3) 243

(1) Uncollectible accounts written off, net of recoveries(2) Interaccount transfers(3) Adjustments as required for the adoption of fresh-start reporting on June 1, 2007, dispositions and write-offs

S-1


Exhibit 10.5

AMENDMENT TO

AIRLINE OPERATING AGREEMENT AND TERMINAL BUILDING LEASE

MINNEAPOLIS-ST. PAUL INTERNATIONAL AIRPORT

This Amendment, effective the 29th day of March, 2002, is between the Metropolitan Airports Commission (“MAC”), a publiccorporation under the laws of the State of Minnesota, and Northwest Airlines, Inc. (“Northwest Airlines” or “AIRLINE”), acorporation organized and existing under the laws of Minnesota and authorized to do business in the State of Minnesota. WHEREAS, MAC and Northwest Airlines entered into an Airline Operating Agreement andTerminal Building Lease (“Lease”)effective January 1,1999; and WHEREAS, the parties wish to amend that Lease to incorporate certain terms of an agreement reached and approved by MAC onJune 18, 2001. NOW THEREFORE, in consideration of the foregoing, the parties agree to amend the Leaseas follows: 1. TERM

“Article ll-TERM” is hereby replaced with the following language: II. TERM

The term of this Agreement shall begin as of the effective date of this Agreementand end December 31, 2015(hereinafter referred to as the “Term”), and the rents, fees, and charges established in this Agreement shall apply to saidTerm.

2. GATES

a. Article IV. H. 2. and Article IV. H. 2. a. regarding SHORT TERM GATES are hereby amended by striking the clauses“presently not leasing a gate directly form MAC or not currently providing air service to the Airport.” b. Article XIII-SUPPLEMENTAL AGREEMENTS” is hereby amended by adding the following language: F. CONCOURSES A, B, C & D

1. CONCOURSES A, B & C

MAC agrees to lease all gates currently under construction on Concourse C as ofJune 18, 2001 (“Phase 2 Gates”) toNorthwest Airlines. MAC agrees to lease allgates on Concourses A and B to Northwest Airlines. Northwest Airlines isobligatedto accommodate other Airlines’ regional propeller aircraft operations on Concourses

1


A and B on a per-turn basis at a reasonable charge not to exceed 115% of the rates and charges being paid by NorthwestAirlines. Such charges shall not require payment for equipment or facilities (e.g. jet bridges) not used by the Airlinebeing accommodated. Such obligation shall not apply if two gates in the aggregate on Concourses A and B are fullyutilized to accommodate regional Airline propeller aircraft activity. If Northwest Airlines fails in this obligation, MACshall have the right to cancel Northwest Airlines’ lease for up to two (2) gates (B14 and/or B16).

2. CONCOURSE D - CONTINGENCY GATES

In exchange for the lease rights set forth in XIII.F.1 above, as soon as Northwest Airlines has received beneficialoccupancy of the Phase 2 Gates. Gates D3, D4 and D5, and associated operations space, will be designated as“Contingency Gates.” MAC may cancel Northwest Airlines’ lease of a Contingency Gate on 90 days advance writtennotice and lease that space to a new entrant Airline, provided that MAC must use its best efforts to convince that Airlineto use existing available facilities including the Humphrey Terminal or other Short Term Gates at the LindberghTerminal, before canceling a Contingency Gate lease.

3. CONTINGENCY FUND

“Article VII-CAPITAL EXPENDITURES” is hereby amended by adding the following language: E. CONTINGENCY FUND AIRLINE agrees that MAC may establish a Contingency Fund in its capital improvement program of $50 million per year (in2001 dollars) for miscellaneous Capital Projects as determined by MAC. Notwithstanding any other provision of this Agreement,the Contingency Fund may include at MAC’s discretion projects to be included in the Airfield Cost Center, and this Agreementshall be deemed to be AIRLINE’S approval (if required) of any such Capital Project which is paid for in its entirety from theContingency Fund without any requirement for Majority-In-Interest review. This Contingency Fund will begin on January 1,2010 and expire on December 31, 2015

4. ADDITIONAL TERMS

A. MAC agrees to offer this Lease Amendment to any Airline agreeing to these amendedterms.

B. Northwest Airlines and MAC agree to cooperatively establish a joint industry/citizen

group to explore programs and procedures working toward the goal of mitigation theimpacts caused by aircraft noise.

Except as herein amended, all terms, covenants and agreements in the Lease shall remain in full force and effect.

2


IN WITNESS WHEREOF, the parties have signed and executed this Amendment in duplicateon the dates listed below.

Date: 3-29-02

METROPOLITAN AIRPORTS COMMISSION

By: /s/ Jeffrey Hamiel

Jeffrey Hamiel

Executive Director

Date: 3-29-02

Northwest Airlines, Inc.

By: /s/ James M. Greenwald

STATE OF MINNESOTA )

) ss.COUNTY OF DAKOTA ) This instrument was acknowledged before me on the 29th day of Mar, 2002, by Jeffrey Hamiel, Executive Director of theMetropolitan Airports Commission.

Eunice Burnham

Notary public


) ss.COUNTY OF DAKOTA ) This instrument was acknowledged before me on the 29th day of Mar, 2002, by on behalf of AIRLINE.

Eunice Burnham

Notary public 3


Exhibit 10.6

SECOND AMENDMENT TOAIRLINE OPERATING AGREEMENT AND TERMINAL BUILDING LEASE


This Amendment, effective the 15th day of November 2004, is between the Metropolitan Airports Commission (“MAC”), a publiccorporation under the laws of the State of Minnesota, and Northwest Airlines, Inc. (“Northwest”), a corporation organized andexisting under the laws of Minnesota and authorized to do business in the State of Minnesota. WHEREAS, MAC and Northwest entered into an Airline Operating Agreement and Terminal Building Lease(“Lease”) effectiveJanuary 1,1999; and WHEREAS, the parties wish to amend the Lease to incorporate certain terms of an agreement reached andapproved by MAC onAugust 13, 2003 allowing Northwest to build-out the void in the floor space betweenthe G Concourse and the ticketing area forrestaurant development purposes. NOW THEREFORE, in consideration of the foregoing, the parties agree to amend the Lease as follows: 1. All references to the Gold Concourse shall be changed to the G Concourse throughout the Lease. 2. Northwest proposes to build-out the void in the floor space (“infill space”) between the G Concourse and the ticketing

area in the south end of the Lindbergh Terminal as currently shown on Exhibit E.l.

A. The infill space shall be used to construct a Wolfgang Puck Express restaurant and bar, subject to MAC’s consent tothe amendment to the sublease between Northwest and HostInternational, Inc. as provided for in the Lease. Allproject costs are the sole responsibility of Northwest. If for some reason final agreement is not reached with Hostfor this concept,Northwest shall retain the right to select a replacement concept subject to the same terms andconditions contained herein.

B. The infill space will be added to the G Concourse leased space effective upon the date of beneficial occupancy of

the new concept. C. In exchange for MAC’s approval, Northwest agrees not to develop the F-G Corridor for aslong as the infill space is

available to Northwest for use as a concession. D. If a project mutually agreed to by MAC and Northwest requires removal of the concession, all removal costs will

be paid for by Northwest. MAC is under no obligation to provideadditional or new space for a replacement facility. E. The project will be built in accordance with MAC’S Design and Construction Standards. The project must comply

with the applicable building codes and building permits will be required. The following conditions apply with respect to construction of the project:

1. The existing ceiling height in the baggage claim area shall be maintained in the infillspace. 2. Structural support of the infill area will only be allowed from the existing structure. No new structural

supporting columns will be allowed down to and/or through the baggage claim level to the valet garagelevel below. No other structures, walls, shafts, or chases will be allowed to penetrate into the baggageclaim level.

3. The existing skylight above the infill space shall remain.

1


4. The existing escalator and stairs between the baggage claim and ticketing levelsshall remain. 5. It has been agreed that to maintain the visual connection between the ticket lobby and the G Concourse

and to address security concerns, a permanent glass wall,approved by the Transportation SecurityAdministration, will be constructed. It has been further agreed that based upon change orderdocumentation (copies of which have been provided to MAC), MAC will contribute $151,745.00 to theconstructioncost of this glass wall. Upon completion of that portion of work, Northwest willpresentsupporting contractor invoice(s) to MAC.

6. All utilities (HVAC, plumbing, electrical) serving the concession in the infill space shall be served from

the G Concourse utilities that are provided and maintained by Northwest. Any additional utilities requiredshall be serviced and maintained by Northwest. Utility penetrations directly below the infill space in thebaggage claimarea will not be allowed.

7. The existing FIDS and currency exchange booth must be incorporated into the overall design in such

manner which does not create a congestion or traffic problem at the FIS/G Concourse intersection or withthe moving walk.

8. Northwest must ensure that the Spirit of St. Louis airplane currently hanging overthe space will be

accommodated for public viewing in its current general locationand that MAC or its designees will beprovided reasonable access for future cleaning and maintenance purposes.

3. Replace Exhibits C page 4 of 26 and E page 1 of 3 of the Lease with the new Exhibits attached hereto. 4. Except as herein amended, all terms, covenants and agreements in the Lease shall remain in full force and effect. IN WITNESS WHEREOF, the parties have signed and executed this Amendment in duplicate on the dateslisted below.

Date: 1-28-05

METROPOLITAN AIRPORTS COMMISSION

/s/Gordon P. Wennerstrom

Gordon P. Wennerstrom

Director, Commercial Management & Airline Affairs

Date:

NORTHWEST AIRLINES, INC.

/s/James M. Greenwald

James M. Greenwald

Vice President, Facilities and Airport Affairs 2



) ss.COUNTY OF HENNIPEN )

This instrument was acknowledged before me on the 28 day of January, 2004, by Gordon P. Wennerstrom, Director, CommercialManagement & Airline Affairs on behalf of the Metropolitan Airports Commission.

Glennis Pilgram

Notary Public


) ss.COUNTY OF ) This instrument was acknowledged before me on the day of , 2004, by James M. Greenwald, Vice President - Facilitiesand Airport Affairs, on behalf of Northwest Airlines, Inc.

Notary Public

3


Exhibit 10.7

AMENDED AND RESTATED THIRD AMENDMENT TO



This Amended and Restated Third Amendment to Airline Operating Agreement and Terminal Building Lease (the “Amended andRestated Third Amendment”) is entered into as of the 28th day of December 2007, by and between the Metropolitan AirportsCommission, a public corporation under the laws of the State of Minnesota (hereinafter sometimes referred to as “MAC” or“Commission”), and Northwest Airlines, Inc., a corporation organized and existing under the laws of Minnesota and authorized to dobusiness in the State of Minnesota (hereinafter referred to as “AIRLINE”). WHEREAS, MAC and AIRLINE entered into an Airline Operating Agreement and Terminal Building Lease effective January 1,1999 and amended such agreement as shown on Exhibit 1 (collectively, “Lease”). WHEREAS, MAC and AIRLINE entered into the Third Amendment to Airline Operating Agreement and Terminal Building Leasedated May 9, 2007 and it has become necessary to modify certain provisions contained in such Third Amendment to conform ThirdAmendment with the form of the 2007A Amendment to the Airline Operating Agreement and Terminal Building Lease entered intobetween MAC and the other Signatory Airlines as set forth herein. WHEREAS, AIRLINE, NWA, Inc. (“NWA”), Northwest Aerospace Training Corporation (“NATCO)”; collectively with Airline andNWA, the “Northwest Entities”) and MAC are parties to a series of agreements and documents with respect to the Minneapolis-St.Paul Metropolitan Airports Commission General Obligation Revenue Refunding Bonds, Series 15 (all such agreements, guaranties,security documents and other documents shall be collectively referred to as the “GO 15 Documents”). WHEREAS, the Northwest Entities filed a petition under Chapter 11 of Title 11 of the United States Code on September 14, 2005,which case is pending in the United States Bankruptcy Court for the Southern District of New York in an administrativelyconsolidated case entitled In re Northwest Airlines Corporation et al., Case No. 05-17930(ALG) (“2005 Bankruptcy Case”). WHEREAS, as part of its reorganization in the 2005 Bankruptcy Case, AIRLINE and MAC negotiated a comprehensive resolution ofall lease and debt issues between them as set forth in a Memorandum of Understanding executed by AIRLINE on February 12, 2007and by MAC on February 19, 2007 (“MOU”). As part of such comprehensive agreement documented in the MOU, AIRLINErequested that, and MAC agreed to, make significant changes to the existing Airline Operating Agreement and Terminal BuildingLeases between the MAC and each Signatory Airline, including AIRLINE’s Lease, that would provide substantial reductions in ratesand charges payable by each Signatory Airline, including AIRLINE, and requiring that MAC share revenue generated from varioussources at the Airport with such airlines. WHEREAS, as part of such comprehensive agreement, MAC has agreed to amend the existing Airline Operating Agreement andTerminal Building Leases between the MAC and each Signatory Airline, including AIRLINE’s Lease on the terms and conditions setforth herein, provided that (i) each Signatory Airline shall be entitled to the reduction of rates and charges and the revenue sharing tobe provided by the MAC hereunder only to the extent that such airline remains in compliance with all of its obligations to the MAC,and (ii) in the case of AIRLINE, (a) the Northwest Entities agree that their plan of reorganization will provide that the NorthwestEntities will continue to fully perform all obligations under the GO 15 Documents with all such obligations remaining unimpaired, and(b) the GO 15 Documents shall be amended to, among other things, pledge the right of AIRLINE to receive revenue sharing proceedsto MAC as security for AIRLINE’S obligations under the GO 15 Documents.


WHEREAS, the Amendment evidenced hereby and the protections described above are an essential part of the comprehensiveresolution and are fundamental to the Agreement contained in the MOU. WHEREAS, in consideration for, among other things, the foregoing and at AIRLINE’S request, MAC is willing to allow the futureanticipated revenue sharing proceeds to be used to determine the AIRLINE’S compliance with its minimum collateral requirementsunder the GO 15 Documents. WHEREAS, AIRLINE hereby acknowledges and accepts that it is reasonable and non-discriminatory under the circumstances thatpursuant to the Amendment to Lease dated March 29, 2002, MAC may cancel AIRLINE’s Short Term Gates for any Airlineproposing to add additional air service and desiring to lease a gate directly from MAC, while the same Short Term Gate provisionapplicable to other Signatory Airlines provides MAC the ability to cancel the lease of a Short Term Gate only for if an Airlinepresently not leasing a gate directly from MAC or not currently providing air service to the airport is proposing to add additional airservice and desires to lease a gate directly from MAC. NOW THEREFORE, in consideration of the foregoing, the parties agree to amend the Lease as follows:

I. INCORPORATION OF AIRLINE OPERATING AGREEMENT AND TERMINALBUILDING LEASE

Except as set forth in this Amended and Restated Third Amendment, the Lease shall remain in full force and effect. In theevent of a conflict between this Amended and Restated Third Amendments and the Lease, the provisions of this Amendedand Restated Third Amendment shall control.

II. DEFINITIONS

All capitalized terms used in this Amended and Restated Third Amendment but not defined herein shall have the meaningsgiven them in the Lease. The following terms, as used herein and in the Lease, shall have the meanings set forth below and,to the extent any such term was defined in the Lease, the definition contained in the Lease shall be deleted and replaced withthe definition for such term set forth below: A. “2005 Bankruptcy Case” means that certain administratively consolidated case pending in the United States

Bankruptcy Court for the Southern District of New York entitled In re Northwest Airlines Corporation et al, CaseNo. 05-17930 (ALG) commenced pursuant to a petition filed by AIRLINE and its affiliates under Chapter 11 ofTitle 11 of the United States Code on September 14, 2005.

B. “Affiliated Airline” means an Airline other than Airline that (a) operates aircraft of 76 passenger seats or less at the

Airport and is party to a code share agreement with AIRLINE applicable to such Airline’s flights to and from theAirport, (b) has signed an Airline Operating Agreement and Terminal Building Lease similar to the form of thisAgreement, (c) is party to an Airline Services Agreement with AIRLINE and (d) has been designated in writing byAIRLINE as an “affiliate” of AIRLINE.

C. “Airline Rented Space” means the aggregate of that portion of Rentable Space under lease to all Signatory Airlines. D. “Airline Services Agreement” means any agreement between AIRLINE and any regional air carrier pursuant to

which such air carrier provides air transportation services for AIRLINE under AIRLINE’s designator code. E. “Amendment Effective Date” shall have the meaning ascribed to such term in Section XII of this Amended and

Restated Third Amendment. 2


F. “Annual Gross Revenue” means rent, concessions fees or similar charges actually received during any Fiscal Year

by MAC from Selected Concessions. Annual Gross Revenue shall not include sales taxes, utility fees, consortiumfees, key money, customer facilities charges or other similar “pass through” charges.

G. “Auto Rental Concessions” means all auto rental companies or other business organizations operating at either the

Lindbergh or Humphrey Terminals pursuant to concessions agreements with MAC. H. “Assumed Agreements” shall have the meaning given to the term in Section XII of this Amended and Restated

Third Amendment. I. “Debt Service” means the aggregate amount of principal and interest payments made by MAC that are due and

payable during the Fiscal Year on MAC financings including but not limited to all future and existing generalobligation revenue bonds, airport revenue bonds, refunding obligations, commercial paper (excluding the principalamount of commercial paper reissued during the Fiscal Year) and other debt instruments of the Commission andspecifically including, but not limited to, those obligations specifically included on Exhibit 2 attached hereto. Inaddition, debt service shall also include:

(i) amounts paid as prepayment of obligations, if such prepayment is deemed approved by a

Majority-In-Interest of Signatory Airlines pursuant to the provisions of Article VII.B. hereof, Or (ii) principal and interest in accordance with its original scheduled amortization for any prepayment made by

MAC which is not deemed approved by the Majority-In-Interest of Signatory Airlines in accordance with(i) above, until such time as the original principal amount of such prepaid obligation has been recovered byMAC.

J. “Deferred Revenue Sharing Amount” shall have the meaning given to the term in Section VIII.I.4 of this Amended

and Restated Third Amendment. K. “Flight” means a scheduled flight of jet aircraft with not less than 70 passenger seats. L. “Food and Beverage Concessions” means companies or other business organizations that sell consumable food or

beverages items, excluding vending operations, to the traveling public at the Lindbergh (excluding sales from the GConcourse) or Humphrey Terminals, pursuant to concessions agreements with MAC.

M. “GO13” means the Minneapolis-St. Paul Airports Commission Taxable General Obligation Revenue Bonds,

Series 13, outstanding from time to time. N. “GO15” means the Minneapolis-St. Paul Metropolitan Airports Commission Taxable General Obligation Revenue

Refunding Bonds, Series 15, outstanding from time to time. O. “Humphrey Terminal Repair and Replacement Surcharge” shall be equal to nine percent (9%) of the Repair and

Replacement Amount. This allocation shall be adjusted every five years based on increases to the cost center’s bookvalue.

P. “Headquarters” means the corporate office which constitutes (i) the principal office of AIRLINE or any assignee

holding substantially (i.e., ninety percent (90%) or more) all of the assets of AIRLINE from which its business isconducted, and (ii) the principal office of

3


AIRLINE’s or such assignee entity’s CEO, CFO and a majority of its other senior management team members.

Q. “Hub” means that AIRLINE and its regional Affiliated Airlines which are party to an Airline Services Agreement

with AIRLINE shall maintain at the Airport no less than an aggregate annual average of 227 daily departing Flightson which an aggregate annual average of at least thirty percent (30%) of Enplanements are passengers whose travelneither originates from nor terminates at the Airport.

R. “Lindbergh Terminal Repair and Replacement Surcharge” shall be equal to nineteen percent (19%) of the Repair

and Replacement Amount divided by Airline Rented Space. This allocation shall be adjusted every five years basedon increases to the cost center’s book value.

S. “Landing Fee Repair and Replacement Amount” shall be equal to sixty-eight percent (68%) of the Repair and


T. “Merchandise Concessions” means companies or other business organizations that sell retail or news products,

excluding automated vending items, to the traveling public at the Lindbergh (excluding sales from the G Concourse)or Humphrey Terminals, pursuant to concessions agreements with MAC.

U. “Net Revenues” has the meaning provided for in the Trust Indenture. V. “Repair and Replacement Amount” means a $15 million deposit for Fiscal Year 2006, and increased by three

percent (3%) per annum for each Fiscal Year thereafter compounded annually (i.e., $15.45 million in Fiscal Year2007, $15.91 million in Fiscal Year 2008, etc.) to a Repair and Replacement subaccount within the constructionfund to be expended for major maintenance and minor (less than $2 million) capital projects, except for automobileparking facilities and roadways.

W. “Selected Concessions” means Food and Beverage Concessions, Merchandise Concessions, and Auto Rental

Concessions. X. “Selected Concessions Revenues Escalation Factor” means the following annual percentage escalation factors

(compounded) to be applied to the dollar thresholds provided in Section VIII.I.1:

Year

Annual Escalation Factor

2006

Base Year

2007

1.77%2008

4.75%

2009

4.47%2010

4.46%

2011

4.20%2012

4.73%

2013

4.46%2014

4.47%

2015

4.46%2016

4.46%

2017

4.46%2018

4.47%

2019

4.47%2020

4.47%

4


Y. “Terminal Apron” and “Terminal Ramp” shall be interchangeable terms and both terms shall mean the airport

parking apron as shown on Exhibit D to the Lease, together with any additions and/or changes thereto. Z. “Terminal Apron Repair and Replacement Amount” shall be equal to four percent (4%) of the Repair and


III. TERM

Article II. “Term” of the Lease is hereby deleted in its entirety and replaced with the following: II. Term.

The term of this Agreement shall begin as of the Amendment Effective Date of this Agreement and endDecember 31, 2020 for all portions of the Premises, provided that the conditions for AIRLINE’s lease of the GConcourse during the period commencing on January 1, 2016 and ending December 31, 2020 shall be determined asset forth in Article II.A. below (hereinafter collectively referred to as the “Term”), and the rents, fees and othercharges established by this Agreement shall apply to said term.

