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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

OR

Commission file number 0-23642

NORTHWEST AIRLINES CORPORATION
(Exact name of registrant as specified in its charter)

2700 Lone Oak Parkway, Eagan, Minnesota 55121
(Address of principal executive offices)

(612) 726-2111
Registrant's telephone number, including area code

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

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

    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 /x/  No / /

    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 Part III of this Form 10-K or any amendment to this Form 10-K. / /

    The aggregate market value of the voting stock held by nonaffiliates of the registrant as of February 28, 2001 was $1.38 billion.

    As of February 28, 2001, there were 85,142,315 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 Proxy Statement for its Annual Meeting of Stockholders to be held on June 28, 2001.

PART I

Item 1.  BUSINESS

    Northwest Airlines Corporation ("NWA Corp." and, together with its subsidiaries, the "Company"), is the indirect parent corporation of Northwest Airlines, Inc. ("Northwest"). Northwest operates the world's fourth largest airline, as measured by 1999 revenue passenger miles ("RPMs"), and is engaged in the business of transporting passengers and cargo. Northwest began operations in 1926. Northwest's business focuses on the development of a global airline network through its strategic assets that include:

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domestic hubs at Detroit, Minneapolis/St. Paul and Memphis;



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an extensive Pacific route system with hubs at Tokyo and Osaka;



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a trans-Atlantic alliance with KLM Royal Dutch Airlines ("KLM"), which operates through a hub in Amsterdam; and



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a global alliance with Continental Airlines, Inc. ("Continental").

    Northwest has developed strategies that are designed to utilize these assets to the Company's competitive advantage. These strategies focus on providing safe, reliable, convenient and consistent air transportation. In addition, the Company's frequent flyer program, customer service enhancements and targeted fare promotions are designed to maintain and improve its competitive position.

Operations and Route Network

    Northwest operates substantial domestic and international route networks and directly serves more than 155 cities in 24 countries in North America, Asia and Europe. Northwest had more than 58.7 million enplanements and flew over 79.13 billion RPMs in 2000.

    During 2000, Northwest strengthened its network through existing alliances and the addition of several new alliance partners. Long-term alliances are the most effective way for Northwest to enter global markets that it would not be able to serve alone and due to the synergies shared by the partners these alliances are the most economic way to expand globally. Alliances improve the travel experience through code-sharing, integration of frequent flyer programs, the ability to check luggage through to the passenger's final destination and reciprocal airport lounge access, while also providing route and schedule coordination, joint marketing, sharing of airport facilities and services and joint procurement of certain goods and services. Northwest and its alliance partners currently provide a global network to over 785 cities in 120 countries in the U.S., Canada, Asia, India, the South Pacific, Europe, the Middle East, Africa, Mexico and the Caribbean, Central America and South America.

Domestic System

    Northwest's domestic route system serves the U.S., Mexico, Canada and the Caribbean. Northwest operates its domestic system through its hubs at Detroit, Minneapolis/St. Paul and Memphis. The hub system gathers passengers from the hub and cities surrounding the hub and provides more frequent local and connecting service than if each route were served on a nonstop point-to-point basis. As part of its alliance with Continental, Northwest's passengers are also able to connect through Continental's hubs in Newark, Houston and Cleveland to additional cities not previously served by Northwest.

    Northwest has exclusive marketing agreements with two regional carriers: Mesaba Aviation, Inc. ("Mesaba") and Express Airlines I, Inc. ("Express"), a wholly-owned indirect subsidiary of NWA Corp. Under the agreements, these regional carriers operate their flights under the Northwest "NW" code and are identified as Northwest Airlink carriers. The primary purpose of these marketing agreements is to provide more frequent service to small and mid-sized cities, which increases connecting traffic at Northwest's hubs. These carriers serve 124 airports, 77 of which are not served by Northwest.

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    In November 2000, the Company offered to purchase all of the outstanding common stock of Mesaba Holdings, Inc., the holding company of Mesaba, at a price of $13 per share, or an aggregate purchase price of approximately $190 million. All of such funds would be obtained from Northwest's general working capital. Mesaba's Board of Directors has formed a special committee to evaluate the offer. Currently, the Company owns 27.9% of the common stock of Mesaba Holdings, Inc.