In addition to the foregoing: A. The conditions on which MAC will lease the G Concourse to AIRLINE during the period commencing

January 1, 2016 and ending December 31, 2020 will be determined by the mutual agreement of the partiesat the time the 2020 Plan is incorporated into the Lease, recognizing that it is the objective of both partiesthat (i) MAC assume operational control of the G Concourse during such period while continuing to leaseto AIRLINE all gate, holdroom, ramp, office, support and operational spaces leased to AIRLINE on theAmendment Effective Date, and (ii) there shall be no substantive change in the net economic impact toeither party taking into consideration all revenue and costs associated with operation and maintenance ofthe G Concourse, including, but not limited to, concession areas, gates, holdrooms, ramp and support andoperations space.

B. AIRLINE shall not enter into any agreement that could affect the operation of the G Concourse after

December 31, 2015 without the prior written consent of MAC.

IV. USE OF THE INTERNATIONAL ARRIVALS FACILITY Article III.C “Use of the International Arrivals Facility” shall be deleted in its entirety and replaced with the following:

C. Use of the International Arrivals Facility

MAC will control prioritization and utilization of the IAF and associated gates for international arrivals by Airlinesproviding International Regularly Scheduled Airline Service and may develop prioritization procedures notinconsistent with the terms of this Agreement. The provisions in this Section C. shall continue throughDecember 31, 2020.

5


1. In order to use the International Arrivals Facility, AIRLINE must maintain its status as International

Regularly Scheduled Airline Service. AIRLINE shall provide MAC a detailed written certification for eachnumbered element on Exhibit H, upon MAC’s request. MAC retains the right to verify the status ofAIRLINE and determine whether AIRLINE qualifies as International Regularly Scheduled Airline Service.

2. Gates G1 through G10 and associated passenger loading bridges, ramp access and lobby and baggage

facilities on Concourse G currently leased by Northwest Airlines, Inc. (hereinafter referred to as“Northwest” or “Northwest Airlines”) shall be made available for access to the International ArrivalsFacility based on the following priority of use:

a. International Regularly Scheduled Airline Service as defined in Exhibit H. b. Northwest or a Northwest Affiliated Airline domestic arrivals and departures. c. Non-scheduled irregular or delayed international charter arrivals when the expected delay for the

flight to use the Humphrey Terminal facility will exceed 90 minutes and the use of an IAF gatewill not interfere with the scheduled use of that gate. Such interference shall be defined as theoverlap of the non-scheduled use with the scheduled use such that the scheduled flight will have tobe relocated to another concourse for its operation or will have to wait for a gate due to theunavailability of any gate. Use of an IAF gate by a non-scheduled flight is subject to Northwest’sapproval; such approval is not to be unreasonably withheld or delayed. Northwest shall designatean individual on site to give necessary approvals.

3. Northwest shall provide all Ground Handling at the IAF gates subject to either (i) air carrier self-handling

rights contained in AIP grant assurances, at rates that do not exceed those specified in the MutualAssistance Ground Service Agreement, or (ii) authorize the use of a third party ground handling companyto provide Ground Handling at the IAF gates upon a requesting airline executing the memorandum ofunderstanding included as Exhibit W. Northwest shall also provide reasonable access for air carriers todata and communications systems at gates G1-G10.

4. No Airline aircraft will remain on gates G1-G10 over two hours if a narrow-body or three hours if a

wide-body. Northwest will coordinate any moving of aircraft with MAC’s operations department, FAA andappropriate federal inspections agencies.

5. AIRLINE, if it self-handles, or Northwest, if it provides Ground Handling to AIRLINE, on gates G1-G10,

shall handle and dispose of all international waste on AIRLINE’s aircraft in accordance with therequirements of the United States Department of Agriculture.

6. Northwest shall be responsible for all maintenance, repair, and operation of MAC jet bridges provided by

MAC as part of the IAF. Northwest shall make the MAC jet bridges available for use by all users of theIAF without additional charge.

Exhibit W has been attached to this Amendment as Exhibit 7

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V. ACCOMMODATION OF OTHER AIRLINES

Article IV.E. “Accommodation of Other Airlines” of the Lease is hereby deleted in its entirety and replaced with thefollowing Article IV.E.:

1. Thirty (30) days in advance of each schedule change AIRLINE shall provide MAC with a copy of thepublished schedule and a gate plot showing all times when aircraft are scheduled to be utilizing eachPreferential Use gate, including aircraft type, projected arrival and departure times, and point of origin ordestination, including activities by subtenants or airlines being accommodated.

2. In furtherance of the public interest of having the Airport’s capacity fully and more effectively utilized, it is

recognized by AIRLINE and MAC that (i) AIRLINE shall be prohibited from subleasing any of itsPremises to another Airline without the prior written consent of MAC, which consent shall not beunreasonably withheld, delayed, or conditioned, however MAC shall not be required to approve anysublease if there is vacant space available from MAC and (ii) from time to time during the term of thisAgreement it may become necessary for the AIRLINE to accommodate another Airline within its Premisesor for MAC unilaterally to require AIRLINE to accommodate another Airline(s) within AIRLINE’sPremises as required for the following:

a. To comply with any applicable rule, regulation, order or statute of any governmental entity that

has jurisdiction over MAC, and to comply with federal grant assurances applicable to MAC. b. To implement a Capital Project at the Airport. c. To facilitate the providing of air services at the Airport by an Airline (“Requesting Airline”) when

no Airline serving the Airport is willing to accommodate the Requesting Airline’s operationalneeds or requirements for facilities at reasonable costs or on other reasonable terms.

d. To accommodate the irregular activity of another Airline (“Irregular Need”). e. To accommodate the Irregular Need of AIRLINE. To the extent possible, AIRLINE shall

accommodate its Irregular Need on its Preferential Use gate(s). When such activity may not beaccommodated on AIRLINE’S Preferential Use gate(s), AIRLINE shall seek accommodationfrom other Airlines on its own through coordination among such Airlines’ supervisors andmanagers. In the event accommodation cannot be found on another Airline’s premises, AIRLINEmay seek assistance from MAC. MAC’s options shall include assigning use of non-leased gatepremises or referring AIRLINE to MAC’s agent responsible for managing MAC’s remote parkinglocations. For an Irregular Need, MAC shall not be responsible for unilaterally accommodating anAirline on another Airline’s leased premises. AIRLINE will be responsible for payment of allapplicable fees and charges including, if applicable, appropriate FIS charges in connection withsuch accommodation.

f. To accommodate a flight that has declared an emergency and such flight shall have priority over

all other flight scheduling. 7


3. In responding to a request for facilities for either a Requesting Airline or to accommodate Irregular Need,

MAC shall first work with the Requesting Airline or Airline seeking accommodation of Irregular Need touse existing Common Use Space or unassigned space, if any is available.

4. When necessary, MAC shall make a determination as to whether any Airline has underutilized facilities or

capacity available. In making such determination MAC shall not act unreasonably. Such determinationsby MAC shall take into consideration the following:

a. The then existing utilization of AIRLINE’s Premises (including any requirements for spare gates

and accommodation of AIRLINE’s Affiliates) and any bona fide plan of AIRLINE or any otherAirline for the increased utilization of the AIRLINE’s Premises to be implemented within twelve(12) months thereafter (any non-public information provided by AIRLINE regarding planned orproposed routes, schedules or operations shall be treated as confidential by MAC to the maximumextent permitted by law).

b. The need for compatibility among the current schedules, including RON requirements, flight

times, operations, operating procedures and equipment of AIRLINE (and its Affiliate(s)) or anyother Airline and those of the Requesting Airline or the Airline seeking accommodation ofIrregular Need, as well as the need for labor harmony, facilities, resources, and other relevantfactors.

c. During irregular operations, AIRLINE’S scheduled operations will have priority over any

accommodated Airline on its Premises. d. Any flights scheduled on AIRLINE’s Preferential use gate(s) must vacate the gate at least 45

minutes before the next use by AIRLINE. e. The maximum gate occupancy by narrow body aircraft for a Requesting Airline or an Airline

seeking accommodation of Irregular Need shall be 45 minutes for an arrival, 45 minutes for adeparture, or 1 hour and 30 minutes for a combined turn.

f. The maximum scheduled gate occupancy by wide body aircraft for a Requesting Airline or an

Airline seeking accommodation of Irregular Need shall be 1 hour for an arrival, 1 hour for adeparture, or 2 hours for a combined turn.

g. Any aircraft occupying a gate longer than the above timeframes may be required to vacate the

gate to accommodate other operations. Should this occur, upon AIRLINE’s request MAC willnotify the Airline being accommodated as soon as MAC becomes aware of the requirement, but inany event no later than 15 minutes before the time that actual vacating is required. Failure tovacate shall result in the imposition of additional overtime fees by AIRLINE to the accommodatedAirline. If an Airline being accommodated does not vacate a gate as required, and AIRLINErequires the use of such gate, upon AIRLINE’s request MAC shall instruct Airline to remove itsaircraft to another location leased by the Airline or to a remote location as designated by MAC’sagent. If failure of the accommodated Airline to remove its aircraft results in AIRLINE requiringremote parking from MAC, MAC shall invoice the

8


accommodated Airline for any remote parking fees that would be charged to AIRLINE.

h. Before MAC accommodates a Requesting Airline within AIRLINE’s Premises, MAC must give

AIRLINE ten (10) days prior written notice of its intent. AIRLINE must accept accommodation ornotify MAC within ten (10) business days after AIRLINE’s receipt of such notice that it wishes tomeet with MAC to show cause why the accommodation should not be made.

5. The accommodated Airline shall be responsible for the payment of all applicable fees and charges for such

use, including but not limited to appropriate FIS charges and overtime fees. 6. In the event that any portion of AIRLINE’s Premises are used to accommodate another Airline or Irregular

Need:

a. AIRLINE shall be authorized to (i) charge such accommodated Airline a reasonableaccommodation fee and (ii) require from the accommodated Airline an indemnity and defenseundertaking, so long as such undertaking is not more favorable to AIRLINE than that whichAIRLINE provide to MAC.

b. Each accommodated Airline shall be responsible for (i) ensuring that its agents, employees, and

contractors are properly qualified prior to operating any and all equipment and (ii) are responsiblefor securing jetway doors upon completion of use.

c. AIRLINE shall not be required to indemnify and save harmless MAC, its employees or agents

with regard to any claim for damages or personal injury arising out of any accommodatedAirline’s use of AIRLINE’s premises, unless caused by the negligence of AIRLINE;

d. AIRLINE shall not be liable to any accommodated Airline or any of its agents, employees,

servants or invitees, for any damage to persons or property due to the condition or design or anydefect in the Premises which may exist or subsequently occur, and such accommodated Airline,with respect to it and its agents, employees, servants and invitees shall be deemed to haveexpressly assumed all risk and damage to persons and property, either proximate or remote, byreason of the present or future condition or use of AIRLINE’S Premises. Further, suchaccommodated Airline shall be deemed to have agreed to release, indemnify, hold harmless anddefend AIRLINE, the MAC, and their respective officers, directors, employees, agents, successorsand assigns, from and against any and all suits, claims, actions, damages, liabilities and expenses(including, without limitation, attorneys’ fees, costs and related expenses) for bodily or personalinjury or death to any persons and for any loss of, damage to, or destruction of any property,including loss of use, incidental and consequential damage thereof, arising out of or in any mannerconnected with the use of AIRLINE’S Premises by such accommodate Airline or any of its agents,representatives, employees, contractors or invitees, whether or not occurring or arising out of thenegligence, whether sole, joint, concurrent, comparative, active, passive, imputed or any othertype, of AIRLINE, MAC or their respective officers, directors, employees or agents; provided,however, the

9


foregoing indemnification shall not apply to any claim or liability resulting from the grossnegligence or willful misconduct of AIRLINE, its officers, directors, employees or agents.

e. MAC shall be responsible for ensuring that such accommodated Airline has in full force and

effect MAC’s required insurance coverages. f. Without limiting any other provision of this Amended and Restated Third Amendment,

AIRLINE’s duty to accommodate another airline shall be conditioned on and subject to thesatisfaction of all requirements of this Section 6.

7. In the event of a labor stoppage or other event which results in the cessation or substantial reduction in

AIRLINE’s flights operations at the Airport, AIRLINE will immediately take all reasonable efforts,including but not limited to, moving of aircraft or equipment, providing access to AIRLINE’s holdroomsand jet bridges or anything else in AIRLINE’s control, in order to accommodate the operations of otherAirlines providing air service to the Airport; provided that: (a) AIRLINE at all times will have access to itspremises and equipment for operational reasons and (b) AIRLINE shall not be required to take any actionwhich would interfere with its ability to re-institute service upon cessation of labor stoppage or other event.Subject to a mutually acceptable agreement between MAC and AIRLINE covering such use, AIRLINEshall have the right to charge reasonable fees and to require reasonable advance payment for such use ofAIRLINE’s gates, holdroom areas, and loading bridges (and any such fees not in excess of 115% of therates and charges payable by AIRLINE hereunder for such premises shall be deemed reasonable).

8. The foregoing shall not be deemed to abrogate, change, or affect any restrictions, limitations or prohibitions

on assignment or use of the AIRLINE’s Premises by others under this Agreement and shall not in anymanner affect, waive or change any of the provisions thereof.

VI. SHORT TERM GATES

Article IV.H. “Short Term Gates” of the Lease is hereby deleted and replaced with the following: H. Short Term Gates

The holdrooms, aircraft parking positions and operations space associated with gates as shown on Exhibit V(hereinafter referred to as “Short Term Gates”) shall be made available to Airlines on the following basis in order topromote Airport access on fair and reasonable terms: 1. AIRLINE shall lease Short Term Gate space under its control on the same basis as provided in this

Agreement, except as provided in this Section. 2. MAC may, in its discretion, cancel the lease of a Short Term Gate leased by AIRLINE if an Airline is

proposing to add additional air service and desires to lease a gate directly from MAC. The followingprocedures shall be followed before a Short Term Gate lease may be cancelled:

a. If an Airline is proposing to add additional air service and desires to lease a gate directly from

MAC, MAC may in its discretion issue a Notice of Cancellation. The Notice of Cancellation maybecome effective after ninety (90) days.

10


b. In the event of a decision to cancel a Short Term Gate, MAC will work with AIRLINE to attempt

to accommodate AIRLINE’s schedule pursuant to the procedures of Article IV.E.3. c. MAC may extend the time periods set forth in this provision for good cause, e.g. the unavailability

of replacement jet bridges or other ground equipment. d. Of Gates D1-D6 leased to AIRLINE, MAC shall cancel the lease for Gate D2 last.

3. In the event MAC cancels the lease of a Short Term Gate pursuant to this Section IV.H., it shallcompensate AIRLINE for the unamortized cost of improvements made to the leased premises of a ShortTerm Gate. AIRLINE shall retain and remove AIRLINE property (e.g. jet bridge or other groundequipment, computers, inserts) or may negotiate their sale.

4. The appearance of a Short Term Gate shall be “generic” i.e. generic carpet, neutral wall finishes and no

distinguishing colors on the podium or backwall except as to improvements existing as of the date of thisAgreement. AIRLINE may hang corporate banners or posters and name identification signs so long as theycan be detached without significantly damaging the premises or AIRLINE commits to restoring thepremises without cost to MAC.

5. If AIRLINE is leasing only one holdroom from MAC, it may request that MAC remove the Short Term

Gate designation from a holdroom by demonstrating that it has met the following conditions:

a. AIRLINE has not been in default on any rental, security deposit, PFC or other payment obligationto MAC under the Lease or this Amended and Restated Third Amendment during the prior twelveconsecutive months; and

b. AIRLINE has maintained an Average Daily Utilization at least equal to seven departures for each

of the previous twelve consecutive months. For purposes of this provision “Average DailyUtilization” shall mean the number of AIRLINE’s and any Affiliated Airline’s scheduled aircraftdepartures using the gate with aircraft of fifty or more seats in a calendar month, divided by thenumber of days in that calendar month; provided, however, that if AIRLINE’s or the AffiliatedAirline’s actual flight activity differs by more than five percent (5%) from its published schedulein any calendar month, MAC shall use AIRLINE’s or the Affiliated Airline’s actual totaldepartures for purpose of calculating Average Daily Utilization.

6. If AIRLINE is leasing three (3) or fewer holdrooms from MAC, MAC agrees to not cancel the lease of

more than one Short Term Gate AIRLINE may be leasing in accordance with the procedures identified inArticle IV.H.2. as long as AIRLINE has adhered to the payment and utilization requirements identifiedwithin Article IV.H.5. for all leased gates for the previous twelve (12) consecutive months.

Exhibit V to the Lease has been attached hereto as Exhibit 5.

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VII. RENTS, FEES, AND CHARGES

Article V.B. “Rents, Fees, and Charges” of the Lease is hereby deleted in its entirety and replaced with the following: B. Rents, Fees, and Charges

1. Landing Fees

AIRLINE shall pay to MAC monthly landing fees to be determined by multiplying the number of1,000-pound units of AIRLINE’s Total Landed Weight during the month by the then-current landing feerate. The landing fee rate shall be calculated according to procedures set forth in Article VI or Article VI.(Alternate).

2. Environmental Surcharges. Intentionally Omitted. 3. Terminal Apron Fees

AIRLINE shall pay to MAC monthly Terminal Apron fees to be determined by multiplying the number oflineal feet of Terminal Apron under lease to AIRLINE (excluding Concourses A and B) during the monthby the then-current Terminal Apron rate. The Terminal Apron rate shall be calculated according to theprocedures set forth in Article VI or Article VI. (Alternate) hereof.

4. Concourse A and B Terminal Apron Fees

AIRLINE shall pay to MAC monthly Terminal Apron Fees associated with Concourses A and B at the rateof fifty percent (50%) of the lineal feet associated with Concourses A and B.

5. Terminal Building Rents and Surcharge

AIRLINE shall pay to MAC monthly Terminal Building rentals and the Lindbergh Terminal Repair andReplacement Surcharge for its Exclusive (janitored and unjanitored), Preferential and Common Use Spacein the Terminal Building. The Terminal Building rental rates shall be calculated according to theprocedures set forth in Article VI or Article VI. (Alternate). Terminal Building rentals for Common Use Space (except the IAF) shall be prorated among SignatoryAirlines using the Common Use Formula.

6. Carrousel and Conveyor Charges

AIRLINE shall pay to MAC monthly carrousel and conveyor charges based upon maintenance andoperating costs and Debt Service. The carrousel and conveyor charges shall be calculated according to theprocedures set forth in Article VI or Article VI. (Alternate) and shall be prorated among Signatory Airlinesusing the Common Use Formula.

7. IAF Gate Fees

AIRLINE shall pay to MAC monthly IAF gate fees determined by multiplying the number of arrivals at theIAF by AIRLINE’s propeller aircraft, narrow-body jet aircraft, and wide-body jet aircraft by $400, $800,and $1,200, respectively.

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8. IAF Use Fees

AIRLINE shall pay to MAC monthly IAF use fees determined by multiplying the number of AIRLINE’sinternational passengers arriving at the IAF during the month by the IAF use fee rate. The IAF use fee rateshall be calculated according to procedures set forth in Article VI or Article VI. (Alternate).

9. Other Fees and Charges

AIRLINE shall pay to MAC reasonable fees for the various other services provided by MAC to AIRLINE.These services include, but may not be limited to, the following:

a. Use of the Humphrey Terminal and Humphrey ramp at rates established from time to time by

MAC. b. Use of Garage Parking Cards by AIRLINE’s employees at rates set forth in the Guidelines for

Administering Validated Airport Parking. c. Use of designated employee parking facilities by AIRLINE’s employees at rates established from

time to time by MAC. d. Non-routine Terminal Apron cleaning and other special services requested by AIRLINE at rates

that reflect the costs incurred by MAC. e. Security and personnel identification badges for AIRLINE’s personnel at rates established from

time to time by MAC. f. Office services, such as facsimile, photocopying, or telephone provided by MAC. Charges for

these services shall be at the rates that MAC customarily charges for such services. g. Charges for the cost of separately metered water and sewer and other such utilities not otherwise

included in the calculation of rents, fees, and charges.

VIII. CALCULATION OF RENTS, FEES, AND CHARGES

Article VI (Alternate), “Calculation of Rents, Fees and Charges” is hereby added to the Lease and shall be placedimmediately following Article VI (“Calculation of Rents, Fees, and Charges”) as follows: VI (ALTERNATE). CALCULATION OF RENTS, FEES AND CHARGES. A. General

Notwithstanding Article VI hereof, effective January 1, 2006, and for each Fiscal Year thereafter, rents, fees, andcharges will be reviewed and recalculated based on the principles and procedures set forth in this Article VI(Alternate). The annual costs associated with each of the indirect cost centers shall be allocated to each of theAirport Cost Centers based on the allocations as set forth in Exhibit M, Indirect Cost Center Allocation, whichallocations may be amended from time to time by mutual consent of MAC and a Majority-In-Interest of SignatoryAirlines. Such consent may not be unreasonably withheld.

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B. Calculation/Coordination Procedures

1. AIRLINE shall provide to MAC: (a) on or before August 1 of each year a preliminary estimate of TotalLanded Weight and Enplaned Passenger for the succeeding calendar year of AIRLINE and each AffiliatedAirline, unless separately reported to MAC by such Affiliated Airline; and (b) on or before October 1 ofeach year a final estimate of such weight. If the final estimate is not so received, MAC may continue torely on the preliminary estimate for the MAC budgeting process. MAC will utilize the forecast indeveloping its preliminary calculation of Total Landed Weight and Enplaned Passengers for use in thecalculation of rents, fees, and charges for the ensuing Fiscal Year.

2. On or before October 15 of each Fiscal Year, MAC shall submit to AIRLINE a preliminary calculation of

rents, fees, and charges for the ensuing Fiscal Year. The preliminary calculation of rents, fees, and chargeswill include, among others, MAC’s estimate of all revenue items, Operation and Maintenance Expenses,Debt Service, Capital Outlays, required deposits, including amounts necessary to be deposited in theCoverage Account in order to meet MAC’s rate covenant under the Trust Indenture, and Rentable Space.

3. Within fifteen (15) days after receipt of the preliminary calculation of rents, fees, and charges, if requested

by the Signatory Airlines, a meeting shall be scheduled between MAC and the Signatory Airlines to reviewand discuss the proposed rents, fees, and charges.

4. MAC shall then complete a calculation of rents, fees, and charges at such time as the budget is approved,

taking into consideration the comments or suggestions of AIRLINE and the other Signatory Airlines. 5. If, for any reason, MAC’s annual budget has not been adopted by the first day of any Fiscal Year, the rents,

fees, and charges for the Fiscal Year will initially be established based on the preliminary calculation ofrents, fees, and charges until such time as the annual budget has been adopted by MAC. At such time as theannual budget has been adopted by MAC, the rents, fees, and charges will be recalculated, if necessary, toreflect the adopted annual budget and made retroactive to the first day of the Fiscal Year.

6. If, during the course of the year, MAC believes significant variances exist in budgeted or estimated

amounts that were used to calculate rents, fees, and charges for the then current Fiscal Year, MAC mayafter notice to Airlines adjust the rents, fees, and charges for future reports to reflect current estimatedamounts.

C. Landing Fees

MAC shall calculate the landing fee rate in the following manner and as illustrated in Exhibit N (revised). 1. The total estimated Airfield Cost shall be calculated by totaling the following annual amounts:

a. The total estimated direct and allocated indirect Operation and Maintenance Expenses allocable tothe Airfield cost center.

b. The estimated Debt Service net of amounts paid from PFCs or grants allocable to the Airfield cost

center.

14


c. The cost of Runway 17/35 deferred and not yet charged from the date of occupancy through

December 31, 2005 will be charged starting January 1, 2006 through December 31, 2035 at$79,535.16 annually.

d. The Landing Fee Repair and Replacement Amount. e. The amount of any fine, assessment, judgment, settlement, or extraordinary charge (net of

insurance proceeds) paid by MAC in connection with the operations on the Airfield, to the extentnot otherwise covered by Article X hereof.

f. The amounts required to be deposited to funds and accounts pursuant to the terms of the Trust

Indenture, including, but not limited to, its Debt Service reserve funds allocable to the Airfieldcost center. MAC agrees to exclude from the calculation of landing fees the amounts which itmay deposit from time to time to the maintenance and operation reserve account and the CoverageAccount established and maintained pursuant to the Trust Indenture except for such amountswhich are necessary to be deposited to the Coverage Account in order for MAC to meet its ratecovenant under the Trust Indenture.

2. The total estimated Airfield Cost shall be adjusted by the total estimated annual amounts of the following

items to determine the Net Airfield Cost:

a. Service fees received from the military, to the extent such fees relate to the use of the Airfield; b. General aviation and non-signatory landing fees; c. Debt Service on the Capital Cost, if any, disapproved by a Majority-In- Interest of Signatory

Airlines.

3. The Net Airfield Cost shall then be divided by the estimated Total Landed Weight (expressed in thousandsof pounds) of the Signatory Airlines operating at the Airport to determine the landing fee rate per 1,000pounds of aircraft weight for a given Fiscal Year.

D. Terminal Apron Fees

MAC shall calculate the Terminal Apron rate in the following manner and as illustrated in Exhibit N (revised). 1. The total estimated Terminal Apron Cost shall be calculated by totaling the following annual amounts:

a. The total estimated direct and allocated indirect Operation and Maintenance Expenses allocable tothe Terminal Apron cost center.

b. The estimated Debt Service net of amounts paid from PFCs or grants allocable to the Terminal

Apron cost center (excluding hydrant fueling repairs and modifications). c. The cost of Concourse A and B Apron Area deferred and not yet charged from the date of

occupancy through December 31, 2005 will be charged

15


starting January 1, 2006 through December 31, 2035 at $159,950.19 annually.

d. The amounts required to be deposited to funds and accounts pursuant to the terms of the Trust

Indenture, including, but not limited to, its Debt Service reserve funds allocable to the TerminalApron cost center. MAC agrees to exclude from the calculation of Terminal Apron fees theamounts which it may deposit from time to time to the maintenance and operation reserve accountand the Coverage Account established and maintained pursuant to the Trust Indenture except forsuch amounts which are necessary to be deposited to the Coverage Account in order for MAC tomeet its rate covenant under the Trust Indenture.

e. The Terminal Apron Repair and Replacement Amount.

2. The Terminal Apron Cost shall then be divided by the total estimated lineal feet of Terminal Apron, todetermine the Terminal Apron rate per lineal foot for a given Fiscal Year. For the purposes of thiscalculation, lineal feet of Terminal Apron shall be computed as the sum of the following:

a. Lineal feet of the Terminal Apron (excluding the Terminal Apron associated with Concourses A &

B); and b. Fifty percent (50%) of lineal feet of the Terminal Apron associated with Concourse A & B

E. Terminal Building Rents

MAC shall calculate the terminal building rental rate for unjanitored and janitored space in the Terminal Building asset forth in subsections 1 and 2 of this Article VI. (Alternate) E. 1. MAC shall calculate the terminal building rental rate for unjanitored space in the Terminal Building in the

following manner and as illustrated in Exhibit N (revised).

a. The total estimated Terminal Building Cost shall be calculated by totaling the following annualamounts:

1) The total estimated direct and allocated indirect Operation and Maintenance Expenses

allocable to the Terminal Building cost center. 2) The estimated direct and allocated Debt Service net of amounts paid from PFCs or grants

allocable to the Terminal Building cost center. 3) The cost of Concourse A, B, C and D deferred and not yet charged from date of

occupancy through December 31, 2005 will be charged starting January 1, 2006 throughDecember 31, 2035 at $2,910,547.40 annually.

4) The amounts required to be deposited to funds and accounts pursuant to the terms of the

Trust Indenture, including, but not limited to, its Debt Service reserve funds allocable tothe Terminal Building cost center. MAC agrees to exclude from the calculation ofTerminal Rents the amounts which it may deposit from time to

16


time to the maintenance and operation reserve account and the Coverage Accountestablished and maintained pursuant to the Trust Indenture except for such amountswhich are necessary to be deposited to the Coverage Account in order for MAC to meetits rate covenant under the Trust Indenture.

b. The total estimated Terminal Building Cost shall be reduced by the total estimated annual amounts

of the following items to determine the Net Terminal Building Cost:

1) Reimbursed expense:

a) Steam and chilled water on the G Concourse;

b) Carrousel and conveyor Capital Cost and Operation and Maintenance Expense; c) Ground Power; d) Loading Dock; and e) Consortium Utilities.

2) Janitorial Operation and Maintenance Expenses, as determined by MAC.

c. The Net Terminal Building Cost shall then be divided by the total estimated Rentable Space in theTerminal Building to determine the terminal building rental rate per square foot for unjanitoredspace for a given Fiscal Year. (See Initial Rentable Square Footage, Exhibit O).

2. MAC shall calculate the terminal building rental rate for janitored space by totaling the following rates and

as illustrated in Exhibit N (revised):

a. The terminal building rental rate per square foot for unjanitored space for a given Fiscal Year, ascalculated in this Section; and

b. An additional rate per square foot, the janitored rate, calculated by dividing the total estimated

direct janitorial Operation and Maintenance Expenses, as determined by MAC, by the totaljanitored space in the Terminal Building (excluding MAC and mechanical space).

F. Carrousel and Conveyor Charge

1. MAC shall calculate the carrousel and conveyor charge, as illustrated in Exhibit N (revised), by totaling thefollowing annual amounts: equipment charges associated with the carrousel and conveyor, including annualDebt Service, maintenance expense, and service charge.

2. MAC shall prorate the carrousel and conveyor charge among the Signatory Airlines using the Common Use

Formula.

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G. IAF Use Fees

The IAF use fee for use of the IAF and any associated gates shall be effective through December 31, 2015 and shallbe based upon: 1. The cost of the maintenance and operation of the International Arrivals Facility which may include, but is

not limited to:

a. utilities; b. cleaning: c. maintenance (including the costs of maintaining the security equipment that existed as of

April 1998); d. police, fire, and administrative cost allocation; e. costs of providing passenger baggage carts, if any; f. costs of providing staff parking for federal inspections agency staff; and

g. $4.17 per square foot recoupment for lost rental area in the G Concourse.

2. Costs associated with the operation of dual international arrivals facility locations at the Airport, based onthe appropriate allocation of costs between the two facilities, not otherwise funded by the federalinspections agencies including, but not limited to additional personnel and equipment used by thoseagencies; and

3. Debt Service, if any; and

Items (1) through (3) above, for which AIRLINE will be billed monthly, shall be set annually at anestimated charge through MAC’s budget process and then adjusted at year end for actual costs pursuant tocertified audit by MAC’s external auditors and such difference shall be charged or credited to AIRLINEand paid by AIRLINE or MAC within thirty (30) days thereafter.

H. Year-End Adjustments of Rents, Fees, and Charges

1. As soon as practical following the close of each Fiscal Year, but in no event later than July 1, MAC shall furnishAIRLINE with an accounting of the costs actually incurred and revenues and credits actually realized during suchFiscal Year with respect to each of the components of the calculation of the rents, fees, and charges calculatedpursuant to this Article broken down by rate making Cost Center.

2. In the event AIRLINE’s rents, fees, and charges billed during the Fiscal Year exceed the amount of AIRLINE’s

rents, fees, and charges required (as recalculated based on actual costs and revenues), such excess shall be refundedor credited to AIRLINE.

3. In the event AIRLINE’s rents, fees, and charges billed during the Fiscal Year are less than the amount of

AIRLINE’s rents, fees, and charges required (as recalculated based on actual costs and revenues), such deficiencyshall be charged to AIRLINE in a supplemental billing.

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I. Revenue Sharing

1. Beginning January 1, 2006, subject to Section XII of the Amended and Restated Third Amendment to theAirline Operating Agreement and Terminal Building Lease, in conjunction with its Year End Adjustmentsof Rents, Fees and Charges, MAC will rebate to AIRLINE a portion of the Annual Gross Revenues forSelected Concessions for the most recent Fiscal Year under the following schedule (“Revenue Sharing”)(all dollar amounts set forth in this Article VI (Alternate) shall apply for 2006 only and shall be escalatedfor each Fiscal Year after 2006 on an annual compounded basis by the Selected Concession RevenueEscalation Factor):

a. If Annual Gross Revenues for the Selected Concessions for 2006 are between $25 million and

$32.299 million for the Fiscal Year, 25% of gross revenues; b. If Annual Gross Revenues for the Selected Concessions are above $ 32.299 million for the Fiscal

Year, 25% of gross revenues up to $32.299 million and 50% of gross revenues above $32.299million;

2. Reduced sharing of gross revenues if Annual Gross Revenues for the Selected Concessions are below $25

million for the Fiscal Year;

a. $24 million to $24.99 million – 20% b. $23 million to $23.99 million – 15% c. $22 million to $22.99 million – 10% d. $21 million to $21.99 million – 5%

3. The total rebate amount shall be allocated among Signatory Airlines according to their pro rata share of

Enplaned Passengers for the Fiscal Year and shall be structured as a post-year-end check to AIRLINEissued by MAC no later than 240 days following each Fiscal Year, subject to correction following anyapplicable audit;

4. Notwithstanding the foregoing, MAC shall have the right to reduce the amount of Revenue Sharing with

respect to any Fiscal Year to the extent necessary so that the Net Revenues of the MAC taking into accountthe Revenue Sharing for such Fiscal Year will not be less than 1.25x of the total Debt Service of MAC forsuch Fiscal Year. In the event that the Revenue Sharing is reduced in any Fiscal Year by any amount (the“Deferred Revenue Sharing Amount”) as a result of the operation of this Article VI. (Alternate), MAC willaccrue the Deferred Revenue Sharing Amount and credit such amount to the Signatory Airlines in thesubsequent Fiscal Year (or, if such amount may not be credited in accordance with this Article VI.(Alternate) in such subsequent Fiscal Year, then such amount will be credited in the next succeeding FiscalYear in which such credit may be issued in accordance with this Article VI. (Alternate); and

5. The rights of any Signatory Airline to any payment, credit or application of Revenue Sharing to or for the

benefit of such Signatory Airline is a contract right, in existence and effective as of January 1, 2006(subject to Section XII of the Amended and Restated Third Amendment), and any such payment, credit orapplication actually made is proceeds thereof.

19


J. Reversion to Pre-Existing Rate Structure

Notwithstanding anything in the Lease or any other agreement between MAC and AIRLINE, in the event AIRLINEis not in compliance with any payment obligation under any agreement with the MAC during the period followingany applicable notice and cure period under such agreement and continuing until payment of any such amounts (the“Payment Default Period”), MAC will have the right, upon written notice to AIRLINE (provided that, if AIRLINEis in bankruptcy, no notice shall be required for the effectiveness of MAC’s exercise of such right, in each case solong as AIRLINE is invoiced by MAC for the amounts payable pursuant to the Pre-Existing Rate Structure and allsuch invoices reference the additional amounts due as a result of such payment default and set forth the applicablerates that are then in effect as a result of such payment default), to: (i) have AIRLINE’s payment obligations underthe Lease during the Payment Default Period revert to the Pre-Existing Rate Structure, and (ii) apply the amount ofany Rate Differential (as defined in Article XII hereof) for AIRLINE during such period and the amount of anyaccrued and unpaid Revenue Sharing credits (if any) otherwise due to AIRLINE pursuant to Article VI. (Alternate)for the Payment Default Period against any amounts owed by AIRLINE to MAC to the extent necessary to cure suchpayment defaults; provided that, with respect to AIRLINE, the MAC shall not have the rights set forth in thisArticle VI(Alternate).J with respect to (i) any obligations of AIRLINE under any existing agreements that arerejected by AIRLINE in the 2005 Bankruptcy Case, which rejected existing agreements shall not include any of theAssumed Agreements, (ii) any obligations of AIRLINE relating to the MSP 2001/2005 special facilities bonds or therelated special facilities lease; and (iii) any obligations of AIRLINE under any agreement between AIRLINE and aparty other than MAC.

A revised Exhibit N to the Lease has been attached hereto as Exhibit 3.

IX. MAJORITY-IN-INTEREST WAIVER

Article VII. of the Lease as amended via the First Amendment dated March 29, 2002 is hereby deleted in its entirety andreplaced with the following Article VII.E.: E. MAJORITY-IN-INTEREST WAIVER

Beginning in January 1, 2010, AIRLINE agrees that MAC may include in its capital improvement program up to$50 million per year (in 2001 dollars) for miscellaneous Capital Projects (“Contingency Projects”) as determined byMAC. Notwithstanding any other provision of this Agreement, these Contingency Projects may include at MAC’sdiscretion projects to be included in the Airfield Cost Center, and this Agreement shall be deemed to be AIRLINE’Sapproval (if required) of any such Capital Project without any requirement for Majority-In-Interest review.

X. BANKRUPTCY

Article XI.E. “Bankruptcy” of the Lease is amended to add the following subsection E.6: 6. In addition to the other rights of MAC hereunder, to the extent necessary, to effect its rights under Article VI

(Alternate).J. of the Lease in any future bankruptcy involving AIRLINE pursuant to the doctrines of setoff and/orrecoupment.

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XI. HUB AND HEADQUARTERS COVENANTS

The Lease is amended to add the following language as Article XVII “Hub and Headquarters Covenants”: XVII. Hub and Headquarters Covenants

AIRLINE hereby covenants and agrees to maintain its Headquarters in the Minneapolis-St. Paul metropolitan areaand to maintain a Hub at the Airport. As the sole remedy for breach of either such covenant and, solely with respectto the Hub covenant, subject to the force majeure exception set forth below, Revenue Sharing will be eliminated inany year in which AIRLINE violates either the Headquarters or Hub covenant (and, in the event any such violationcontinues for three (3) consecutive years, or either such covenant is determined to be unenforceable, AIRLINE’sRevenue Sharing will be eliminated permanently). Force majeure. Notwithstanding the foregoing, AIRLINE shall not be deemed to be in default of the Hub covenant ifit is prevented from performing any of its obligations contained in the Hub covenant by reason of strikes, boycotts,labor disputes, embargoes, shortages of energy or materials, acts of the public enemy, prolonged unseasonableweather conditions and results of acts of nature, riots, rebellion, or sabotage, despite AIRLINE’s best efforts tocomply. No force majeure provision shall apply to the Headquarters covenant.

XII. AMENDMENT EFFECTIVE DATE AND CONDITIONS

The amended rate structures and changes in rate methodology (the “Rate Changes”) and the Revenue Sharing (the RevenueSharing together with the Rate Changes, shall be called the “Savings”) set forth in Sections VII and VIII of this Amended andRestated Third Amendment shall be effective commencing January 1, 2006 and shall continue through the term of eachAirline’s Airline Operating Agreement and Terminal Building Lease, subject to the terms and conditions thereof. However,MAC and AIRLINE hereby acknowledge and agree that receipt of any credits for the Savings under this Amended andRestated Third Amendment is expressly conditioned upon the entry of an order in the 2005 Bankruptcy Case (which wouldinclude an order confirming a plan of reorganization and which shall contain the provisions regarding effectiveness set forthherein) (the “Assumption Order”) not later than September 30, 2007 approving the assumption by AIRLINE of the executoryagreements relating to GO15, GO13, the Lease, and the other leases and executory agreements between AIRLINE and MACset forth on Exhibit 4 hereto (the “Assumed Agreements”). The Assumption Order shall provide that the effectiveness of theassumption of the Assumed Agreements is conditioned upon the approval by all of the Signatory Airlines of this Amendedand Restated Third Amendment or the 2007A Amendment to Airline Operating Agreement and Terminal Building Lease (the“2007A Amendment,” attached hereto as Exhibit 6) as an amendment to each Signatory Airline’s Airline OperatingAgreement and Terminal Building Lease. Within thirty (30) days after the later to occur of (i) the entry of the AssumptionOrder and (ii) approval by all of the Signatory Airlines of this Amended and Restated Third Amendment or the 2007AAmendment and any other documents implementing the Savings (the “Amendment Effective Date”), MAC will (A) issue acheck to (i) each Signatory Airline in an amount equal to the difference between the rates and charges calculated under thepre-existing Airline Operating Agreement and Terminal Building Lease with each Signatory Airline, without taking intoaccount the changes set forth in this Amended and Restated Third Amendment (“Pre-Existing Rate Structure”), and suchrates and charges calculated taking into account the Rate Changes and other revisions to the Airline Operating Agreementand Terminal Building Lease with each Signatory Airline that are set forth in this Amended and Restated Third Amendment(“Amended Rate Structure”, with such difference between the Pre-Existing Rate Structure and the Amended Rate Structure,the “Rate Differential”) for the period commencing January 1, 2006 through the Amendment Effective Date, (ii) eachSignatory Airline for the amount of the Revenue Sharing for 2006 and any succeeding calendar year ending prior to theAmendment Effective Date, with such credit issued upon the completion of the certified independent audits report

21


for such year, and (iii) each Signatory Airline for interest on the credit amounts referenced in clauses (i) and (ii) of thissentence at MAC’s actual earned overnight interest rate (“Applicable Interest Rate”) from the period commencing onFebruary 12, 2007 (but in the case of 2006 Revenue Sharing, not earlier than the completion of the comprehensive annualfinancial report for 2006) (“Interest Commencement Date”) through the date of the issuance of such credits, and(B) implement the terms of the Amended and Restated Third Amendment as of the Amendment Effective Date.

Notwithstanding the foregoing provisions of this Section XII, the credits described in the immediately precedingparagraph shall not be issued to AIRLINE, AIRLINE will continue to pay its Lease obligations under thePre-Existing Rate Structure and AIRLINE will not receive any credits relating to the Revenue Sharing, until the 30thday after the date an order entered by the 2005 Bankruptcy Case becomes a final order approving a plan ofreorganization and only if no Impairment (as defined in Section 4(e) of the MOU) has occurred (“AIRLINEEffective Date”). From the Amendment Effective Date to the AIRLINE Effective Date, AIRLINE’s RateDifferential and any credits relating to the Revenue Sharing will continue to accrue during such period and shallearn interest at the Applicable Rate commencing from the Interest Commencement Date. Upon the AIRLINEEffective Date, MAC will issue to AIRLINE a credit for the amounts accrued under this Section XII together withinterest as provided herein. In the event that the Assumption Order is not entered in the 2005 Bankruptcy Case on orbefore September 30, 2007, MAC shall have the right to elect to terminate this Amended and Restated ThirdAmendment, in which case MAC shall retain all of the credits and interest, and continue to calculate rates andcharges in accordance with the Pre-Existing Rate Structure (and in the event MAC so elects, the provisions added tothe Lease pursuant to the Amended and Restated Third Amendment pending the occurrence of the AmendmentEffective Date shall be deemed deleted and withdrawn and of no force and effect).

XIII. 2007B AMENDMENT

In addition to the 2007A Amendment, MAC shall offer to the Signatory Airlines a 2007B Amendment, which shall, amongother things, offer to extend the term of other Signatory Airline Leases until December 31, 2020 in exchange for certainAirlines agreeing that any time after July 1, 2010, MAC may give Airline notice of MAC’s intention to terminate the lease ofall of such Airline’s Leased Premises in the Lindbergh Terminal and to amend the Lease to add alternate premises in theHumphrey Terminal. MAC shall provide alternate premises to Airline at the Humphrey Terminal and will consult withAirline throughout the design and planning process. In exchange for this agreement, MAC will reimburse Airline for allnecessary and reasonable relocation expenses, subject to advance written approval of such relocation estimate. MAC’s offer of the 2007B Amendment to the Signatory Airlines shall terminate effective September 30, 2007.