    Northwest's hubs provide connections that feed traffic into its eight gateway cities for international service. Northwest operates international flights from its Detroit and Minneapolis/St. Paul hubs as well as from Boston, Honolulu, Los Angeles, Miami, New York, San Francisco, Seattle and Washington, D.C. Northwest, together with Mesaba, currently operates service to seven cities in Mexico, 12 cities in Canada and five cities in the Caribbean.

    Detroit.  Northwest and Mesaba together serve over 130 cities from Detroit. For the nine months ended September 30, 2000, Northwest and Mesaba enplaned 61% of originating passengers from this hub, while the next largest competitor enplaned 7%. Detroit, which is the seventh largest origination/destination hub in the U.S., is Northwest's largest international gateway from the continental U.S., offering 214 weekly nonstop flights to 19 foreign cities, including 18 nonstop flights to Japan per week.

    Northwest is managing and supervising the design and construction of a $1.2 billion terminal at Detroit Metropolitan Wayne County Airport. The new terminal is scheduled to be completed in December 2001 and will offer 97 gates, 106 ticket-counter positions, a fourth parallel runway, over 80 shops and restaurants, four WorldClubs, an 11,500-space parking facility, covered curbside drop-off areas and 18 luggage carousels. The new terminal will also offer international-to-domestic connections within the same facility. In addition, a new 400-room hotel in the terminal is scheduled to be completed in 2002.

    Minneapolis/St. Paul.  Northwest and Mesaba together serve over 140 cities from Minneapolis/St. Paul. For the nine months ended September 30, 2000, Northwest and Mesaba enplaned 66% of originating passengers from this hub, while the next largest competitor enplaned 11%. Minneapolis/St. Paul is the ninth largest origination/destination hub in the U.S. Northwest offers 195 weekly nonstop flights to 23 foreign cities from Minneapolis/St. Paul.

    Minneapolis/St. Paul International Airport is in the midst of a $2.4 billion construction program that will include a 50% increase in parking, and add 15 new jet gates, 30 new commuter gates, a new north/south runway, and will extend and improve existing runways. Additional airport improvements include a new skyway and automated people movers to shorten transit time between the concourses and the parking garage and another WorldClub. This multi-year project is scheduled to be completed in phases through 2010.

    Memphis.  Northwest and its Airlink carriers serve over 85 cities from Memphis. For the nine months ended September 30, 2000, they enplaned approximately 51% of originating jet passengers from this hub, while the next largest competitor enplaned approximately 25%.

    The Memphis-Shelby County Airport Authority is in the process of a $400 million airport renovation and expansion scheduled to be completed in 2004. This program will provide nearly $300 million in airfield improvements including a new 13,000-foot runway, which opened in late 2000 to accommodate additional arrivals and departures. During 2000, Northwest added a fourth bank of flights accounting for 104 new takeoffs and landings daily. With this 25% increase in service, Memphis gained additional daily nonstop service to 44 cities. The airport renovation will also include $40 million in parking expansion and $60 million in terminal improvements, which will directly benefit Northwest with the creation of 15 new Northwest gates, the redesign of eight gates to accommodate regional jet service, a new WorldClub and the addition of 11 new ticket counter positions.

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International System

    Northwest has a comprehensive route network to the Pacific, providing extensive service to Japan and China, and also serves destinations in Europe and India.

    Pacific.  Northwest has served the Pacific market since 1947 and has one of the world's largest Pacific route networks, with approximately 475 weekly flights. Northwest's Pacific operations are concentrated at its Tokyo hub. Northwest has the largest slot portfolio of any non-Japanese airline at Tokyo's slot-constrained Narita International Airport, with 316 weekly takeoff and landing slots. Northwest uses its route certificates and slot portfolio to operate a network linking seven U.S. gateways and ten Asian and Micronesian destinations via Tokyo with 124 weekly departures. Northwest has also developed a hub at Osaka's Kansai airport, where it holds 108 weekly takeoff and landing slots and provides more service between the U.S. and Osaka than any other carrier. Northwest currently operates 39 weekly departures from Osaka, which includes service between four U.S. gateways and three Asian destinations.