XIV. SURVIVAL OF INDEMNIFICATION

The provisions of Article VII (INDEMNIFICATION) of the Special Facilities Lease between MAC and AIRLINE, dated asof June 1, 2001, except for subsection (a) of such Section (“Surviving Indemnifications”), shall survive the confirmation ofany plan of reorganization for AIRLINE and its related entities (“Plan”) and claims under the Surviving Indemnificationsshall not be disallowed solely by reason of Bankruptcy Code sections 502(b)(9) and (c) or the bar date. Any claims by MACunder the Surviving Indemnifications (“Surviving Indemnification Claims”) will be treated and paid as general unsecuredclaims. If any Surviving Indemnification Claims are allowed after any distribution has been made to general unsecuredcreditors, MAC will receive (on the distribution date following the allowance of any such Surviving Indemnification Claim)the consideration and of the value that would have been distributed with respect to such allowed Surviving IndemnificationClaims if they had been allowed at the time any such previous distributions had been made, or, at

22


AIRLINE’s election, cash in an amount equal to the value of such consideration on the date it would have been distributed toMAC. AIRLINE or its related entities will not contest the validity or enforceability of the Surviving Indemnifications (exceptas enforceability may be limited by bankruptcy, insolvency or any other proceeding affecting creditors’ rights generally(including AIRLINE’s current proceeding, but excluding this Amended and Restated Third Amendment)). The provisions ofthis Section XIV shall be binding on any trustee that may be appointed in the AIRLINE bankruptcy case and shall remainbinding without regard to any determination in the adversary proceeding brought by AIRLINE seeking, among other things,recharacterization of the 2001/2005 Special Facilities Bonds, and without regard to any rejection, termination or modificationof the Special Facilities Lease. Any dispute as to the allowed amount of any Surviving Indemnification Claims shall bedetermined in the manner provided in the Plan for determining disputes as to the allowed amount of general unsecured claimsof the amount claimed by MAC, or, if no such manner is prescribed, in the manner determined by the court havingjurisdiction of AIRLINE’s bankruptcy case at the time MAC makes its first Surviving Indemnification Claims.

XV. COOPERATION

AIRLINE agrees to cooperate with MAC, including participation in mediation or requests for approval from FAA, inattempting to resolve the current noise litigation venued in Hennepin County District Court.

The remainder of this page has been intentionally left blank.

23


IN WITNESS WHEREOF, the parties have signed and executed this Amendment in duplicate the day and year first below written.

METROPOLITAN AIRPORTS COMMISSION Date: , 2007 By: /s/ Jeffrey W. Hamiel

Jeffrey W. Hamiel, Executive Director

NORTHWEST AIRLINES, INC. Date: , 2007 By: /s/ Barry J. Hofer

Its: Vice President – Facilities and Airport Affairs STATE OF MINNESOTA )

) ss.

COUNTY OF HENNEPIN )

This instrument was acknowledged before me on the day of , 2007, Jeffrey W. Hamiel, the Executive Director of theMetropolitan Airports Commission on behalf of the Commission.

Notary Public STATE OF MINNESOTA )

) ss.

COUNTY OF )

This instrument was acknowledged before me on the day of , 2007,By , the of Northwest Airlines, Inc.

Notary Public

24


EXHIBIT 1

AIRLINE OPERATING AGREEMENT AND TERMINAL BUILDING LEASE AND AMENDMENTS

Agreement/Amendment

Effective Date Airline Operating Agreement and Terminal Building Lease

January 1, 1999 First Amendment

March 29, 2002 Second Amendment

November 15, 2004

25


EXHIBIT 2

LIST OF MAC BOND OBLIGATIONS

Current Outstanding Debt

General Obligation Revenue Bonds

Series 13 (2015)

Series 14 (2011)

Series 15 (2022) General Airport Revenue Bonds

Series 1998B Sr (2016)




Series 2007A Sr (2032)

Series 2001D Sub (2016)

Series 2003A Sub (2031)



Series 2005B Sub (2026)

Series 2005C Sub (2032)

Series 2007B Sub (2032) Commercial Paper

Series A

Series B

Series C

Series D Notes Payable – Equipment Leasing

2003 Financing (2008)

2004 Financing (2009) Other Notes Payable/Financing Leases

26


EXHIBIT 3 - REVISED EXHIBIT N

Metropolitan Airports Commission

Minneapolis-St. Paul International AirportIllustration of Calculation of Rates for Rents, Fees and Charges

Calculation of Landing Fee Rates

ArticleReference

200x

V1.C.1.

Direct Operation and Maintenance Expense (Includes Control Tower, NoiseAbatement & Operations)

$ 8,500,000

Indirect Operation and Maintenance Expense

16,500,000

Direct and Indirect Debt Service

7,000,000

Runway 17/35 Deferral

79,535

Capital Outlays/Deposit to Rehab & Replacement Fund

10,200,000

Direct and Indirect Cost of Capital Outlays/Leases (Original)

1,500,000

Fine, Assessment, Judgment or Settlement

—

Debt Service Reserve Fund Deposit

—

Operation Reserve Account Deposit

—

Coverage Account Deposit

—

Total Airfield Cost

$ 40,479,535

Less:

V1C.2.

Service Fees (Military)

$ 150,000

General Aviation Landing Fees

880,000

Nonsignatory Landing Fees (HHH and Commuter)

720,000

Off-Airport Aircraft Noise Costs

—

Projects Rejected by MII of Signatory Airlines

—

Total Adjustments

$ 1,750,000

Net Airfield Cost

$ 38,729,535

V1.C.3.

Total Landed Weight of Signatory Airlines (1,000-lb. Units)

23,500,000

Landing Fee Rate per 1,000 lbs.

$ 1.648

27





Calculation of Terminal Apron Rates

ArticleReference

200x

V1.E.1.

Direct Operation and Maintenance Expense

$ 210,000


3,500,000


10,000

Direct and Indirect Cost of Capital Outlays/Lease

500,000


600,000

Concourse A & B Ramp Deferral Recovery

159,950


—


—


—

Total Terminal Apron Cost

$ 4,979,950

V1.E.2.

Total Lineal Feet of Terminal Apron(Excluding Terminal A & B Ramp) 9,971

Terminal A Apron Lineal Feet 1,253

Terminal B Apron Lineal Feet 1,409

V1.E.3.

Total Terminal A & B Apron 2,662

Terminal A & B Apron @ ½ 1,331

Total Chargeable Terminal Apron Lineal Feet

11,302

Terminal Rate Per Lineal Foot

$ 440.626

28


EXHIBIT 3 - REVISED EXHIBIT NMetropolitan Airports Commission


Calculation of Terminal Building Rental Rate (Janitored and Unjanitored Space)

ArticleReference

200x

V1.G1.a.

Unjanitored Space Rate Calculation

Direct Operation and Maintenance Expense(Includes Energy Management Center)

$ 21,490,000


9,000,000


21,700,000

Terminal A-D Deferral Recovery

2,910,537

Direct and Indirect Cost of Capital Outlays/Leases

500,000


—


—


—

Total Terminal Building Cost

$ 55,600,537

Less:

V1.G1.b.

Steam and Chilled Water Reimbursement (G Concourse)

$ 940,000

Carrousel and Conveyor Costs

220,000

Ground Power

390,000

Loading Dock

2,265,000

Consortium Utilities

440,000

Total Adjustments

$ 4,255,000

Net Terminal Building Cost

$ 51,345,537

V1.G.1.c.

Total Rentable Space

$ 1,088,393

Terminal Building Rental Rate per Square Foot for Unjanitored Space

$ 47.176

Terminal Airlines R & R Fund Surcharge Amount


$ 6,000,000

Weighted Average Airline Rentable Space(Janitored and Unjanitored)

570,000

Surcharge Amount

$ 10.526

29





Janitored Space Rate Calculation

V1.G.2.

Total Direct Janitored Operation and Maintenance Expenses

$ 5,800,000

Total Janitored Space /1

975,000

Janitored Rate per Square Foot

$ 5.949

Terminal Building Rental Rate per Square Foot for Unjanitored Space (Above)

$ 47.176

Terminal Building Rental Rate per Square Foot for Janitored Space

$ 53.125

/1 Excludes MAC and mechanical space.

30




Calculation of Carrousel and Conveyor Charge

ArticleReference

200x

V1.H.1.

Direct and Indirect Maintenance Depreciation Charges

$ 250,000


—


—

Total

$ 250,000

31




Calculation of Airline Cost Per Enplaned Passenger

Actual200x

Landing Fees-Signatory

$ 36,000,000

Landing Fees-HHH Nonsignatory

70,000

Landing Fees-Commuter Nonsignatory

650,000

Ramp Fees-Signatory

4,410,000

Ramp Fees-HHH Nonsignatory

15,000

Ramp Fees-Commuter Nonsignatory

—

Terminal Building

33,920,000

IAF Charges

2,850,000

Carrousels & Conveyors

205,000

Old Portion of G Concourse

421,000

Lobby Fees

6,210,000

FIS Surcharge

880,000

HHH Terminal Building Rent

640,000

Concessions Rebate

(9,100,000)Apron Fees - HH Terminal

500,000

Apron Fees - Commuter

—

Police/Fire/Admin. - G Concourse

700,000

Steam/Chilled Water - G Concourse

900,000

Janitorial - G Concourse

700,000

Self-Liquidating - C/G Concourse

1,592,000

Total Costs

$ 81,563,000

Enplaned Passengers

17,000,000

Airline Cost Per Enplaned Passenger

$ 4.798

32


EXHIBIT 4

ASSUMED AGREEMENTS

NWA Assumption of Agreements and Survival of Obligations

1. All Executory contracts that were entered into in connection with the GO15 and GO13 Bonds, excluding adequate protection

stipulations 2. All other obligations and agreements related to the GO 15 and GO 13 Bonds including but not limited to all guaranties,

security agreements, mortgages and other documents shall remain unimpaired and fully enforceable following assumption ofthe GO 15 and GO 13 executory contracts

3. Airline Operating Agreement and Terminal Building Lease dated as of January 1, 1999 (as amended) 4. Main Base Agreement dated as of March 5, 1956 as amended (a.k.a. Building B Lease) 5. Republic Airlines, Inc. Main Base Lease and Agreement dated as of December 19, 1966 as amended (a.k.a. Building C

Lease) 6. Lease Agreement dated as of October 6, 1969 as amended (a.k.a. Building F Lease) 7. Runway 12R De-Icing Operations Center Site Agreement dated as of December 2003 8. Runway 30R De-Icing Operations Center Agreement dated as November 2001 9. Deicing Operations Center Agreement dated as of April 1998 as amended (a.k.a. 12L Deicing Operations Center Lease) 10. Runway 17/35 Glycol Reclamation Facility Agreement dated as of August 2004. 11. Lease and Fuel Agreement as Restated and Amended for Aviation Fuel Facilities dated February 1, 2005.

33


EXHIBIT 5

EXHIBIT V

34


2007A AMENDMENT TO



This 2007A Amendment to Airline Operating Agreement and Terminal Building Lease (hereinafter “2007A Amendment” or“Amendment”) is entered into as of the day of 2007, by and between the Metropolitan AirportsCommission, a public corporation under the laws of the State of Minnesota (hereinafter sometimes referred to as “MAC” or“Commission”), and , a corporation organized and existing under the laws of andauthorized to do business in the State of Minnesota (hereinafter referred to as “AIRLINE”). WHEREAS, MAC and AIRLINE entered into an Airline Operating Agreement and Terminal Building Lease effective January 1,1999 and amended such agreement as shown on Exhibit 1 (collectively, “Lease”); and WHEREAS, NWA, Inc. (“NWA”), Northwest Aerospace Training Corporation (“NATCO”), and Northwest Airlines, Inc. (“NAI”),(collectively the “Northwest Entities”) and MAC are parties to a series of agreements and documents with respect to theMinneapolis-St. Paul Metropolitan Airports Commission General Obligation Revenue Refunding Bonds, Series 15 (all suchagreements, guaranties, security documents and other documents shall be collectively referred to as the “GO 15 Documents”); and WHEREAS, the Northwest Entities filed a petition under Chapter 11 of Title 11 of the United States Code on September 14, 2005which case is pending in the United States Bankruptcy Court for the Southern District of New York in an administrativelyconsolidated case entitled In re Northwest Airlines Corporation et al., Case No. 05-17930(ALG) (“2005 Bankruptcy Case”); and WHEREAS, as part of its reorganization in the 2005 Bankruptcy Case, NAI, on behalf of AIRLINE and other Signatory Airlines, andMAC negotiated a comprehensive resolution of various lease and debt issues between them as set forth in a Memorandum ofUnderstanding executed by NAI on February 12, 2007 and by MAC on February 19, 2007 (“MOU”). As part of such comprehensiveagreement documented in the MOU, NAI requested that, and MAC agreed to, make significant changes to the existing AirlineOperating Agreement and Terminal Building Leases between the MAC and each Signatory Airline, including AIRLINE’s Lease, andthat would provide substantial reductions in rates and charges payable by each Signatory Airline, including AIRLINE, and requiringthat MAC share revenue generated from various sources at the Airport with such airlines; and WHEREAS, as part of such comprehensive agreement, MAC has agreed to amend the existing Airlines Operating Agreement andTerminal Building Leases between the MAC and each Signatory Airline, including AIRLINE’s Lease on terms and conditions setforth herein, provided that (i) each Signatory Airline shall be entitled to the reduction of rates and charges and the revenue sharing tobe provided by the MAC hereunder only to the extent that such airline remains in compliance with all of its obligations to the MAC,and (ii) the Northwest Entities agree that their plan of reorganization will provide that the Northwest Entities will continue to fullyperform all obligations under the GO 15 Documents with all such obligations remaining unimpaired; and WHEREAS, the Amendment evidenced hereby and the protections described above are an essential part of the comprehensiveresolution and are fundamental to the Agreement contained in the MOU; and

35


WHEREAS, implementation of this 2007A Amendment is conditioned on approval by all Signatory Airlines as part of the 2005Bankruptcy Case. NOW THEREFORE, in consideration of the foregoing, the parties agree to amend the Lease as follows:

I. INCORPORATION OF AIRLINE OPERATING AGREEMENT AND TERMINAL BUILDING LEASE

Except as set forth in this 2007A Amendment, the Lease shall remain in full force and effect. In the event of a conflictbetween this 2007A Amendment and the Lease, the provisions of this 2007A Amendment shall control.

II. DEFINITIONS

All capitalized terms used in this 2007A Amendment but not defined herein shall have the meanings given them in theLease. The following terms, as used herein and in the Lease shall have the meanings set forth below and, to the extent anysuch term was defined in the Lease, the definition contained in the Lease shall be deleted and replaced with the definition forsuch term set forth below: A. “2005 Bankruptcy Case” means that certain administratively consolidated case pending in the United States

Bankruptcy Court for the Southern District of New York entitled In re Northwest Airlines Corporation et al, CaseNo. 05-17930 (ALG) commenced pursuant to a petition filed by NAI and affiliates under Chapter 11 of Title 11 ofthe United States Code on September 14, 2005.

B. “Affiliated Airline” means an Airline other than Airline that (a) operates aircraft of 76 passenger seats or less at the

Airport and is party to a code share agreement with AIRLINE applicable to such Airline’s flights to and from theAirport, (b) has signed an Airline Operating Agreement and Terminal Building Lease similar to the form of thisAgreement, (c) is party to an Airline Services Agreement with AIRLINE and (d) has been designated in writing byAIRLINE as an “affiliate” of AIRLINE.

C. “Airline Rented Space” means the aggregate of that portion of Rentable Space under lease to all Signatory Airlines. D. “Airline Services Agreement” means any agreement between AIRLINE and any regional air carrier pursuant to

which such air carrier provides air transportation services for AIRLINE under AIRLINE’s designator code. E. “Amendment Effective Date” shall have the meaning ascribed to such term in Section IX of this 2007A

Amendment. F. “Annual Gross Revenue” means rent, concessions fees or similar charges actually received during any Fiscal Year

by MAC from Selected Concessions. Annual Gross Revenue shall not include sales taxes, utility fees, consortiumfees, key money, customer facilities charges or other similar “pass through” charges.

G. “Auto Rental Concessions” means all auto rental companies or other business organizations operating at either the

Lindbergh or Humphrey Terminals pursuant to concessions agreements with MAC. H. “Assumed Agreements” shall have the meaning given to the term in Section IX of the 2007A Amendment.

36


I. “Debt Service” means the aggregate amount of principal and interest payments made by MAC that are due and

payable during the Fiscal Year on MAC financings including but not limited to all future and existing generalobligation revenue bonds, airport revenue bonds, refunding obligations, commercial paper (excluding the principalamount of commercial paper reissued during the Fiscal Year) and other debt instruments of the Commission andspecifically including, but not limited to, those obligations specifically included on Exhibit 2 attached hereto. Inaddition, debt service shall also include:

(i) amounts paid as prepayment of obligations, if such prepayment is deemed approved by a

Majority-In-Interest of Signatory Airlines pursuant to the provisions of Article VII.B. hereof, Or (ii) principal and interest in accordance with its original scheduled amortization for any prepayment made by

MAC which is not deemed approved by the Majority-In-Interest of Signatory Airlines in accordance with(i) above, until such time as the original principal amount of such prepaid obligation has been recovered byMAC.

J. “Deferred Revenue Sharing Amount” shall have the meaning given to the term in Section VII.I.4 of this 2007A

Amendment. K. “Food and Beverage Concessions” means companies or other business organizations that sell consumable food or

beverages items, excluding vending operations, to the traveling public at the Lindbergh (excluding sales from the GConcourse) or Humphrey Terminals, pursuant to concessions agreements with MAC.

L. “GO13” means the Minneapolis-St. Paul Airports Commission Taxable General Obligation Revenue Bonds,

Series 13, outstanding from time to time. M. “GO15” means the Minneapolis-St. Paul Metropolitan Airports Commission Taxable General Obligation Revenue

Refunding Bonds, Series 15, outstanding from time to time. N. “Humphrey Terminal Repair and Replacement Surcharge” shall be equal to nine percent (9%) of the Repair and


O. “Lindbergh Terminal Repair and Replacement Surcharge” shall be equal to nineteen percent (19%) of the Repair

and Replacement Amount divided by Airline Rented Space. This allocation shall be adjusted every five years basedon increases to the cost center’s book value.

P. “Landing Fee Repair and Replacement Amount” shall be equal to sixty-eight percent (68%) of the Repair and


Q. “Merchandise Concessions” means companies or other business organizations that sell retail or news products,

excluding automated vending items, to the traveling public at the Lindbergh (excluding sales from the G Concourse)or Humphrey Terminals, pursuant to concessions agreements with MAC.

R. “Net Revenues” has the meaning provided for in the Trust Indenture.

37


S. “Repair and Replacement Amount” means a $15 million deposit for Fiscal Year 2006, and increased by three

percent (3%) per annum for each Fiscal Year thereafter compounded annually (i.e., $15.45 million in Fiscal Year2007, $15.91 million in Fiscal Year 2008, etc.) to a Repair and Replacement subaccount within the constructionfund to be expended for major maintenance and minor (less than $2 million) capital projects, except for automobileparking facilities and roadways.

T. “Selected Concessions” means Food and Beverage Concessions, Merchandise Concessions, and Auto Rental

Concessions. U. “Selected Concessions Revenues Escalation Factor” means the following annual percentage escalation factors

(compounded) to be applied to the dollar thresholds provided in Section VII.I.1.:

Year

Annual Escalation Factor

2006

Base Year

2007

1.77%2008

4.75%

2009

4.47%2010

4.46%

2011

4.20%2012

4.73%

2013

4.46%2014

4.47%

2015

4.46%2016

4.46%

2017

4.46%2018

4.47%

2019

4.47%2020

4.47%

V. “Terminal Apron” and “Terminal Ramp” shall be interchangeable terms and both terms shall mean the airport

parking apron as shown on Exhibit D to the Lease, together with any additions and/or changes thereto. W. “Terminal Apron Repair and Replacement Amount” shall be equal to four percent (4%) of the Repair and


III. USE OF THE INTERNATIONAL ARRIVALS FACILITY

Article III.C “Use of the International Arrivals Facility” shall be deleted in its entirety and replaced with the following:

C. Use of the International Arrivals Facility

MAC will control prioritization and utilization of the IAF and associated gates for international arrivals by Airlinesproviding International Regularly Scheduled Airline Service and may develop prioritization procedures notinconsistent with the terms of this Agreement. The provisions in this Section C. shall continue throughDecember 31, 2020.

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1. In order to use the International Arrivals Facility, AIRLINE must maintain its status as International

Regularly Scheduled Airline Service. AIRLINE shall provide MAC a detailed written certification for eachnumbered element on Exhibit H, upon MAC’s request. MAC retains the right to verify the status ofAIRLINE and determine whether AIRLINE qualifies as International Regularly Scheduled Airline Service.

2. Gates G1 through G10 and associated passenger loading bridges, ramp access and lobby and baggage

facilities on Concourse G currently leased by Northwest Airlines, Inc. (hereinafter referred to as“Northwest” or “Northwest Airlines”) shall be made available for access to the International ArrivalsFacility based on the following priority of use:

a. International Regularly Scheduled Airline Service as defined in Exhibit H. b. Northwest or a Northwest Affiliated Airline domestic arrivals and departures. c. Non-scheduled irregular or delayed international charter arrivals when the expected delay for the

flight to use the Humphrey Terminal facility will exceed 90 minutes and the use of an IAF gatewill not interfere with the scheduled use of that gate. Such interference shall be defined as theoverlap of the non-scheduled use with the scheduled use such that the scheduled flight will have tobe relocated to another concourse for its operation or will have to wait for a gate due to theunavailability of any gate. Use of an IAF gate by a non-scheduled flight is subject to Northwest’sapproval; such approval is not to be unreasonably withheld or delayed. Northwest shall designatean individual on site to give necessary approvals.

3. Northwest shall provide all Ground Handling at the IAF gates subject to either (i) air carrier self-handling

rights contained in AIP grant assurances, at rates that do not exceed those specified in the MutualAssistance Ground Service Agreement, or (ii) authorize the use of a third party ground handling companyto provide Ground Handling at the IAF gates upon a requesting airline executing the memorandum ofunderstanding included as Exhibit W. Northwest shall also provide reasonable access for air carriers todata and communications systems at gates G1-G10.

4. No Airline aircraft will remain on gates G1-G10 over two hours if a narrow-body or three hours if a

wide-body. Northwest will coordinate any moving of aircraft with MAC’s operations department, FAA andappropriate federal inspections agencies.

5. AIRLINE, if it self-handles, or Northwest, if it provides Ground Handling to AIRLINE, on gates G1-G10,

shall handle and dispose of all international waste on AIRLINE’s aircraft in accordance with therequirements of the United States Department of Agriculture.

6. Northwest shall be responsible for all maintenance, repair, and operation of MAC jet bridges provided by

MAC as part of the IAF. Northwest shall make the MAC jet bridges available for use by all users of theIAF without additional charge.

Exhibit W has been attached to this Amendment as Exhibit 6

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IV. ACCOMMODATION OF OTHER AIRLINES

Article IV.E. “Accommodation of Other Airlines” of the Lease is hereby deleted in its entirety and replaced with thefollowing Article IV.E.: 1. Thirty (30) days in advance of each schedule change AIRLINE shall provide MAC with a copy of the published

schedule and a gate plot showing all times when aircraft are scheduled to be utilizing each Preferential Use gate,including aircraft type, projected arrival and departure times, and point of origin or destination, including activitiesby subtenants or airlines being accommodated.

2. In furtherance of the public interest of having the Airport’s capacity fully and more effectively utilized, it is

recognized by AIRLINE and MAC that (i) AIRLINE shall be prohibited from subleasing any of its Premises toanother Airline without the prior written consent of MAC, which consent shall not be unreasonably withheld,delayed or conditioned, however, MAC shall not be required to approve any sublease if there is vacant spaceavailable from MAC and (ii) from time to time during the term of this Agreement it may become necessary for theAIRLINE to accommodate another Airline within its Premises or for MAC unilaterally to require AIRLINE toaccommodate another Airline(s) within AIRLINE’s Premises as required for the following:

a. To comply with any applicable rule, regulation, order or statute of any governmental entity that has

jurisdiction over MAC, and to comply with federal grant assurances applicable to MAC. b. To implement a Capital Project at the Airport. c. To facilitate the providing of air services at the Airport by an Airline (“Requesting Airline”) when no

Airline serving the Airport is willing to accommodate the Requesting Airline’s operational needs orrequirements for facilities at reasonable costs or on other reasonable terms.

d. To accommodate the irregular activity of another Airline (“Irregular Need”). e. To accommodate the Irregular Need of AIRLINE. To the extent possible, AIRLINE shall accommodate its

Irregular Need on its Preferential Use gate(s). When such activity may not be accommodated onAIRLINE’S Preferential Use gate(s), AIRLINE shall seek accommodation from other Airlines on its ownthrough coordination among such Airlines’ supervisors and managers. In the event accommodation cannotbe found on another Airline’s premises, AIRLINE may seek assistance from MAC. MAC’s options shallinclude assigning use of non-leased gate premises or referring AIRLINE to MAC’s agent responsible formanaging MAC’s remote parking locations. For an Irregular Need, MAC shall not be responsible forunilaterally accommodating an Airline on another Airline’s leased premises. AIRLINE will be responsiblefor payment of all applicable fees and charges including, if applicable, appropriate FIS charges inconnection with such accommodation.

f. To accommodate a flight that has declared an emergency and such flight shall have priority over all other

flight scheduling.

3. In responding to a request for facilities for either a Requesting Airline or to accommodate Irregular Need, MACshall first work with the Requesting Airline or Airline seeking

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accommodation of Irregular Need to use existing Common Use Space or unassigned space, if any is available.

4. When necessary, MAC shall make a determination as to whether any Airline has underutilized facilities or capacity

available. In making such determination MAC shall not act unreasonably. Such determinations by MAC shall takeinto consideration the following:

a. The then existing utilization of AIRLINE’s Premises (including any requirements for spare gates and

accommodation of AIRLINE’s Affiliates) and any bona fide plan of AIRLINE or any other Airline for theincreased utilization of the AIRLINE’s Premises to be implemented within twelve (12) months thereafter(any non-public information provided by AIRLINE regarding planned or proposed routes, schedules oroperations shall be treated as confidential by MAC to the maximum extent permitted by law).

b. The need for compatibility among the current schedules, including RON requirements, flight times,

operations, operating procedures and equipment of AIRLINE (and its Affiliate(s)) or any other Airline andthose of the Requesting Airline or the Airline seeking accommodation of Irregular Need, as well as theneed for labor harmony, facilities, resources, and other relevant factors.

c. During irregular operations, AIRLINE’S scheduled operations will have priority over any accommodated

Airline on its Premises. d. Any flights scheduled on AIRLINE’s Preferential use gate(s) must vacate the gate at least 45 minutes

before the next use by AIRLINE. e. The maximum gate occupancy by narrow body aircraft for a Requesting Airline or an Airline seeking

accommodation of Irregular Need shall be 45 minutes for an arrival, 45 minutes for a departure, or 1 hourand 30 minutes for a combined turn.

f. The maximum scheduled gate occupancy by wide body aircraft for a Requesting Airline or an Airline

seeking accommodation of Irregular Need shall be 1 hour for an arrival, 1 hour for a departure, or 2 hoursfor a combined turn.

g. Any aircraft occupying a gate longer than the above timeframes may be required to vacate the gate to

accommodate other operations. Should this occur, upon AIRLINE’s request MAC will notify the Airlinebeing accommodated as soon as MAC becomes aware of the requirement, but in any event no later than 15minutes before the time that actual vacating is required. Failure to vacate shall result in the imposition ofadditional overtime fees by AIRLINE to the accommodated Airline. If an Airline being accommodateddoes not vacate a gate as required, and AIRLINE requires the use of such gate, upon AIRLINE’s requestMAC shall instruct Airline to remove its aircraft to another location leased by the Airline or to a remotelocation as designated by MAC’s agent. If failure of the accommodated Airline to remove its aircraftresults in AIRLINE requiring remote parking from MAC, MAC shall invoice the accommodated Airlinefor any remote parking fees that would be charged to AIRLINE.

h. Before MAC accommodates a Requesting Airline within AIRLINE’s Premises, MAC must give AIRLINE

ten (10) days prior written notice of its intent. AIRLINE must accept accommodation or notify MAC withinten (10) business

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days after AIRLINE’s receipt of such notice that it wishes to meet with MAC to show cause why theaccommodation should not be made.

5. The accommodated Airline shall be responsible for the payment of all applicable fees and charges for such use,

including but not limited to appropriate FIS charges and overtime fees. 6. In the event that any portion of AIRLINE’s Premises are used to accommodate another Airline or Irregular Need:

a. AIRLINE shall be authorized to (i) charge such accommodated Airline a reasonable accommodation feeand (ii) require from the accommodated Airline an indemnity and defense undertaking, so long as suchundertaking is not more favorable to AIRLINE than that which AIRLINE provide to MAC.

b. Each accommodated Airline shall be responsible for (i) ensuring that its agents, employees, and contractors

are properly qualified prior to operating any and all equipment and (ii) are responsible for securing jetwaydoors upon completion of use.

c. AIRLINE shall not be required to indemnify and save harmless MAC, its employees or agents with regard

to any claim for damages or personal injury arising out of any accommodated Airline’s use of AIRLINE’spremises, unless caused by the negligence of AIRLINE;

d. AIRLINE shall not be liable to any accommodated Airline or any of its agents, employees, servants or

invitees, for any damage to persons or property due to the condition or design or any defect in the Premiseswhich may exist or subsequently occur, and such accommodated Airline, with respect to it and its agents,employees, servants and invitees shall be deemed to have expressly assumed all risk and damage to personsand property, either proximate or remote, by reason of the present or future condition or use of AIRLINE’SPremises. Further, such accommodated Airline shall be deemed to have agreed to release, indemnify, holdharmless and defend AIRLINE, the MAC, and their respective officers, directors, employees, agents,successors and assigns, from and against any and all suits, claims, actions, damages, liabilities andexpenses (including, without limitation, attorneys’ fees, costs and related expenses) for bodily or personalinjury or death to any persons and for any loss of, damage to, or destruction of any property, including lossof use, incidental and consequential damage thereof, arising out of or in any manner connected with the useof AIRLINE’S Premises by such accommodate Airline or any of its agents, representatives, employees,contractors or invitees, whether or not occurring or arising out of the negligence, whether sole, joint,concurrent, comparative, active, passive, imputed or any other type, of AIRLINE, MAC or their respectiveofficers, directors, employees or agents; provided, however, the foregoing indemnification shall not applyto any claim or liability resulting from the gross negligence or willful misconduct of AIRLINE, its officers,directors, employees or agents.

e. MAC shall be responsible for ensuring that such accommodated Airline has in full force and effect MAC’s

required insurance coverages.

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f. Without limiting any other provision of this 2007A Amendment, AIRLINE’s duty to accommodate

another airline shall be conditioned on and subject to the satisfaction of all requirements of this Section 6.

7. In the event of a labor stoppage or other event which results in the cessation or substantial reduction in AIRLINE’sflights operations at the Airport, AIRLINE will immediately take all reasonable efforts, including but not limited to,moving of aircraft or equipment, providing access to AIRLINE’s holdrooms and jet bridges or anything else inAIRLINE’s control, in order to accommodate the operations of other Airlines providing air service to the Airport;provided that: (a) AIRLINE at all times will have access to its premises and equipment for operational reasons and(b) AIRLINE shall not be required to take any action which would interfere with its ability to re-institute serviceupon cessation of labor stoppage or other event. Subject to a mutually acceptable agreement between MAC andAIRLINE covering such use, AIRLINE shall have the right to charge reasonable fees and to require reasonableadvance payment for such use of AIRLINE’s gates, holdroom areas, and loading bridges (and any such fees not inexcess of 115% of the rates and charges payable by AIRLINE hereunder for such premises shall be deemedreasonable).

8. The foregoing shall not be deemed to abrogate, change, or affect any restrictions, limitations or prohibitions on

assignment or use of the AIRLINE’s Premises by others under this Agreement and shall not in any manner affect,waive or change any of the provisions thereof.

V. SHORT TERM GATES

Exhibit V to the Lease has been attached hereto as Exhibit 5. Article IV.H. “Short Term Gates” of the Lease is hereby modified to add subsection 6: 6. If AIRLINE is leasing three (3) or fewer holdrooms from MAC, MAC agrees to not cancel the lease of more than

one Short Term Gate AIRLINE may be leasing in accordance with the procedures identified in Article IV.H.2. aslong as AIRLINE has adhered to the payment and utilization requirements identified within Article IV.H.5. for allleased gates for the previous twelve (12) consecutive months.

VI. RENTS, FEES, AND CHARGES

Article V.B. “Rents, Fees, and Charges” of the Lease is hereby deleted in its entirety and replaced with the following: B. Rents, Fees, and Charges

1. Landing Fees

AIRLINE shall pay to MAC monthly landing fees to be determined by multiplying the number of1,000-pound units of AIRLINE’s Total Landed Weight during the month by the then-current landing feerate. The landing fee rate shall be calculated according to procedures set forth in Article VI or Article VI.(Alternate).

2. Environmental Surcharges. Intentionally Omitted. 3. Terminal Apron Fees

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AIRLINE shall pay to MAC monthly Terminal Apron fees to be determined by multiplying the number oflineal feet of Terminal Apron under lease to AIRLINE (excluding Concourses A and B) during the monthby the then-current Terminal Apron rate. The Terminal Apron rate shall be calculated according to theprocedures set forth in Article VI or Article VI. (Alternate) hereof.

4. Concourse A and B Terminal Apron Fees

AIRLINE shall pay to MAC monthly Terminal Apron Fees associated with Concourses A and B at the rateof fifty percent (50%) of the lineal feet associated with Concourses A and B.

5. Terminal Building Rents and Surcharge

AIRLINE shall pay to MAC monthly Terminal Building rentals and the Lindbergh Terminal Repair andReplacement Surcharge for its Exclusive (janitored and unjanitored), Preferential and Common Use Spacein the Terminal Building. The Terminal Building rental rates shall be calculated according to theprocedures set forth in Article VI. or Article VI. (Alternate) Terminal Building rentals for Common Use Space (except the IAF) shall be prorated among SignatoryAirlines using the Common Use Formula.

6. Carrousel and Conveyor Charges

AIRLINE shall pay to MAC monthly carrousel and conveyor charges based upon maintenance andoperating costs and Debt Service. The carrousel and conveyor charges shall be calculated according to theprocedures set forth in Article VI or Article VI. (Alternate) and shall be prorated among Signatory Airlinesusing the Common Use Formula.

7. IAF Gate Fees

AIRLINE shall pay to MAC monthly IAF gate fees determined by multiplying the number of arrivals at theIAF by AIRLINE’s propeller aircraft, narrow-body jet aircraft, and wide-body jet aircraft by $400, $800,and $1,200, respectively.

8. IAF Use Fees

AIRLINE shall pay to MAC monthly IAF use fees determined by multiplying the number of AIRLINE’sinternational passengers arriving at the IAF during the month by the IAF use fee rate. The IAF use fee rateshall be calculated according to procedures set forth in Article VI or Article VI. (Alternate).

9. Other Fees and Charges

AIRLINE shall pay to MAC reasonable fees for the various other services provided by MAC to AIRLINE.These services include, but may not be limited to, the following:

a. Use of the Humphrey Terminal and Humphrey ramp at rates established from time to time by

MAC.

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b. Use of Garage Parking Cards by AIRLINE’s employees at rates set forth in the Guidelines for

Administering Validated Airport Parking. c. Use of designated employee parking facilities by AIRLINE’s employees at rates established from

time to time by MAC. d. Nonroutine Terminal Apron cleaning and other special services requested by AIRLINE at rates

that reflect the costs incurred by MAC. e. Security and personnel identification badges for AIRLINE’s personnel at rates established from

time to time by MAC. f. Office services, such as facsimile, photocopying, or telephone provided by MAC. Charges for

these services shall be at the rates that MAC customarily charges for such services. g. Charges for the cost of separately metered water and sewer and other such utilities not otherwise

included in the calculation of rents, fees, and charges.

VII. CALCULATION OF RENTS, FEES, AND CHARGES

Article VI (Alternate), “Calculation of Rents, Fees and Charges” is hereby added to the Lease and shall be placedimmediately following Article VI (“Calculation of Rents, Fees, and Charges”) as follows: VI (ALTERNATE). CALCULATION OF RENTS, FEES AND CHARGES. A. General

Notwithstanding Article VI hereof, effective January 1, 2006, and for each Fiscal Year thereafter, rents, fees, andcharges will be reviewed and recalculated based on the principles and procedures set forth in this Article VI(Alternate). The annual costs associated with each of the indirect cost centers shall be allocated to each of theAirport Cost Centers based on the allocations as set forth in Exhibit M, Indirect Cost Center Allocation, whichallocations may be amended from time to time by mutual consent of MAC and a Majority-In-Interest of SignatoryAirlines. Such consent may not be unreasonably withheld.

B. Calculation/Coordination Procedures

1. AIRLINE shall provide to MAC: (a) on or before August 1 of each year a preliminary estimate of TotalLanded Weight and Enplaned Passenger for the succeeding calendar year of AIRLINE and each AffiliatedAirline, unless separately reported to MAC by such Affiliated Airline; and (b) on or before October 1 ofeach year a final estimate of such weight. If the final estimate is not so received, MAC may continue torely on the preliminary estimate for the MAC budgeting process. MAC will utilize the forecast indeveloping its preliminary calculation of Total Landed Weight and Enplaned Passengers for use in thecalculation of rents, fees, and charges for the ensuing Fiscal Year.

2. On or before October 15 of each Fiscal Year, MAC shall submit to AIRLINE a preliminary calculation of

rents, fees, and charges for the ensuing Fiscal Year. The preliminary calculation of rents, fees, and chargeswill include, among others, MAC’s estimate of all revenue items, Operation and Maintenance Expenses,Debt

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Service, Capital Outlays, required deposits, including amounts necessary to be deposited in the CoverageAccount in order to meet MAC’s rate covenant under the Trust Indenture, and Rentable Space.

3. Within fifteen (15) days after receipt of the preliminary calculation of rents, fees, and charges, if requested

by the Signatory Airlines, a meeting shall be scheduled between MAC and the Signatory Airlines to reviewand discuss the proposed rents, fees, and charges.

4. MAC shall then complete a calculation of rents, fees, and charges at such time as the budget is approved,

taking into consideration the comments or suggestions of AIRLINE and the other Signatory Airlines. 5. If, for any reason, MAC’s annual budget has not been adopted by the first day of any Fiscal Year, the rents,

fees, and charges for the Fiscal Year will initially be established based on the preliminary calculation ofrents, fees, and charges until such time as the annual budget has been adopted by MAC. At such time as theannual budget has been adopted by MAC, the rents, fees, and charges will be recalculated, if necessary, toreflect the adopted annual budget and made retroactive to the first day of the Fiscal Year.

6. If, during the course of the year, MAC believes significant variances exist in budgeted or estimated

amounts that were used to calculate rents, fees, and charges for the then current Fiscal Year, MAC mayafter notice to Airlines adjust the rents, fees, and charges for future reports to reflect current estimatedamounts.

C. Landing Fees

MAC shall calculate the landing fee rate in the following manner and as illustrated in Exhibit N (revised). 1. The total estimated Airfield Cost shall be calculated by totaling the following annual amounts:

a. The total estimated direct and allocated indirect Operation and Maintenance Expenses allocable tothe Airfield cost center.

b. The estimated Debt Service net of amounts paid from PFCs or grants allocable to the Airfield cost

center. c. The cost of Runway 17/35 deferred and not yet charged from the date of occupancy through

December 31, 2005 will be charged starting January 1, 2006 through December 31, 2035 at$79,535.16 annually.

d. The Landing Fee Repair and Replacement Amount. e. The amount of any fine, assessment, judgment, settlement, or extraordinary charge (net of

insurance proceeds) paid by MAC in connection with the operations on the Airfield, to the extentnot otherwise covered by Article X.

f. The amounts required to be deposited to funds and accounts pursuant to the terms of the Trust

Indenture, including, but not limited to, its Debt Service reserve funds allocable to the Airfieldcost center. MAC agrees to exclude

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from the calculation of landing fees the amounts which it may deposit from time to time to themaintenance and operation reserve account and the Coverage Account established and maintainedpursuant to the Trust Indenture except for such amounts which are necessary to be deposited to theCoverage Account in order for MAC to meet its rate covenant under the Trust Indenture.

2. The total estimated Airfield Cost shall be adjusted by the total estimated annual amounts of the following

items to determine the Net Airfield Cost:

a. Service fees received from the military, to the extent such fees relate to the use of the Airfield; b. General aviation and nonsignatory landing fees; c. Debt Service on the Capital Cost, if any, disapproved by a Majority-In-Interest of Signatory

Airlines.

3. The Net Airfield Cost shall then be divided by the estimated Total Landed Weight (expressed in thousandsof pounds) of the Signatory Airlines operating at the Airport to determine the landing fee rate per 1,000pounds of aircraft weight for a given Fiscal Year.

D. Terminal Apron Fees

MAC shall calculate the Terminal Apron rate in the following manner and as illustrated in Exhibit N (revised). 1. The total estimated Terminal Apron Cost shall be calculated by totaling the following annual amounts:

a. The total estimated direct and allocated indirect Operation and Maintenance Expenses allocable tothe Terminal Apron cost center.

b. The estimated Debt Service net of amounts paid from PFCs or grants allocable to the Terminal

Apron cost center (excluding hydrant fueling repairs and modifications). c. The cost of Concourse A and B Apron Area deferred and not yet charged from the date of

occupancy through December 31, 2005 will be charged starting January 1, 2006 throughDecember 31, 2035 at $159,950.19 annually.

d. The amounts required to be deposited to funds and accounts pursuant to the terms of the Trust

Indenture, including, but not limited to, its Debt Service reserve funds allocable to the TerminalApron cost center. MAC agrees to exclude from the calculation of Terminal Apron fees theamounts which it may deposit from time to time to the maintenance and operation reserve accountand the Coverage Account established and maintained pursuant to the Trust Indenture except forsuch amounts which are necessary to be deposited to the Coverage Account in order for MAC tomeet its rate covenant under the Trust Indenture.

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e. The Terminal Apron Repair and Replacement Amount.

2. The Terminal Apron Cost shall then be divided by the total estimated lineal feet of Terminal Apron, todetermine the Terminal Apron rate per lineal foot for a given Fiscal Year. For the purposes of thiscalculation, lineal feet of Terminal Apron shall be computed as the sum of the following:

a. Lineal feet of the Terminal Apron (excluding the Terminal Apron associated with Concourses A &

B); and b. Fifty percent (50%) of lineal feet of the Terminal Apron associated with Concourse A & B.

E. Terminal Building Rents

MAC shall calculate the terminal building rental rate for unjanitored and janitored space in the Terminal Building asset forth in subsections 1 and 2 of this Article VI. (Alternate) E. 1. MAC shall calculate the terminal building rental rate for unjanitored space in the Terminal Building in the

following manner and as illustrated in Exhibit N (revised).

a. The total estimated Terminal Building Cost shall be calculated by totaling the following annualamounts:

1) The total estimated direct and allocated indirect Operation and Maintenance Expenses

allocable to the Terminal Building cost center. 2) The estimated direct and allocated Debt Service net of amounts paid from PFCs or grants

allocable to the Terminal Building cost center. 3) The cost of Concourse A, B, C and D deferred and not yet charged from date of

occupancy through December 31, 2005 will be charged starting January 1, 2006 throughDecember 31, 2035 at $2,910,547.40 annually.

4) The amounts required to be deposited to funds and accounts pursuant to the terms of the

Trust Indenture, including, but not limited to, its Debt Service reserve funds allocable tothe Terminal Building cost center. MAC agrees to exclude from the calculation ofTerminal Rents the amounts which it may deposit from time to time to the maintenanceand operation reserve account and the Coverage Account established and maintainedpursuant to the Trust Indenture except for such amounts which are necessary to bedeposited to the Coverage Account in order for MAC to meet its rate covenant under theTrust Indenture.

b. The total estimated Terminal Building Cost shall be reduced by the total estimated annual amounts

of the following items to determine the Net Terminal Building Cost:

1) Reimbursed expense:

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a) Steam and chilled water on the G Concourse;

b) Carrousel and conveyor Capital Cost and Operation and Maintenance Expense; c) Ground Power; d) Loading Dock; and e) Consortium Utilities.

2) Janitorial Operation and Maintenance Expenses, as determined by MAC.

c. The Net Terminal Building Cost shall then be divided by the total estimated Rentable Space in theTerminal Building to determine the terminal building rental rate per square foot for unjanitoredspace for a given Fiscal Year. (See Initial Rentable Square Footage, Exhibit O).

2. MAC shall calculate the terminal building rental rate for janitored space by totaling the following rates and

as illustrated in Exhibit N (revised):

a. The terminal building rental rate per square foot for unjanitored space for a given Fiscal Year, ascalculated in this Section; and

b. An additional rate per square foot, the janitored rate, calculated by dividing the total estimated

direct janitorial Operation and Maintenance Expenses, as determined by MAC, by the totaljanitored space in the Terminal Building (excluding MAC and mechanical space).