    Northwest provides passenger service between various points in the U.S. and Japan and operates flights between Japan and Korea, Taiwan, the Philippines, Thailand, Singapore, Malaysia, Mariana Islands, and China, including Hong Kong. Northwest's Japan presence results from the U.S.-Japan bilateral aviation agreement, which establishes rights to carry traffic between Japan and the U.S. and extensive "fifth freedom" rights between Japan and India, the South Pacific and other Asian destinations. "Fifth freedom" rights allow Northwest to operate service from any gateway in Japan to points beyond Japan and 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 also has unlimited rights and frequencies to operate between any point in the U.S. and Japan and the ability to code-share with Japanese carriers.

    Northwest is one of two U.S. carriers to operate nonstop service between the U.S. and Beijing, China's capital, with four flights weekly from Detroit. Northwest also provides service to China from Detroit with two nonstop and four one-stop flights weekly to Shanghai and three one-stop flights weekly to Beijing.

    Atlantic.  Northwest provides passenger service from various points in the U.S. to Amsterdam, Frankfurt, London, Paris and Rome with 98 weekly nonstop flights. Northwest also provides daily service to both Mumbai and Delhi, India from Amsterdam.

    Northwest and KLM operate their trans-Atlantic flights pursuant to a commercial and operational joint venture alliance, which has antitrust immunity that facilitates coordinated pricing, scheduling, product development and marketing. In 1992, the U.S. and the Netherlands entered into an "open-skies" bilateral aviation treaty which authorizes the airlines of each country to provide international air transportation between any U.S.-Netherlands city pair and to operate connecting service to destinations in other countries. Northwest and KLM have expanded their trans-Atlantic presence by operating joint service between 13 U.S. cities and Amsterdam, KLM's hub airport. Code-sharing between Northwest and KLM has been implemented on flights to 66 European, seven Middle Eastern, 11 African, two Asian and approximately 190 U.S. cities. Northwest and KLM have a minimum of nine years remaining under their current joint venture alliance.

Alliances

    Northwest operates within an international global alliance whose other primary members are KLM and Continental. Through these and other alliance partners, such as Air China, Malaysia Airlines, Japan Air System and Alitialia, Northwest is able to provide seamless global service and more choices to its customers through code-sharing, frequent flyer program reciprocity, coordinated scheduling of flights to permit convenient connections, airport facility coordination and other cooperative activities. This coordination increases the destinations, connections and frequencies offered by Northwest, and thus provides an opportunity to increase traffic on flight segments connecting with alliance partners. Code-sharing is an

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agreement under which an airline's flights can be marketed under the two-letter designator code of another airline, thereby allowing the two carriers to provide joint service with one aircraft.

    Northwest and Continental have extended through 2025 their global strategic commercial alliance that connects the two carriers' networks and includes extensive code-sharing, frequent flyer program reciprocity and other cooperative activities. The airlines continue to operate their two networks under separate identities. The combined network has resulted in a domestic presence comparable to that of either United or American Airlines Inc. ("American"), (as measured by ASMs for the twelve months ended December 31, 1999), and provides Northwest access to Central and South America and increases its Pacific presence.

    Northwest and Continental code-share to more than 250 destinations. These code-share flights serve eight cities in Central America, three cities in South America, 16 cities in Mexico, seven cities in the Caribbean, 12 cities in Canada, six cities in Asia and over 200 cities in the U.S. Northwest anticipates that it will continue to increase its code-sharing with Continental. Through additional domestic and international connections, Northwest has increased its market share and enhanced its revenue. Other joint activities include airport facility coordination, joint purchasing and certain coordinated sales programs. Through combined purchasing power and increased efficiencies in airport operations, Northwest is experiencing reduced operating costs.

    Northwest has domestic marketing agreements with Alaska Airlines, American Eagle Airlines, America West Airlines, Inc., Big Sky Airlines, Business Express Airlines, Continental Express Airlines, Gulfstream International Airlines, Hawaiian Airlines, Horizon Air and Midwest Express Airlines for frequent flyer program reciprocity and code-sharing on some of these carriers' routes. The primary purpose of these arrangements is to provide increased connections between the airlines' route networks so as to generate increased traffic into Northwest's domestic system and international gateways.