F. Carrousel and Conveyor Charge

1. MAC shall calculate the carrousel and conveyor charge, as illustrated in Exhibit N (revised), by totaling thefollowing annual amounts: equipment charges associated with the carrousel and conveyor, including annualDebt Service, maintenance expense, and service charge.

2. MAC shall prorate the carrousel and conveyor charge among the Signatory Airlines using the Common Use

Formula.

G. IAF Use Fees

The IAF use fee for use of the IAF and any associated gates shall be effective through December 31, 2015 and shallbe based upon: 1. The cost of the maintenance and operation of the International Arrivals Facility which may include, but is

not limited to:

a. utilities; b. cleaning:

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c. maintenance (including the costs of maintaining the security equipment that existed as of

April 1998); d. police, fire, and administrative cost allocation; e. costs of providing passenger baggage carts, if any; f. costs of providing staff parking for federal inspections agency staff; and

g. $4.17 per square foot recoupment for lost rental area in the G Concourse.

2. Costs associated with the operation of dual international arrivals facility locations at the Airport, based onthe appropriate allocation of costs between the two facilities, not otherwise funded by the federalinspections agencies including, but not limited to additional personnel and equipment used by thoseagencies; and

3. Debt Service, if any; and Items (1) through (3) above, for which AIRLINE will be billed monthly, shall be set annually at an estimated chargethrough MAC’s budget process and then adjusted at year end for actual costs pursuant to certified audit by MAC’sexternal auditors and such difference shall be charged or credited to AIRLINE and paid by AIRLINE or MACwithin thirty (30) days thereafter.

H. Year-End Adjustments of Rents, Fees, and Charges

1. As soon as practical following the close of each Fiscal Year, but in no event later than July 1, MAC shallfurnish AIRLINE with an accounting of the costs actually incurred and revenues and credits actuallyrealized during such Fiscal Year with respect to each of the components of the calculation of the rents, fees,and charges calculated pursuant to this Article broken down by rate making Cost Center.

2. In the event AIRLINE’s rents, fees, and charges billed during the Fiscal Year exceed the amount of

AIRLINE’s rents, fees, and charges required (as recalculated based on actual costs and revenues), suchexcess shall be refunded or credited to AIRLINE.

3. In the event AIRLINE’s rents, fees, and charges billed during the Fiscal Year are less than the amount of

AIRLINE’s rents, fees, and charges required (as recalculated based on actual costs and revenues), suchdeficiency shall be charged to AIRLINE in a supplemental billing.

I. Revenue Sharing

1. Beginning January 1, 2006, subject to Section IX of the 2007A Amendment to the Airline OperatingAgreement and Terminal Building Lease, in conjunction with its Year End Adjustments of Rents, Fees andCharges, MAC will rebate to AIRLINE a portion of the Annual Gross Revenues for Selected Concessionsfor the most recent Fiscal Year under the following schedule (“Revenue Sharing”) (all dollar amounts setforth in this Article VI (Alternate) shall apply for 2006 only and shall be escalated for each Fiscal Yearafter 2006 on an annual compounded basis by the Selected Concession Revenue Escalation Factor):

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a. If Annual Gross Revenues for the Selected Concessions for 2006 are between $25 million and

$32.299 million for the Fiscal Year, 25% of gross revenues; b. If Annual Gross Revenues for the Selected Concessions are above $ 32.299 million for the Fiscal

Year, 25% of gross revenues up to $32.299 million and 50% of gross revenues above $32.299million;

2. Reduced sharing of gross revenues if Annual Gross Revenues for the Selected Concessions are below $25

million for the Fiscal Year;

a. $24 million to $24.99 million – 20%

b. $23 million to $23.99 million – 15%

c. $22 million to $22.99 million – 10%

d. $21 million to $21.99 million – 5% 3. The total rebate amount shall be allocated among Signatory Airlines according to their pro rata share of

Enplaned Passengers for the Fiscal Year and shall be structured as a post-year-end check to AIRLINEissued by MAC no later than 240 days following each Fiscal Year, subject to correction following anyapplicable audit;

4. Notwithstanding the foregoing, MAC shall have the right to reduce the amount of Revenue Sharing with

respect to any Fiscal Year to the extent necessary so that the Net Revenues of the MAC taking into accountthe Revenue Sharing for such Fiscal Year will not be less than 1.25x of the total Debt Service of MAC forsuch Fiscal Year. In the event that the Revenue Sharing is reduced in any Fiscal Year, by any amount (the“Deferred Revenue Sharing Amount”) as a result of the operation of this Article VI (Alternate), MAC willaccrue the Deferred Revenue Sharing Amount and credit such amount to the Signatory Airlines in thesubsequent Fiscal Year (or, if such amount may not be credited in accordance with this Article VI(Alternate) in such subsequent Fiscal Year, then such amount will be credited in the next succeeding FiscalYear in which such credit may be issued in accordance with this Article VI (Alternate); and

5. The rights of any Signatory Airline to any payment, credit or application of Revenue Sharing to or for the

benefit of such Signatory Airline is a contract right, in existence and effective as of January 1, 2006(subject to Section IX of the 2007A Amendment), and any such payment, credit or application actuallymade is proceeds thereof.

J. Reversion to Pre-Existing Rate Structure.

Notwithstanding anything in the Lease or any other agreement between MAC and AIRLINE, in the event AIRLINEis not in compliance with any payment obligation under any agreement with the MAC during the period followingany applicable notice and cure period under such agreement and continuing until payment of any such amounts (the“Payment Default Period”), MAC will have the right, upon written notice to AIRLINE (provided that, if AIRLINEis in bankruptcy, no notice shall be required for the effectiveness of the following, although invoices reference theadditional amounts due as a result of such

51


payment default and set forth the applicable rates that are then in effect as a result of such payment default), to:(i) have AIRLINE’s payment obligations under the Lease during the Payment Default Period revert to thePre-Existing Rate Structure, and (ii) apply the amount of any Rate Differential (as defined in Section IX hereof) forAIRLINE during such period and the amount of any accrued and unpaid Revenue Sharing credits (if any) otherwisedue to AIRLINE pursuant to Article VI (Alternate) for the Payment Default Period against any amounts owed byAIRLINE to MAC to the extent necessary to cure such payment defaults.

A revised Exhibit N to the Lease has been attached hereto as Exhibit 3.

VIII. BANKRUPTCY

Article XI.E. “Bankruptcy” of the Lease is amended to add the following subsection E.6: 6. In addition to the other rights of MAC hereunder, to the extent necessary, to effect its rights under Article VI

(Alternate).J. of the Lease in any future bankruptcy involving AIRLINE pursuant to the doctrines of setoff and/orrecoupment.

IX. AMENDMENT EFFECTIVE DATE AND CONDITIONS

The amended rate structures and changes in rate methodology (the “Rate Changes”) and the Revenue Sharing (the RevenueSharing together with the Rate Changes, shall be called the “Savings”) set forth in Sections VI and VII of the 2007AAmendment (as hereinafter defined) shall be effective commencing January 1, 2006 and shall continue through the term ofeach Airline’s Airline Operating Agreement and Terminal Building Lease, subject to the terms and conditions thereof. However, MAC and AIRLINE hereby acknowledge and agree that receipt of any credits for the Savings under this 2007AAmendment is expressly conditioned upon the entry of an order in the 2005 Bankruptcy Case (which would include an orderconfirming a plan of reorganization and which shall contain the provisions regarding effectiveness set forth herein) (the“Assumption Order”) not later than September 30, 2007 approving the assumption by NAI of the executory agreementsrelating to GO15, GO13, the Lease, and the other leases and executory agreements between NAI and MAC set forth onExhibit 4 hereto (the “Assumed Agreements”). The Assumption Order shall provide that the effectiveness of the assumptionof the Assumed Agreements is conditioned upon the approval by all of the Signatory Airlines of this 2007A Amendment orthe Third Amendment to Airline Operating Agreement and Terminal Building Lease (“NAI’s Third Amendment”) as anamendment to each Signatory Airline’s Airline Operating Agreement and Terminal Building Lease. Within thirty (30) daysafter the later to occur of (i) the entry of the Assumption Order and (ii) approval by all of the Signatory Airlines of this2007A Amendment or NAI’s Third Amendment and any other documents implementing the Savings (the “AmendmentEffective Date”), MAC will (A) issue a check to (i) each Signatory Airline in an amount equal to the difference between therates and charges calculated under the pre-existing Airline Operating Agreement and Terminal Building Lease with eachSignatory Airline, without taking into account the changes set forth in this 2007A Amendment (“Pre-Existing RateStructure”), and such rates and charges calculated taking into account the Rate Changes and other revisions to the AirlineOperating Agreement and Terminal Building Lease with each Signatory Airline that are set forth in this 2007A Amendment(“Amended Rate Structure”, with such difference between the Pre-Existing Rate Structure and the Amended Rate Structure,the “Rate Differential”) for the period commencing January 1, 2006 through the Amendment Effective Date, (ii) eachSignatory Airline for the amount of the Revenue Sharing for 2006 and any succeeding calendar year ending prior to theAmendment Effective Date with such credit issued upon the completion of the certified independent audits report for suchyear, and (iii) each Signatory Airline for interest on the credit amounts referenced in clauses (i) and (ii) of this sentence atMAC’s actual earned overnight interest rate (“Applicable Interest Rate”) from the period commencing on February

52


12, 2007 (but in the case of 2006 Revenue Sharing, not earlier than the completion of the comprehensive annual financialreport for 2006) (“Interest Commencement Date”) through the date of the issuance of such credits, and (B) implement theterms of the 2007A Amendment as of the Amendment Effective Date.

The remainder of this page has been intentionally left blank.

53


IN WITNESS WHEREOF, the parties have signed and executed this Amendment in duplicate the day and year first below written.

METROPOLITAN AIRPORTS COMMISSION Date:

, 2007 By:

Its:

AIRLINE Date:

, 2007 By:

Its:


) ss.COUNTY OF HENNEPIN ) This instrument was acknowledged before me on the day of , 2007, , the of theMetropolitan Airports Commission on behalf of the Commission.

Notary Public


) ss.COUNTY OF RAMSEY ) This instrument was acknowledged before me on the day of , 2007, , the of .

Notary Public

54


EXHIBIT 1

AIRLINE OPERATING AGREEMENT AND TERMINAL BUILDING LEASE AND AMENDMENTS

Agreement/Amendment

Effective Date Airline Operating Agreement and Terminal Building Lease

January 1, 1999

55


EXHIBIT 2

LIST OF MAC BOND OBLIGATIONS

Current Outstanding Debt

General Obligation Revenue Bonds

Series 13

(2015)

Series 14

(2011)

Series 15

(2022)

General Airport Revenue Bonds

Series 1998B Sr

(2016)

Series 1999B Sr

(2022)

Series 2000B Sr

(2021)

Series 2001B Sr

(2024)

Series 2007A Sr

(2032)

Series 2001D Sub

(2016)

Series 2003A Sub

(2031)

Series 2004A Sub

(2031)

Series 2005A Sub

(2035)

Series 2005B Sub

(2026)

Series 2005C Sub

(2032)

Series 2007B Sub

(2032)

Commercial Paper

Series A

Series B

Series C

Series D

Notes Payable –Equipment Leasing

2003 Financing

(2008)

2004 Financing

(2009) Other Notes Payable/Financing Leases

56




Calculation of Landing Fee Rates

ArticleReference

200x

V1.C.1.

Direct Operation and Maintenance Expense(Includes Control Tower, Noise Abatement &Operations)

$ 8,500,000


16,500,000


7,000,000

Runway 17/35 Deferral

79,535

Capital Outlays/Deposit to Repair & Replacement Fund

10,200,000

Direct and Indirect Cost of Capital Outlays/Leases(Original)

1,500,000

Fine, Assessment, Judgment or Settlement

—


—


—


—

Total Airfield Cost

$ 40,479,535

Less:

V1C.2.

Service Fees(Military)

$ 150,000

General Aviation Landing Fees

880,000

Nonsignatory Landing Fees(HHH and Commuter)

720,000

Off-Airport Aircraft Noise Costs

—

Projects Rejected by MII of Signatory Airlines

—

Total Adjustments

$ 1,750,000

Net Airfield Cost

$ 38,729,535

V1.C.3.

Total Landed Weight of Signatory Airlines(1,000-lb. Units)

23,500,000

Landing Fee Rate per 1,000 lbs.

$ 1.648

57





Calculation of Terminal Apron Rates

ArticleReference

200x

V1.E.1.

Direct Operation and Maintenance Expense

$ 210,000


3,500,000


10,000

Direct and Indirect Cost of Capital Outlays/Lease

500,000

Capital Outlays/Deposit to Repair & Replacement Fund

600,000

Concourse A & B Ramp Deferral Recovery

159,950


—


—


—

Total Terminal Apron Cost

$ 4,979,950

V1.E.2.

Total Lineal Feet of Terminal Apron

9,971

(Excluding Terminal A & B Ramp)

Terminal A Apron Lineal Feet 1,253

Terminal B Apron Lineal Feet 1,409

V1.E.3.

Total Terminal A & B Apron 2,662

Terminal A & B Apron @ ½

1,331

Total Chargeable Terminal Apron Lineal Feet

11,302

Terminal Rate Per Lineal Foot

$ 440.626

58



Metropolitan Airports CommissionMinneapolis-St. Paul International Airport

Illustration of Calculation of Rates for Rents, Fees and ChargesCalculation of Terminal Building Rental Rate (Janitored and Unjanitored Space)

ArticleReference

200x

V1.G.1.a

Unjanitored Space Rate Calculation

Direct Operation and Maintenance Expense(Includes Energy Management Center)

$ 21,490,000


9,000,000


21,700,000

Terminal A-D Deferral Recovery

2,910,537


500,000


—


—


—

Total Terminal Building Cost

$ 55,600,537

Less:

V1.G1.b.

Steam and Chilled Water Reimbursement (G Concourse)

$ 940,000

Carrousel and Conveyor Costs

220,000

Ground Power

390,000

Loading Dock

2,265,000

Consortium Utilities

440,000

Total Adjustments

$ 4,255,000

Net Terminal Building Cost

$ 51,345,537

V1.G.1.c.

Total Rentable Space

$ 1,088,393

Terminal Building Rental Rate per Square Foot for Unjanitored Space

$ 47.176

Terminal Airlines R & R Fund Surcharge Amount


$ 6,000,000

Weighted Average Airline Rentable Space(Janitored and Unjanitored)

570,000

Surcharge Amount

$ 10.526

59






Janitored Space Rate Calculation

V1.G.2.

Total Direct Janitored Operation and Maintenance Expenses

$ 5,800,000

Total Janitored Space (1)

975,000

Janitored Rate per Square Foot

$ 5.949

Terminal Building Rental Rate per Square Foot for Unjanitored Space (Above)

$ 47.176

Terminal Building Rental Rate per Square Foot for Janitored Space

$ 53.125

(1) Excludes MAC and mechanical space.

60





Calculation of Carrousel and Conveyor Charge

ArticleReference

200x

V1.H.1.

Direct and Indirect Maintenance Depreciation Charges

$ 250,000


—


—

Total

$ 250,000

61





Calculation of Airline Cost Per Enplaned Passenger

Actual200x

Landing Fees-Signatory

$ 36,000,000

Landing Fees-HHH Nonsignatory

70,000

Landing Fees-Commuter Nonsignatory

650,000

Ramp Fees-Signatory

4,410,000

Ramp Fees-HHH Nonsignatory

15,000

Ramp Fees-Commuter Nonsignatory

—

Terminal Building

33,920,000

IAF Charges

2,850,000

Carrousels & Conveyors

205,000

Old Portion of G Concourse

421,000

Lobby Fees

6,210,000

FIS Surcharge

880,000

HHH Terminal Building Rent

640,000

Concessions Rebate

(9,100,000)Apron Fees – HH Terminal

500,000

Apron Fees - Commuter

—

Police/Fire/Admin. – G Concourse

700,000

Steam/Chilled Water – G Concourse

900,000

Janitorial – G Concourse

700,000

Self-Liquidating – C/G Concourse

1,592,000

Total Costs

$ 81,563,000

Enplaned Passengers

17,000,000

Airline Cost Per Enplaned Passenger

$ 4.798

62


EXHIBIT 4

ASSUMED AGREEMENTS

NWA Assumption of Agreements and Survival of Obligations

1. All Executory contracts that were entered into in connection with the GO15 and GO13 Bonds, excluding adequate protection

stipulations 2. All other obligations and agreements related to the GO 15 and GO 13 Bonds including but not limited to all guaranties,

security agreements, mortgages and other documents shall remain unimpaired and fully enforceable following assumption ofthe GO 15 and GO 13 executory contracts

3. Airline Operating Agreement and Terminal Building Lease dated as of January 1, 1999 (as amended) 4. Main Base Agreement dated as of March 5, 1956 as amended (a.k.a. Building B Lease) 5. Republic Airlines, Inc. Main Base Lease and Agreement dated as of December 19, 1966 as amended (a.k.a. Building C

Lease) 6. Lease Agreement dated as of October 6, 1969 as amended (a.k.a. Building F Lease) 7. Runway 12R De-Icing Operations Center Site Agreement dated as of December 2003 8. Runway 30R De-Icing Operations Center Agreement dated as November 2001 9. Deicing Operations Center Agreement dated as of April 1998 as amended (a.k.a. 12L Deicing Operations Center Lease) 10. Runway 17/35 Glycol Reclamation Facility Agreement dated as of August 2004. 11. Lease and Fuel Agreement as Restated and Amended for Aviation Fuel Facilities dated February 1, 2005.

63


EXHIBIT 5

EXHIBIT V

Same as Third Amendment.

64


EXHIBIT 6

EXHIBIT W

Memorandum of Understanding

For Ground Handling on Lindbergh Terminal FIS Gates

This Memorandum of Understanding (“MOU”) is made the day of , 2006, between the Metropolitan AirportsCommission, a public corporation of the State of Minnesota (“MAC”), (insert airline name) authorized to dobusiness in the State of Minnesota (“AIRLINE”), and Northwest Airlines, Inc., a Minnesota corporation authorized to do business inthe State of Minnesota (“Northwest”). WHEREAS, the parties to this MOU desire to establish the terms and conditions by which AIRLINE permitted to contract with a 3rdparty for the provision of ground handling services while operating from the Lindbergh Terminal of the Minneapolis-St. PaulInternational Airport (“Airport). NOW, THEREFORE, in consideration of the foregoing and mutual promises and covenants set forth, the parties hereby agree asfollows: 1. Background Information

AIRLINE has requested from MAC the ability to contract with a 3rd party ground handling company (“Ground HandlingCompany”) for the provision of below-wing ground handling services for its international operations which occur on GatesG1-G10 of the Lindbergh Terminal (the “Gates”).

2. Airline Operating Agreement & Terminal Building Lease

Pursuant to the Airline Operating Agreement and Terminal Building Lease (“Airline Agreement”) that both AIRLINE andNorthwest have separately entered into with the MAC, Airlines operating on the Gates have the option to either self-handle orutilize Northwest for below-wing ground handling services. However, MAC, AIRLINE, and Northwest would like toestablish alternate terms and conditions by which AIRLINE is permitted to contract with a Ground Handling Company forthe provision of below-wing ground handling services at the Gates without amending the Airline Agreement.

3. Effective Date & Term

The effective date of this MOU shall be . This MOU is terminable by any party providing 90 days advance written notice to the other two parties in accordance withthis MOU.

4. MAC Commitments

A. Ensure the Ground Handling Company selected by AIRLINE executes and adheres to all of the requirements ofMAC’s Limited Airside Services License. This License establishes the insurance, indemnification, environmental,and financial requirements for operating at the Airport consistent with AIP grant assurances.

B. Assist AIRLINE and Northwest with ensuring the Ground Handling Company operates within the parameters

established by this MOU and the Limited Airside Services License.

65


C. Assist with ensuring AIRLINE is provided access to FIS accessible gates in accordance with the Airline Agreement. D. In the event an aircraft is not able to depart the gate within the two hour limit for narrow-body aircraft and the three

hour limit for wide-body aircraft identified in Section 5.D. and Northwest is requiring use of the gate, MAC shall tothe best of its ability assist AIRLINE in relocation of the aircraft to either another gate location designated byNorthwest or to a remote parking area designated by MAC or MAC’s agent.

E. Establish ticket counters and outbound baggage belt access for AIRLINE and the Ground Handling Company

independent of ticket counters and baggage belts occupied by Northwest.

5. AIRLINE Commitments

A. Provide in advance Northwest and MAC with AIRLINE’s schedule on a monthly basis and the specific time in

advance of the aircraft arrival that AIRLINE requests the Ground Handling Company to be allowed to stageequipment on the Northwest designated gate. In most cases, Gate TBD shall be the gate designated by Northwest;however this gate assignment is subject to change by Northwest based on the operating conditions of any given day.

B. Provide Northwest with as much notice as possible of aircraft arrival and departure time changes that occur for

various reasons on a day-to-day basis to ensure proper access to gates and the FIS bag room. C. To the best of AIRLINE’s ability, ensure only ground handling equipment incidental to the servicing of its aircraft

operations may be positioned on the ramp adjacent to the applicable gate. Equipment may be staged on the gate nomore than 20 minutes in advance of aircraft arrival and must be removed promptly upon departure of the aircraft.

D. To the best of AIRLINE’s ability, ensure its aircraft does not remain on the gate after arrival any longer than two

hours for narrow-body aircraft and three hours for wide-body aircraft. In the event an aircraft is not able to departthe gate within the applicable two or three hour limit and Northwest is requiring use of the gate, AIRLINE shallrelocate the aircraft to either another gate location designated by Northwest or to a remote parking area designatedby MAC or MAC’s agent. AIRLINE shall be responsible for the cost of parking its aircraft on another gatedesignated by Northwest or within a remote parking area designated by MAC.