    Northwest's alliance with Air China connects the two carriers' networks and also includes frequent flyer program reciprocity and joint marketing. Northwest and Air China together provide 22 flights each week between the U.S. and China. Code-share service was expanded within the U.S. during 1999 and within China in 2000. Northwest alliance partners, Alaska Airlines, America West Airlines and Continental, have also entered into alliance agreements with Air China. Northwest and its partners collectively provide the most service, nonstop and one-stop, between the U.S. and China.

    Northwest continues to expand its Pacific presence through additional alliances. Northwest has implemented an alliance with Japan Air System, which operates more domestic routes in Japan than any other carrier. The alliance includes code-sharing, coordinated flight connections, traffic servicing and reciprocal frequent flyer programs. Northwest also implemented an alliance with Malaysia Airlines during 1999. This alliance was recently granted anti-trust immunity by the U.S., which allows the two airlines to coordinate sales, marketing and operations to the extent desirable. Currently, Northwest is the only U.S. airline serving Malaysia. Northwest also has code-sharing and reciprocal frequent flyer programs with Pacific Island Aviation.

    To further enhance Northwest's service in Europe, India, and Southeast Asia, Northwest has code-sharing and reciprocal frequent flyer programs with Air Alps Aviation, Air Engiadina, Braathens, Cyprus Airways, KLM cityhopper, KLM exel, KLM uk, and Transavia airlines. Northwest also has frequent flyer reciprocity with Cebu Pacific Airlines, Garuda Indonesia, Jet Airways Private Ltd. and Kenya Airways.

Cargo

    In 2000, cargo accounted for 7.5% of the Company's operating revenues, with the majority of its cargo revenues originating in or destined for Asia. Through its Tokyo and Anchorage cargo hubs, Northwest serves most major air freight markets between the U.S. and the Pacific with ten Boeing 747-200 freighter

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aircraft. Two additional Boeing 747-200 aircraft, which are being converted into freighters, were acquired in 2000 and are scheduled to begin revenue service in the summer of 2001. Northwest is now the largest cargo carrier among U.S. passenger airlines and the only one to operate a dedicated cargo freighter fleet.

    The trans-Pacific market is expected to be a leading growth market for the air freight industry, with most of the growth expected to originate from the high-yield express business. Northwest is able to participate in the express business due to its extensive network across the Pacific, its hubs at Tokyo and Anchorage that allow for the efficient transfer of freight, and its dedicated freighter fleet. In June 2000, Northwest and Japan Airlines entered into a long-term cargo alliance agreement. This alliance received DOT approval in September 2000 and includes code-sharing that allows Northwest to provide its customers with an improved and expanded schedule.

Other Activities

    MLT Inc.  MLT Inc. ("MLT") is among the largest vacation wholesale companies in the U.S. In addition to its Worry-Free Vacations charter program, MLT markets and supports Northwest's WorldVacations and offers leisure fares to destinations throughout the U.S., Canada, Mexico, the Caribbean, Europe and Asia, primarily on Northwest.

    Northwest Aerospace Training Corporation.  Northwest Aerospace Training Corporation ("NATCO") provides training and aircraft simulation services to pilots for Northwest, other airlines, governments and corporations. The NATCO training facility is among the world's largest aircraft simulation facilities, with 21 full-flight simulators and four fixed-base training devices. NATCO's customer base includes both domestic and international airlines. In 2000, NATCO had $8 million in revenue from third parties.

    Worldspan.  The Company holds a 33.7% partnership interest in Worldspan, L.P. ("Worldspan"). Worldspan operates and markets a global computer reservations and passenger processing system ("CRS"). A CRS is used by travel agents, corporate accounts and direct consumers on the internet to make airline, hotel, car and other travel reservations and to issue airline tickets. Delta Air Lines, Inc. and Trans World Airlines, Inc. own 40% and 26.3% of Worldspan, respectively. Northwest's presence through Worldspan in the CRS market gives it a voice in the traditional and emerging distribution channels.

Marketing

    Consistent with the experience of other carriers, 74% of ticket sales for travel on Northwest are sold by travel agents. Travel agents generally receive commissions on sales of tickets. Airlines often pay additional commissions in connection with special promotions.

E-Commerce

    In 2000, Northwest became the first network airline to permit domestic system-wide online check-in via its award-winning web site at nwa.com. Northwest customers in the U.S. can now create their own boarding passes from the convenience of their home or office. Northwest's web site has also been enhanced to make it possible to reach nearly every feature in three or fewer mouse-clicks. Sales through nwa.com accounted for approximately $400 million in 2000, compared with approximately $200 million in 1999. In addition to the sales growth on nwa.com, electronic ticket ("E-Ticket") sales accounted for 60% of all tickets for Northwest in 2000, including approximately 75% of all North American tickets, compared to 57% and 63%, respectively, in 1999.

    E-Tickets allow for improved service and reduced costs and have been the catalyst for e-commerce at Northwest. In October 2000, Northwest and Continental launched the industry's largest interline E-Ticket network. As a result, travelers can now make connections between the two airlines on E-tickets as well as use either Northwest or Continental E-Service Centers for check-in. Northwest expects to establish

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interline E-Ticketing capabilities with other carriers in 2001. Currently, Northwest has deployed over 225 E-Service Centers. E-Service Centers handled more than 4 million check-ins in 2000.

    Northwest, along with Continental, Delta Air Lines, United and American, is forming a new multi-airline travel web site, Orbitz.com, which will allow travelers to purchase their airline, hotel and car rental services online. This web site will provide a comprehensive selection of online airfares, including Internet-only fares, and other travel information and customer features. Thirty-five U.S. and foreign carriers have signed agreements to become charter associates in the new travel web site, and will also provide seat inventory to the site. The web site is managed independently from the involved airlines. In the fourth quarter of 2000 Hotwire.com, an online opaque ticket selling joint venture involving Northwest and six other major U.S. airlines, was launched.

    The Company has joined many other carriers to form Aeroxchange, a business-to-business e-commerce exchange for the airline industry. Aeroxchange.com was launched in February 2001 to bring volume-buying discounts, a broader range of suppliers and a better way to manage and reduce inventory and to sell surplus parts more quickly.

    The Company is the holder of warrants in a number of start-up e-commerce companies focused on various segments of the travel distribution network. The warrants are recorded at fair value with the offset recorded to non-operating income. The fair value of these warrants was not material at December 31, 2000 or 1999.

World Business Class Seat Reconfiguration

    World Business Class passengers on both Northwest and KLM will experience reconfigured seating, which will provide 50% additional legroom and 150 degrees of seat recline as part of an improved business class product. Northwest's wide-body aircraft have been reconfigured to provide the increased space, and KLM's wide-body aircraft reconfiguration will be complete in the second quarter of 2001.

Customers First Service Plan

    In December 1999, Northwest implemented its Customers First Service Plan, which includes twelve customer service commitments developed in conjunction with the Air Transport Association. Northwest's Customers First Service Plan includes enhanced customer communications, customer responsive event recovery plans, a streamlined customer relations process, increased luggage liability limits and a new rule for non-refundable tickets that will allow customers who meet certain requirements 24 hours to receive a full refund without penalty.

Frequent Flyer Program

    Northwest operates a frequent flyer marketing program known as "WorldPerks," under which mileage credits are earned by flying on Northwest or its alliance partners and by using the services of participating bank credit cards, hotels, long-distance companies, car rental firms and other non-airline partners. Northwest sells mileage credits to the other companies participating in the program. The program was designed to retain and increase the business of frequent travelers by offering incentives for their continued patronage.

    Under the WorldPerks program, miles earned are accumulated in an account for each member and do not expire. Mileage credits can be redeemed for free or upgraded travel on Northwest and other participating airlines or for other travel industry awards. Domestic award travel levels starting as low as 20,000 miles are available nine months of the year. Additional features include the use of seasonal awards based on peak/off-peak period travel and a three-tier elite program incentive and reward structure.

    WorldPerks frequent flyer members can now fully manage their accounts online at nwa.com. Customers can enroll themselves in the WorldPerks program, check mileage balances and account histories, book

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award travel and report mileage discrepancies. In addition, with a new WorldPerks partner MilePoint, Northwest has begun offering travelers exciting new ways to redeem WorldPerks miles. MilePoint.com enables WorldPerks members to use WorldPerks miles toward purchases from many of the web's most popular retailers.