E. AIRLINE assumes responsibility for its above-wing operations through use of AIRLINE’s employees or a 3 rd party

handler. F. AIRLINE shall secure ticket counter and outbound baggage areas from MAC and shall be responsible for all costs

relating to the use of or construction of such areas. G. AIRLINE shall pay MAC all fees related to its use of a gate and the FIS facility as required by the Airline

Agreement. H. In the event Airline exercises its rights pursuant to Section III.C.3 of the 2007A Amendment, AIRLINE agrees to

indemnify, defend, save and hold harmless MAC and Northwest and their respective Commissioners, officers, andemployees (collectively, “Indemnitees”) from and against any and all liabilities, losses, damages, suits, actions,claims, judgments, settlements, fines or demands of any person other than an Indemnitee arising by reason of injuryor death of any person, or damage to any property, including all

66


reasonable costs for investigation and defense thereof (including but not limited to attorneys’ fees, court costs, andexpert fees), of any nature whatsoever arising out of or incident to the use or occupancy of, or operations ofAIRLINE at or about the Gates unless such injury, death or damage is caused by (i) the negligent act or omission ofan Indemnitee whether separate or concurrent with negligence of others, including AIRLINE. MAC and Northwestshall give AIRLINE reasonable notice of any such claims or actions. In indemnifying or defending MAC andNorthwest, AIRLINE shall use legal counsel reasonably acceptable to MAC and Northwest and shall control thedefense of such claim or action

6. Northwest Commitments

A. AIRLINE will have gate access in accordance with Article III. of the Airline Agreement. B. To the best of Northwest’s ability, the gate designated for AIRLINE’s operation shall be clear of Northwest’s

equipment and accessories 30 minutes in advance of the AIRLINE’s scheduled arrival. C. To the best of Northwest’s ability, neither Northwest nor its equipment shall prevent the Ground Handling Company

from reasonable use of and access to the FIS bag room in accordance with this MOU.

7. Notices

All notices and other communications under this Agreement shall be effective two (2) business days after deposit with theUnited States Postal Service, first class, postage prepaid, or when hand delivered or transmitted by facsimile, and shall be inwriting and addressed to the parties at the following addresses:

To Northwest: Northwest Airlines, Inc.

2700 Lone Oak Parkway (Dept. A1135)

Eagan, MN 55121-1534

Fax No. (612) 727-6041

Attention: Vice President - Facilities & Airport Affairs To AIRLINE:

To MAC: Metropolitan Airports Commission

6040 28th Avenue South

Minneapolis, MN 55450

Attn: Director, Commercial Management & Airline Affairs

Either party may change the address at which notice is to be made by providing notice of the change to the other party, inwriting, in the manner provided for in this Section 6.

8. Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota.

67


9. Integration; Amendment and Modification

This Agreement embodies the entire agreement between the parties hereto relative to the subject matter hereof and shall notbe modified, changed or altered in any respect except in writing.

10. Counterparts

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of whichshall constitute one agreement.

IN WITNESS WHEREOF, the parties hereto signed and executed this instrument the day and year first above written, but effective asof the date set forth in Article 3.

Date:

, 2007 METROPOLITAN AIRPORTS COMMISSION Date:

, 2007 AIRLINE Date:

, 2007 NORTHWEST AIRLINES, INC.

68


EXHIBIT 7

EXHIBIT W

Memorandum of Understanding

For Ground Handling on Lindbergh Terminal FIS Gates

This Memorandum of Understanding (“MOU”) is made the day of , 2006, between the Metropolitan AirportsCommission, a public corporation of the State of Minnesota (“MAC”), (insert airline name) authorized todo business in the State of Minnesota (“AIRLINE”), and Northwest Airlines, Inc., a Minnesota corporation authorized to do businessin the State of Minnesota (“Northwest”). WHEREAS, the parties to this MOU desire to establish the terms and conditions by which AIRLINE permitted to contract with a 3rdparty for the provision of ground handling services while operating from the Lindbergh Terminal of the Minneapolis-St. PaulInternational Airport (“Airport). NOW, THEREFORE, in consideration of the foregoing and mutual promises and covenants set forth, the parties hereby agree asfollows: 1. Background Information

AIRLINE has requested from MAC the ability to contract with a 3rd party ground handling company (“Ground HandlingCompany”) for the provision of below-wing ground handling services for its international operations which occur on GatesG1-G10 of the Lindbergh Terminal (the “Gates”).

2. Airline Operating Agreement & Terminal Building Lease

Pursuant to the Airline Operating Agreement and Terminal Building Lease (“Airline Agreement”) that both AIRLINE andNorthwest have separately entered into with the MAC, Airlines operating on the Gates have the option to either self-handle orutilize Northwest for below-wing ground handling services. However, MAC, AIRLINE, and Northwest would like toestablish alternate terms and conditions by which AIRLINE is permitted to contract with a Ground Handling Company forthe provision of below-wing ground handling services at the Gates without amending the Airline Agreement.

3. Effective Date & Term

The effective date of this MOU shall be . This MOU is terminable by any party providing 90 days advance written notice to the other two parties in accordance withthis MOU.

4. MAC Commitments

A. Ensure the Ground Handling Company selected by AIRLINE executes and adheres to all of the requirements ofMAC’s Limited Airside Services License. This License establishes the insurance, indemnification, environmental,and financial requirements for operating at the Airport consistent with AIP grant assurances.

B. Assist AIRLINE and Northwest with ensuring the Ground Handling Company operates within the parameters

established by this MOU and the Limited Airside Services License. C. Assist with ensuring AIRLINE is provided access to FIS accessible gates in accordance with the Airline Agreement.

69


D. In the event an aircraft is not able to depart the gate within the two hour limit for narrow-body aircraft and the three

hour limit for wide-body aircraft identified in Section 5.D. and Northwest is requiring use of the gate, MAC shall tothe best of its ability assist AIRLINE in relocation of the aircraft to either another gate location designated byNorthwest or to a remote parking area designated by MAC or MAC’s agent.

E. Establish ticket counters and outbound baggage belt access for AIRLINE and the Ground Handling Company

independent of ticket counters and baggage belts occupied by Northwest.

5. AIRLINE Commitments

A. Provide in advance Northwest and MAC with AIRLINE’s schedule on a monthly basis and the specific time in

advance of the aircraft arrival that AIRLINE requests the Ground Handling Company to be allowed to stageequipment on the Northwest designated gate. In most cases, Gate TBD shall be the gate designated by Northwest;however this gate assignment is subject to change by Northwest based on the operating conditions of any given day.

B. Provide Northwest with as much notice as possible of aircraft arrival and departure time changes that occur for

various reasons on a day-to-day basis to ensure proper access to gates and the FIS bag room. C. To the best of AIRLINE’s ability, ensure only ground handling equipment incidental to the servicing of its aircraft

operations may be positioned on the ramp adjacent to the applicable gate. Equipment may be staged on the gate nomore than 20 minutes in advance of aircraft arrival and must be removed promptly upon departure of the aircraft.

D. To the best of AIRLINE’s ability, ensure its aircraft does not remain on the gate after arrival any longer than two

hours for narrow-body aircraft and three hours for wide-body aircraft. In the event an aircraft is not able to departthe gate within the applicable two or three hour limit and Northwest is requiring use of the gate, AIRLINE shallrelocate the aircraft to either another gate location designated by Northwest or to a remote parking area designatedby MAC or MAC’s agent. AIRLINE shall be responsible for the cost of parking its aircraft on another gatedesignated by Northwest or within a remote parking area designated by MAC.

E. AIRLINE assumes responsibility for its above-wing operations through use of AIRLINE’s employees or a 3 rd party

handler. F. AIRLINE shall secure ticket counter and outbound baggage areas from MAC and shall be responsible for all costs

relating to the use of or construction of such areas. G. AIRLINE shall pay MAC all fees related to its use of a gate and the FIS facility as required by the Airline

Agreement. H. In the event Airline exercises its rights pursuant to Section III.C.3 of the 2007A Amendment, AIRLINE agrees to

indemnify, defend, save and hold harmless MAC and Northwest and their respective Commissioners, officers, andemployees (collectively, “Indemnitees”) from and against any and all liabilities, losses, damages, suits, actions,claims, judgments, settlements, fines or demands of any person other than an Indemnitee arising by reason of injuryor death of any person, or damage to any property, including all reasonable costs for investigation and defensethereof (including but not limited to attorneys’ fees, court costs, and expert fees), of any nature whatsoever arisingout of or incident to the use or occupancy of, or operations of AIRLINE at or about the Gates unless such injury,death or damage is caused by (i) the negligent act or omission of an Indemnitee whether

70


separate or concurrent with negligence of others, including AIRLINE. MAC and Northwest shall give AIRLINEreasonable notice of any such claims or actions. In indemnifying or defending MAC and Northwest, AIRLINE shalluse legal counsel reasonably acceptable to MAC and Northwest and shall control the defense of such claim oraction.

6. Northwest Commitments

A. AIRLINE will have gate access in accordance with Article III. of the Airline Agreement. B. To the best of Northwest’s ability, the gate designated for AIRLINE’s operation shall be clear of Northwest’s

equipment and accessories 30 minutes in advance of the AIRLINE’s scheduled arrival. C. To the best of Northwest’s ability, neither Northwest nor its equipment shall prevent the Ground Handling Company

from reasonable use of and access to the FIS bag room in accordance with this MOU.

7. Notices

All notices and other communications under this Agreement shall be effective two (2) business days after deposit with theUnited States Postal Service, first class, postage prepaid, or when hand delivered or transmitted by facsimile, and shall be inwriting and addressed to the parties at the following addresses:

To Northwest: Northwest Airlines, Inc.

2700 Lone Oak Parkway (Dept. A1135)

Eagan, MN 55121-1534

Fax No. (612) 727-6041

Attention: Vice President - Facilities & Airport Affairs To AIRLINE:

To MAC: Metropolitan Airports Commission

6040 28th Avenue South

Minneapolis, MN 55450

Attn: Director, Commercial Management & Airline Affairs

Either party may change the address at which notice is to be made by providing notice of the change to the other party, inwriting, in the manner provided for in this Section 6.

8. Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota.

9. Integration; Amendment and Modification

This Agreement embodies the entire agreement between the parties hereto relative to the subject matter hereof and shall notbe modified, changed or altered in any respect except in writing.

10. Counterparts


This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of whichshall constitute one agreement.

71


IN WITNESS WHEREOF, the parties hereto signed and executed this instrument the day and year first above written, but effective asof the date set forth in Section 3.

Date:

, 2007 METROPOLITAN AIRPORTS COMMISSION

By:

Date:

, 2007 AIRLINE Date:

, 2007 NORTHWEST AIRLINES, INC.

72


EXHIBIT 10.22

FORM OFNORTHWEST AIRLINES CORPORATION

INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT, dated as of this 13 th day of February, 2008 by and between NORTHWESTAIRLINES CORPORATION, a Delaware corporation (the “Company”) and (“Indemnitee”).

RECITALS

A. Indemnitee is a director or executive officer of the Company and in such capacity is performing valuable services for theCompany. B. The Company and Indemnitee recognize the difficulty in obtaining directors’ and officers’ liability insurance, the significantcost of such insurance and the periodic reduction in the coverage of such insurance. C. The Company and Indemnitee further recognize the substantial increase in litigation subjecting directors and officers toexpensive litigation risks at the same time such liability insurance is being severely limited. D. The Company has adopted and its stockholders have approved the Amended and Restated Certificate of Incorporation of theCompany providing for the indemnification of the Company’s directors and officers to the fullest extent permitted by the laws of theState of Delaware. E. The Amended and Restated Certificate of Incorporation of the Company and the Delaware General Corporation Lawspecifically provide that they are not exclusive, and they expressly contemplate that contracts may be entered into between theCompany and its directors and officers with respect to indemnification of such directors and officers. F. The Board of Directors of the Company has determined that (1) it is in the best interests of the Company’s stockholders thatthe Company act to assure Indemnitee that there will be increased certainty of protection in the future, and that (2) it is reasonable,prudent and necessary for the Company contractually to obligate itself to indemnify Indemnitee to the fullest extent permitted byapplicable law, including Section 145 of the Delaware General Corporation Law, as in effect from time to time so that Indemnitee willcontinue to serve the Company free from undue concern that Indemnitee will not be so indemnified.

AGREEMENTS

1. Definitions. For purposes of this Agreement: 1.1 “Board” means the Board of Directors of the Company.

1


1.2 “Certificate’ means the Amended and Restated Certificate of Incorporation of the Company, as it may be amended from timeto time. 1.3 “Change in Control” means the occurrence of any of the following: (1) the direct or indirect sale, transfer, conveyance or otherdisposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of theproperties or assets of the Company and its subsidiaries taken as a whole to any “person” (as that term is used in Section 13(d)(3) ofthe Exchange Act, or any successor provision); (2) the adoption of a plan relating to the liquidation or dissolution of the Company;(3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any“person” (as defined above), becomes the beneficial owner (as the term is defined in Rule 13d-3 and Rule 13d-5 under the ExchangeAct, or any successor provisions), directly or indirectly, of more than 50% of the voting stock of the Company that is entitled to votein the election of the board of directors (measured by voting power rather than number of shares); or (4) the first day on which amajority of the members of the Board are not Continuing Directors. 1.4 “Continuing Directors” means, as of any date of determination, any member of the Board who: (1) was a member of suchBoard on the date of this Agreement, or (2) was nominated for election or elected to such Board with the approval of a majority of theContinuing Directors who were members of such Board at the time of such nomination or election. 1.5 “Damages” means any and all losses, claims, damages, liabilities or Expenses, including, without limitation, attorneys’ fees,judgments, fines, ERISA excise taxes or penalties, witness fees, amounts paid in settlement and other Expenses incurred in connectionwith a Proceeding (including all interest, assessments and other charges paid or payable in connection with or in respect of suchDamages). 1.6 “DGCL” means the Delaware General Corporation Law. 1.7 “Disinterested Directors” means those directors of the Company who are not and were not parties to the Proceeding in respectof which indemnification is sought by Indemnitee. 1.8 “Exchange Act” means the Securities Exchange Act of 1934, as amended. 1.9 “Expense Advance” means the advance by the Company of Expenses incurred by Indemnitee in any Proceeding, as suchExpenses are incurred, and in advance of such Proceeding’s final disposition. 1.10 “Expenses” include attorneys’ fees and all other costs of any type or nature whatsoever, including any and all expenses andobligations paid or incurred in connection with investigating, defending, being a witness in, participating in (including on appeal), orpreparing to defend, be a witness in or participate in any Proceeding or establishing or enforcing a right to indemnification under thisAgreement. 1.11 “Independent Counsel” means an attorney, a law firm, or a member of a law firm who (or which) is experienced in legalmatters relating to indemnification of directors and officers

2


and at the time retained neither then is, nor in the prior five years has been, retained to represent: (i) the Company or Indemnitee inany other matter material to either such party; or (ii) any other party to the Proceeding giving rise to a claim for indemnificationhereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicablestandards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemniteein an action to determine Indemnitee’s rights under this Agreement. 1.12 “Proceeding” means any event or occurrence and any completed, actual, pending or threatened action, suit, claim orproceeding (including any arbitration or alternative dispute resolution proceeding), whether civil, criminal, administrative orinvestigative (including an action by or in the right of the Company) and whether formal or informal, in which Indemnitee is, was orbecomes involved (including as a witness) by reason of the fact that Indemnitee is or was a director, or officer, of the Company or anyof its subsidiaries or that Indemnitee is or was serving at the request of the Company as a director or officer, of another corporation oras a manager/member of a limited liability company or as a partner, trustee or agent of a partnership joint venture, trust or otherenterprise, including service with respect to an employee benefit plan, whether the basis of such proceeding is alleged action (orinaction) by Indemnitee in an official capacity as such director, officer/manager/member, partner, trustee or agent or in any othercapacity while serving as a director, officer/manager/member, partner, trustee or agent; provided, however, that, except with respect toan action to enforce the provisions of this Agreement, prior to a Change of Control”, “Proceeding” shall not include any action, suit,claim or proceeding including any counter claim, cross claim or third-party claim instituted by or at the direction of Indemnitee, unlesssuch action, suit, claim or proceeding is or was authorized by the Board. 1.13 “SEC” means the Securities and Exchange Commission. 2. Agreement to Serve. In consideration of the protection afforded by this Agreement, Indemnitee agrees to continue to serve in hisor her capacity as a director or executive officer of the Company at the will of the Company (or under separate agreement, if suchagreement exists) so long as he or she is duly appointed or elected and qualified in accordance with the applicable provisions of theCompany’s or any of its subsidiaries organizational documents or until such time as he or she tenders his or her resignation in writing.Nothing contained in this Agreement is intended to create in Indemnitee any right to continue employment. 3. Indemnity Of Indemnitee. 3.1 Scope. The Company hereby agrees to indemnify Indemnitee and to hold Indemnitee free and harmless from any and allDamages in connection with any Proceeding, to the fullest extent permitted by law, notwithstanding that the basis for suchindemnification is not specifically enumerated in this Agreement, the Certificate, the DGCL, any other statute or otherwise. In theevent of any change, after the date of this Agreement, in any applicable law, the DGCL or rule regarding the right of a Delawarecorporation to indemnify a member of its board of directors or an officer, such change, to the extent it would expand Indemnitee’srights hereunder, shall be included within Indemnitee’s rights and the Company’s obligations hereunder, and, to the extent it wouldnarrow Indemnitee’s rights or the Company’s obligations hereunder, shall be excluded from this Agreement; provided, however, thatany change required by applicable laws, the

3


DGCL, any statute, rule or regulation which is fully and finally determined by a court of competent jurisdiction to be applied to thisAgreement shall be so applied regardless of whether the effect of such change is to narrow Indemnitee’s rights or the Company’sobligations hereunder. 3.2 Nonexclusivity. The indemnification provided by this Agreement shall not be deemed exclusive of any rights to whichIndemnitee may be entitled under the Certificate, any agreement, any vote of stockholders or Disinterested Directors, the DGCL orotherwise, whether as to action in Indemnitee’s official capacity or otherwise. 3.3 Procedure For Determination Of Entitlement To Indemnification. (a) Submission of Request For Indemnification. To obtain indemnification under this Agreement in connection with anyProceeding, and for the duration thereof, Indemnitee shall submit to the Company a written request, including therein or therewithsuch documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and towhat extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of any such requestfor indemnification, advise the Board in writing that Indemnitee has requested indemnification. (b) Presumption of Right to Indemnification. It shall initially be presumed in all cases that Indemnitee is entitled toindemnification, that Indemnitee may establish a conclusive presumption of any fact necessary to such a determination by deliveringto the Company a declaration made under penalty of perjury that such fact is true, unless the Company shall deliver to Indemnitee awritten notice stating that the Company believes that a determination is required under applicable law pursuant to Section 3.3(c) as towhether Indemnitee is entitled to indemnification hereunder, and the Company is promptly and diligently proceeding with suchdetermination. In such case, such notice will be given to Indemnitee within thirty (30) days after the Company’s receipt ofIndemnitee’s initial written request for indemnification. If the Company does not give such notice within such thirty (30) day period,Indemnitee shall be conclusively presumed to be entitled to indemnification hereunder, and in such case the Company hereby agrees,to the fullest extent permitted by law, not to assert otherwise. (c) Determination of Right. If the DGCL or applicable case law requires that a determination of Indemnitee’s entitlement toindemnification be made as a condition to Indemnification under this Agreement, then upon written request by Indemnitee forindemnification, such determination shall be made: (i) if a Change in Control shall have occurred, by Independent Counsel, unless Indemnitee shall request that suchdetermination be made by the Board or the stockholders, in which case such determination shall be made in the manner provided forin clause (ii) of this Section 3.3(c), provided, however, that if such determination shall have been made by Independent Counsel, acopy of such written opinion shall be delivered to Indemnitee; or (ii) if a Change of Control shall not have occurred, (A) by the Board by a majority vote of Disinterested Directors (eventhough less than a quorum) or (B) if such Disinterested Directors so direct, either (x) by a committee of Disinterested Directors, (y) byIndependent

4


Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee, or (z) by the stockholders of theCompany, as determined by such quorum of Disinterested Directors, or a quorum of the Board, as the case may be. In either case, such determination shall be made within sixty (60) days of Indemnitee’s request for indemnification. The cost of anysolicitation of the stockholders by the Company to obtain a determination under this Section 3.3 shall be paid by the Company. TheCompany may, at its option and pursuant to the determination under this Section 3.3(c), defer a decision on whether Indemnitee isentitled to indemnification or the amount of indemnification to which Indemnitee is entitled, if it believes, in good faith, thatadditional progress in the Proceeding is necessary before such final determination is made, provided that the Company providesIndemnification to the extent of Expense Advances, subject to Section 4.2, during such time as it defers such determination. (d) Payment; Cooperation. If Indemnitee is entitled to Indemnification pursuant to Section 3.3(b) or pursuant to a determinationunder Section 3.3(c), payment to Indemnitee shall be made within thirty (30) days after entitlement or a determination of entitlement,as the case may be. Payment of Expense Advances pending any final determination of entitlement shall be made in each case withinthirty (30) days of request therefor. Indemnitee shall cooperate with the person, persons or entity making any determination if suchdetermination is required under Section 3.3 (c), including without limitation providing to such person, persons or entity uponreasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure andwhich is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (includingattorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making suchdetermination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) andthe Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. (e) Selection of Independent Counsel. If Independent Counsel is required pursuant to Section 3.3(c), such Independent Counselshall be selected as follows: (i) if a Change of Control shall not have occurred, Independent Counsel shall be selected by the Boardand approved by the Indemnitee (which approval shall not be unreasonably withheld); or (ii) if a Change of Control shall haveoccurred, Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by theBoard, in which event (i) shall apply), and Indemnitee shall give written notice to the Company advising it of the identity ofIndependent Counsel so selected. The Company may, within seven (7) days after such written notice of selection shall have beengiven, deliver to the Indemnitee a written objection to such selection. Such objection may be asserted only on the ground thatIndependent Counsel so selected does not meet the requirements of Independent Counsel as defined herein and the objection shall setforth with particularity the factual basis of such assertion. If such written objection is made, Independent Counsel so selected may notserve as Independent Counsel unless and until a court has determined that such objection is without merit. If, within ten (10) days aftersubmission by Indemnitee of a written request for indemnification, no Independent Counsel shall have been selected and not objectedto, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware, or any other court of competentjurisdiction, for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection

5


of Independent counsel and/or for appointment as Independent Counsel of a person selected by such court or by such other person assuch court shall designate, and the person with respect to whom an objection is so resolved or the person so appointed shall act asIndependent Counsel. The Company shall pay any and all reasonable fees and Expenses of Independent Counsel incurred by suchIndependent Counsel in connection with its actions pursuant to this Agreement, and the Company shall pay all reasonable fees andExpenses incident to the procedures of this Section, regardless of the manner in which such Independent Counsel was selected orappointed. 3.4 Contribution/Partial Indemnification. (a) If the indemnification provided under Section 3.1 is unavailable by reason of a court decision, based on grounds other thanany of those set forth in paragraphs (b) through (d) of Section 6.1, then, in respect of any Proceeding in which the Company is jointlyliable with Indemnitee (or would be if joined in such Proceeding), the Company shall contribute to the amount of Damages (includingattorneys’ fees) actually and reasonably incurred and paid or payable by Indemnitee in such proportion as is appropriate to reflect(i) the relative benefits received by the Company on the one hand and Indemnitee on the other from the transaction from which suchProceeding arose and (ii) the relative fault of the Company on the one hand and of Indemnitee on the other in connection with theevents that resulted in such Damages as well as any other relevant equitable considerations. The relative fault of the Company on theone hand and of Indemnitee on the other shall be determined by reference to, among other things, the parties’ relative intent,knowledge, access to information and opportunity to correct or prevent the circumstances resulting in such Damages. The Companyagrees that it would not be just and equitable if contribution pursuant to this Section were determined by pro rata allocation or anyother method of allocation that does not take account of the foregoing equitable considerations. (b) If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for a portion, but not all,of the Damages, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. 3.5 Survival. The indemnification and contribution provided under this Agreement shall apply to any and all Proceedings,notwithstanding that Indemnitee has ceased to serve the Company or at the request of the Company, and shall continue so long asIndemnitee shall be subject to any possible Proceeding, whether civil, criminal or investigative, by reason of the fact that Indemniteewas a director or officer of the Company or serving in any other capacity at the request of the Company. 4. Expense Advances. 4.1 Generally. The right to indemnification conferred by Section 3.1 shall include the right to Expense Advances. Unless and untila determination shall have been made under applicable law or pursuant to Section 3.3(c) that Indemnitee is not entitled toindemnification hereunder, then, subject to Section 4.2, the Company shall provide Expense Advances pending final resolution of theProceeding which gave rise to the request for Indemnification. Payment of such Expense Advances shall be made within thirty (30)days of request therefor. To the extent permitted under applicable law and prior to the completion of any Proceeding, if adetermination shall have been made that Indemnitee is not entitled to indemnification hereunder and

6


notwithstanding such determination, Indemnitee commences an Enforcement Action to enforce his or her right to indemnificationhereunder, the Company shall provide Expense Advances pending resolution of such Enforcement Action. 4.2 Conditions To Expense Advances. The Company’s obligation to provide Expense Advances is subject to the followingconditions: (a) Undertaking. If the Proceeding arose in connection with Indemnitee’s service as a director or officer of the Company, thenIndemnitee or Indemnitee’s representative shall have executed and delivered to the Company an undertaking, which need not besecured and shall be accepted without reference to Indemnitee’s financial ability to make repayment, by or on behalf of Indemnitee, torepay all Expense Advances if it shall ultimately be determined by a final, unappealable decision rendered by a court havingjurisdiction over the parties that Indemnitee is not entitled to be indemnified by the Company. (b) Cooperation. Indemnitee shall give the Company such information and cooperation in the defense of any Proceeding as theCompany may reasonably request and as shall be within Indemnitee’s power. 5. Procedures For Enforcement. 5.1 Enforcement. In the event that any claim for indemnity, whether an Expense Advance or otherwise, is made hereunder and isnot paid in full within sixty (60) days after written notice of such claim is delivered to the Company, Indemnitee may, but need not, atany time thereafter bring suit against the Company to recover the unpaid amount of the claim (an “Enforcement Action”). 5.2 Presumptions In Enforcement Action. In any Enforcement Action, the following presumptions (and limitation onpresumptions) shall apply: (a) Inducement. The Company expressly affirms and agrees that it has entered into this Agreement and assumed the obligationsimposed on it hereunder to induce Indemnitee to become or to continue as a director or officer of the Company; (b) No Presumption From Determination. Neither (i) the failure of the Company (including the Board, Independent Counsel orthe Company’s stockholders) to have made a determination prior to the commencement of the Enforcement Action thatindemnification of Indemnitee is proper in the circumstances; (ii) an actual determination by the Company, the Board, IndependentCounsel or stockholders that Indemnitee is not entitled to indemnification; or (iii) a deferral by the Company of a decision onindemnification under Section 3.3(c) shall be a defense to the Enforcement Action or create a presumption that Indemnitee is notentitled to indemnification hereunder; and (c) Controlled Subsidiaries. If Indemnitee is or was serving as a director or officer of an entity of which a majority of the sharesentitled to vote in the election of its directors is held by the Company, or in a management capacity in a partnership, limited liabilitycompany, joint venture, trust or other enterprise of which the Company or a wholly owned subsidiary of the

7


Company is a general partner or has a majority ownership, then Indemnitee shall conclusively be deemed to be serving in suchcapacity at the Company’s request. 5.3 Attorneys’ Fees And Expenses For Enforcement Action. In the event Indemnitee is required to bring an Enforcement Actionand if the Indemnitee is successful, in whole or in part in such Enforcement Action, the Company shall pay all of Indemnitee’s feesand Expenses in bringing and pursuing the Enforcement Action (including attorneys’ fees at any stage, including on appeal). 5.4 Indemnitee Not Required to Pursue Other Remedies. Indemnitee shall not be required to exercise any rights against any otherparties (such as under any insurance policy purchased by the Company, Indemnitee or any other person or entity) before Indemniteeenforces this Agreement. However, to the extent the Company actually indemnifies Indemnitee or advances Expenses, the Companyshall be entitled to enforce any such rights which Indemnitee may have against third parties. Indemnitee shall assist the Company inenforcing those rights if the Company pays Indemnitee’s reasonable costs and Expenses of doing so. 6. Limitations On Indemnity; Mutual Acknowledgment. 6.1 Limitations On Indemnity. No indemnity pursuant to this Agreement shall be provided by the Company: (a) Short-Swing Profits. On account of any suit in which a final, unappealable judgment is rendered against Indemnitee for anaccounting of profits made from the purchase or sale by Indemnitee of securities of the Company in violation of the provisions ofSection 16(b) of the Exchange Act; (b) Paid By Insurance. For Damages that have been paid directly to Indemnitee by an insurance carrier under a policy ofdirectors’ and officers’ liability insurance maintained by the Company; (c) Unlawful Payments. With respect to remuneration paid to Indemnitee if it shall be determined by a final judgment or otherfinal adjudication that such remuneration was in violation of law; (d) Unlawful Conduct. On account of Indemnitee’s conduct which is finally adjudged to have been intentional misconduct, aknowing violation of law, a violation of Section 174 of the DGCL or a transaction from which Indemnitee derived an improperpersonal benefit; or (e) Court Determination. If a final decision by a court having jurisdiction in the matter shall determine that such indemnificationis not lawful. 6.2 SEC Undertaking. Indemnitee understands and acknowledges that the Company may be required in the future to undertakewith the SEC to submit in certain circumstances the question of indemnification to a court for a determination of the Company’s rightunder public policy to indemnify Indemnitee and Indemnitee agrees that in such event, the Company shall not be

8


required to make any payment hereunder unless and until such matter shall have been so determined. 7. Notification And Defense Of Claim. 7.1 Notification. Promptly after receipt by Indemnitee of notice of the commencement of any Proceeding, Indemnitee shall, if aclaim in respect thereof is to be made against the Company under this Agreement, notify the Company of the commencement thereof;but the omission so to notify the Company will not, however, relieve the Company from any liability which it may have to Indemniteeunder this Agreement unless and only to the extent that such omission can be shown to have materially prejudiced the Company’sposition. 7.2 Defense Of Claim. With respect to any such Proceeding as to which Indemnitee notifies the Company of the commencementthereof, the Company may participate therein at its own expense or the Company, jointly with any other indemnifying party similarlynotified, may assume the defense thereof, with counsel satisfactory to Indemnitee. After notice from the Company to Indemnitee of itselection so to assume the defense thereof, the Company shall not be liable to Indemnitee under this Agreement for any legal or otherExpenses (other than reasonable costs of investigation) subsequently incurred by Indemnitee in connection with the defense thereofunless (i) the employment of counsel by Indemnitee has been authorized by the Company in writing, (ii) Indemnitee shall havereasonably concluded that there is a conflict of interest between the Company (or any other person or persons included in the jointdefense) and Indemnitee in the conduct of the defense of such action, or (iii) the Company shall not, in fact, have employed counsel toassume the defense of such action, in each of which cases the fees and expenses of counsel shall be at the Company’s expense. TheCompany shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Company or as to whichIndemnitee shall have reasonably made the conclusion provided for in clause (ii) of this Section 7.2. 7.3 Settlement By Indemnitee. The Company shall not be liable to Indemnitee under this Agreement for any amounts paid insettlement of any Proceeding effected without its written consent. 7.4 Settlement By Company. The Company shall not settle any action or claim in any manner that would impose any penalty orlimitation on Indemnitee without Indemnitee’s written consent. 7.5 Withholding Consent to Settlement. Neither the Company nor Indemnitee shall unreasonably withhold its consent to anyproposed settlement, provided that Indemnitee may withhold consent to any settlement that does not provide a complete release ofIndemnitee. 8. Directors’ and Officers’ Liability Insurance. 8.1 Insurance Not Required. The Company shall, from time to time, make the good faith determination whether or not it ispracticable for the Company to obtain and maintain a policy or policies of insurance with reputable insurance companies providing theofficers and directors of the Company with coverage for losses from wrongful acts, or to ensure the Company’s performance of itsindemnification obligations under this Agreement. Among other

9


considerations, the Company will weigh the costs of obtaining such insurance coverage against the protection afforded by suchcoverage. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain such insurance if the Companydetermines in good faith that such insurance is not reasonably available, if the premium costs for such insurance are disproportionateto the amount of the coverage provided, if the coverage provided by such insurance is limited by exclusions so as to provide aninsufficient benefit, or if Indemnitee is covered by similar insurance maintained by any entity who Indemnitee was serving at therequest of the Company. 8.2 Notice To Insurers. If, at the time the Company becomes aware of any claim which may give rise to an obligation to indemnifyIndemnitee hereunder, the Company has director and officer liability insurance in effect, the Company shall give prompt notice ofsuch claim to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take allnecessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of suchproceeding in accordance with the terms of such policies. 9. General. 9.1 Notices. All notices, claims and other communications hereunder shall be in writing and made by hand delivery, registered orcertified mail (postage prepaid, return receipt requested), facsimile or overnight air courier guaranteeing next-day delivery:

If to the Company, to:

Northwest Airlines Corporation

2700 Lone Oak Parkway

Dept. A1180

Eagan, MN 55121

Attn: General Counsel

If to Indemnitee, to or to such other address as either party may from time to time furnish to the other party by a notice given in accordance with theprovisions of this Section 9.1. Communications shall be deemed to have been duly given if (i) personally delivered, at the timedelivered, (ii) mailed, five days after deposited in the mails, registered or certified mail, postage prepaid, (iii) sent by facsimiletransmission, upon confirmation of receipt, and (iv) sent by any other means, upon receipt. 9.2 Severability. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or to fail todo any act in violation of applicable law. The

10


Company’s inability, pursuant to court order, to perform its obligations under this Agreement shall not constitute a breach of thisAgreement. The provisions of this Agreement shall be severable, and if this Agreement or any portion hereof is held to be invalid,illegal or unenforceable for any reason whatsoever, (i) the validity, legality and enforceability of the remaining provisions of theAgreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision) shall not inany way be affected or impaired thereby, and (ii) to the fullest extent possible, the provisions of this Agreement (including, withoutlimitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable,that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by theprovision held invalid, illegal or unenforceable. 9.3 Choice of Law. This Agreement shall be interpreted and enforced in accordance with the laws of the State of Delawareapplicable to agreements entered into and to be fully performed therein. 9.4 Successors and Assigns. This Agreement shall be binding on Indemnitee and on the Company and its successors and assigns(including, without limitation, any direct or indirect successor by purchase or consolidation, any direct or indirect transferee of all orsubstantially all of its assets and any successor by merger or otherwise by operation of law), and shall inure to the benefit ofIndemnitee and Indemnitee’s heirs, personal representatives and assigns and to the benefit of the Company and its successors andassigns. The Company shall not effect any sale of substantially all of its assets, merger, consolidation or other reorganization in whichit is not the surviving entity, unless the surviving entity agrees in writing to assume all such obligations of the Company under thisAgreement. 9.5 Amendments. No amendment, modification, termination or cancellation of this Agreement shall be effective unless in writingsigned by both parties hereto. 9.6 Headings. The headings are included in this Agreement for convenience and shall not be held in interpreting the provisions ofthis Agreement. 9.7 Presumption. For purposes of this Agreement, to the fullest extent permitted by law, the termination of any Proceeding(whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create apresumption that Indemnitee did not meet any particular standard or conduct or have any particular belief or that a court haddetermined that indemnification is not permitted by applicable law. 9.8 Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment toall of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary tosecure such rights and to enable the Company effectively to bring suit to enforce such rights. 9.9 Gender. All pronouns contained herein and any variation thereof shall be deemed to refer to the masculine, feminine or neuter,singular or plural, as the identity of the parties hereto may require.

11


9.10 Integration and Entire Agreement. This Agreement sets forth the entire understanding between the parties hereto andsupersedes and merges all previous written and oral negotiations, commitments, understandings and agreements relating to the subjectmatter hereof between the parties hereto. 9.11 Limitations Period. No legal action shall be brought and no cause of action shall be asserted by or in the right of the Companyor any affiliate of the Company against Indemnitee, Indemnitee’s spouse, heirs, executors or personal or legal representatives after theexpiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company or itsaffiliate shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two year period;provided, however, that if any shorter period of limitation is otherwise applicable to any such cause of action such shorter period shallgovern. 9.12 Assumption of Liability by the Company. If Indemnitee is deceased and is entitled to indemnification under any provision ofthis Agreement, the Company shall indemnify Indemnitee’s estate and his or her spouse, heirs, administrators and executors against,and the Company shall, and does hereby agree to assume, any and all Expenses, penalties and fines actually and reasonably incurredby or for Indemnitee or his or her estate, in connection with the investigation, defense, settlement or appeal of any such action, suit orproceeding. Further, when requested in writing by the spouse of Indemnitee, and/or the heirs, executors and administrators ofIndemnitee’s estate, the Company shall provide appropriate evidence of the Company’s agreement set out herein, to indemnifyIndemnitee against, and to itself assume, such costs, liabilities and Expenses.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written.

INDEMNITEE: NORTHWEST AIRLINES

CORPORATION

By:

[Signature of Indemnitee] Title:

12


Exhibit 12.1


COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

(Dollars in millions)

Successor

Predecessor

Period from

Period from

June 1 to

January 1 to

December 31,

May 31,

Year ended December 31

2007

2007

2006

2005

2004

2003

Earnings:

Income (loss) before income taxes and

cumulative effect of accounting change

$ 566

$ 1,749

$ (2,864) $ (2,457) $ (861) $ 218

Less:

Income (loss) from less than 50% ownedinvestees

2

—

1

(14) 8

18

Capitalized interest

9

6

10

10

8

10

Add:

Fixed charges, from below

408

322

745

865

791

753

Amortization of interest capitalized

—

3

8

8

8

10

Adjusted earnings

$ 963

$ 2,068

$ (2,122) $ (1,580) $ (78) $ 953

Fixed charges:

Rent expense representative of interest (1)

$ 126

$ 97

$ 180

$ 255

$ 248

$ 253

Interest expensed and capitalized, issuance costs, amortization of debt discounts andpremiums and interest of preferredsecurity holder (2)

282

225

565

610

543

500

Fixed charges

$ 408

$ 322

$ 745

$ 865

$ 791

$ 753

Ratio of earnings to fixed charges

2.36

6.42

—(3) —(3) —(3) 1.27

(1) Calculated as one-third of rentals, which is considered representative of the interest factor. (2) Subsequent to its Chapter 11 filing and prior to its emergence, the Company recorded post-petition interest expense on pre-petition obligations

only to the extent it believed the interest would be paid during the bankruptcy proceeding or that it was probable that the interest would be anallowed claim.

(3) Earnings were inadequate to cover fixed charges by $2.87 billion, $2.45 billion, and $869 million for the years ended December 31, 2006,

2005, and 2004.


Exhibit 12.2


COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGESAND PREFERRED STOCK REQUIREMENTS

(Dollars in millions)

Successor

Predecessor

Period from

Period from

June 1 to

January 1 to

December 31,

May 31,

Year ended December 31

2007

2007

2006

2005

2004

2003

Earnings:

Income (loss) before income taxes and

cumulative effect of accounting change

$ 566

$ 1,749

$ (2,864) $ (2,457) $ (861) $ 218

Less:

Income (loss) from less than 50% ownedinvestees

2

—

1

(14) 8

18

Capitalized interest

9

6

10

10

8

10

Add:

Fixed charges, from below

408

322

745

887

820

765

Amortization of interest capitalized

—

3

8

8

8

10

Adjusted earnings

$ 963

$ 2,068

$ (2,122) $ (1,558) $ (49) $ 965

Fixed charges:

Rent expense representative of interest (1)

$ 126

$ 97

$ 180

$ 255

$ 248

$ 253

Interest expensed and capitalized, issuancecosts, amortization of debt discounts andpremiums and interest of preferredsecurity holder (2)

282

225

565

610

543

500

Preferred stock requirements

—

—

—

22

29

12

Fixed charges and preferred stock

requirements

$ 408

$ 322

$ 745

$ 887

$ 820

$ 765

Ratio of earnings to fixed charges and

preferred stock requirements

2.36

6.42

—(3) —(3) —(3) 1.25

(1) Calculated as one-third of rentals, which is considered representative of the interest factor. (2) Subsequent to its Chapter 11 filing and prior to its emergence, the Company recorded post-petition interest expense on pre-petition obligations

only to the extent it believed the interest would be paid during the bankruptcy proceeding or that it was probable that the interest would be anallowed claim.

(3) Earnings were inadequate to cover fixed charges by $2.87 billion, $2.45 billion, and $869 million for the years ended December 31, 2006,

2005, and 2004.


Exhibit 21.1


LIST OF SUBSIDIARIES

Aircraft Foreign Sales, Inc. (U.S. Virgin Islands corporation) Cardinal Insurance Company (Cayman) Ltd. (Cayman Islands corporation) Compass Airlines, Inc. (Delaware corporation) Margoon Holding B.V. (Netherlands corporation) MCH, Inc. (Delaware corporation) Mesaba Aviation, Inc. (Minnesota corporation) MLT Inc. (Minnesota corporation) Montana Enterprises, Inc. (Montana corporation) Northwest Aerospace Training Corporation (Delaware corporation) Northwest Airlines Charitable Foundation (Minnesota non-profit organization) Northwest Airlines, Inc. (Minnesota corporation) NWA Aircraft Finance, Inc. (Delaware corporation) NWA Fuel Services Corporation (New York corporation) NWA Real Estate Holding Company LLC (Delaware limited liability company) NWA Retail Sales Inc. (Minnesota corporation) NWA Worldclub, Inc. (Wisconsin corporation) NW Red Baron LLC (Delaware limited liability company) Tomisato Shoji Kabushiki Kaisha (Japan corporation) Wings Finance Y.K. (Japanese limited liability company)


Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the use of our reports dated February 28, 2008, with respect to the consolidated financial statements and schedule ofNorthwest Airlines Corporation and the effectiveness of internal control over financial reporting of Northwest Airlines Corporation,included in this Annual Report (Form 10-K) for the year ended December 31, 2007. We consent to the incorporation by reference in the following Registration Statements and the related Prospectuses:

(1) Registration Statements on Form S-3 (Nos. 333-141802 and 333-107070) of Northwest Airlines Corporation andNorthwest Airlines, Inc.,

(2) Registration Statements on Form S-8 (Nos. 333-143384) of Northwest Airlines Corporation

of our report dated February 28, 2008, with respect to the consolidated financial statements and schedule of Northwest AirlinesCorporation included herein and our report dated February 28, 2008, with respect to the effectiveness of internal control over financialreporting of Northwest Airlines Corporation, included herein.

Minneapolis, MinnesotaFebruary 28, 2008


EXHIBIT 31.1

Certification by the Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Douglas M. Steenland, certify that:

1. I have reviewed this annual report on Form 10-K of Northwest Airlines Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report; 4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as definedin Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries,is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that hasmaterially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or personsperforming the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financialinformation; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting.

Date: February 29, 2008


Douglas M. SteenlandPresident and Chief Executive Officer


EXHIBIT 31.2

Certification by the Chief Financial OfficerPursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, David M. Davis, certify that:

1. I have reviewed this annual report on Form 10-K of Northwest Airlines Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report; 4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as definedin Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries,is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that hasmaterially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or personsperforming the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financialinformation; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting.

Date: February 29, 2008

/s/ DAVID M. DAVIS

David M. DavisExecutive Vice President andChief Financial Officer


EXHIBIT 32.1

Certification by the Chief Executive Officer Pursuant to18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the annual report of Northwest Airlines Corporation (the “Company”) on Form 10-K for the period ending

December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Douglas M. Steenland,President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of theSarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations ofthe Company. Date: February 29, 2008


Douglas M. SteenlandPresident and Chief Executive Officer This certification accompanies this Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not,except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Actof 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing underthe Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it byreference.


EXHIBIT 32.2

Certification by the Chief Financial Officer Pursuant to18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the annual report of Northwest Airlines Corporation (the “Company”) on Form 10-K for the period ending

December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David M. Davis,Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations ofthe Company. Date: February 29, 2008

/s/ DAVID M. DAVIS

David M. DavisExecutive Vice President andChief Financial Officer This certification accompanies this Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not,except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Actof 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing underthe Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it byreference.

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