    Northwest accounts for its frequent flyer obligation on the accrual basis using the incremental cost method. Northwest includes food and beverage, fuel, insurance, security, miscellaneous claims and WorldPerks service center expense in its incremental cost calculation. The incremental costs do not include any contribution to overhead or profit. Food, beverage and other costs are based on average cost per passenger for the current twelve-month period. The incremental fuel unit cost per passenger is based on engineering formulas that determine the average fuel cost per pound carried. Average fuel prices and estimated average weight of each added onboard passenger and luggage are factored into the incremental cost computation and converted to a rate per passenger per award.

    The number of estimated travel awards outstanding at December 31, 2000, 1999 and 1998 was approximately 7,162,000, 6,520,000 and 6,147,000 awards, respectively. The estimated liability excludes accounts that have never attained the average travel award level and awards that are expected to be redeemed for upgrades or are not expected to be redeemed at all, and includes an estimate for partially earned awards on accounts that previously earned an award. Northwest has recorded a liability for these estimated awards of $115 million, $107 million and $100 million at December 31, 2000, 1999 and 1998, respectively. The number of travel awards used for travel on Northwest during the years ended December 31, 2000, 1999 and 1998 was approximately 1,263,000, 1,295,000 and 1,159,000, respectively. These awards represented an estimated 6.6%, 6.1% and 6.8% of Northwest's total RPMs for each such year, respectively. Northwest believes displacement of revenue passengers is minimal based on the low ratio of WorldPerks award usage to revenue passenger miles, the Company's ability to manage frequent flyer inventory through seat allocations and blackout dates, and program incentives to travel during off-peak periods.

Aircraft Fuel

    Northwest's worldwide aircraft fuel requirements are met by approximately 50 different suppliers. The terms of Northwest's contracts vary as to price, payment terms, quantities and duration. Northwest also makes purchases of fuel based on price and availability. In order to provide a measure of control over price and supply, Northwest trades and ships fuel and maintains fuel storage facilities. Petroleum product prices, including jet fuel, are primarily driven by crude oil costs. The market's alternate uses of crude oil to produce petroleum products other than jet fuel (e.g., heating oil and gasoline), as well as the adequacy of refining capacity and other supply constraints, affect the price and availability of jet fuel. Major changes in the price or availability of fuel could materially affect the financial results of the Company.

    The following table summarizes Northwest's fuel consumption and costs:

(1)

Excludes taxes and into-plane fees.

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Employees

    The airline industry is labor-intensive and as of December 31, 2000, the Company had approximately 53,500 full-time equivalent employees of whom approximately 2,300 were foreign nationals working primarily in Asia. Unions represent approximately 90% of the Company's employees. Collective bargaining agreements provide standards for wages, hours of work, working conditions, settlement of disputes and other matters. The major agreements with domestic employees became amendable or will become amendable on various dates as follows:

    The above agreements are governed by the Railway Labor Act ("RLA"). Pursuant to the RLA, an agreement becomes amendable at the expiration of its stated term, and continues in effect while the parties pursue agreement on a new contract. In addition to the direct negotiation phase, the RLA also provides for a period of mediation, potential arbitration of unresolved issues, and a 30-day "cooling off" period before either party can resort to self-help. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Other Information" for further discussion of collective bargaining activities.

Regulation

    General.  The Airline Deregulation Act of 1978, as amended, eliminated most domestic economic regulation of passenger and freight transportation. Northwest is subject to DOT regulations because it holds certificates of public convenience and necessity as well as air carrier operating certificates. Northwest's domestic route authority from the DOT permits it to engage in the interstate and overseas transportation of passengers, freight and mail between all points in the U.S. and its territories and possessions.

    The DOT has jurisdiction over international route authorities, CRSs and certain consumer protection matters, such as advertising, denied boarding compensation and baggage liability. The Federal Aviation Administration ("FAA") regulates flight operations, including air space control and aircraft and security standards. The Department of Justice ("DOJ") has jurisdiction over airline competition matters, including mergers and acquisitions. Other federal agencies have jurisdiction over postal operations, use of radio facilities by aircraft and certain other aspects of Northwest's operations.

    Several items of legislation have been introduced in Congress in the last several years that would, if enacted, establish a "Passenger Bill of Rights" mandating certain customer service practices. The outcome of the proposed legislation is unknown. However, to the extent that special regulatory protections are

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imposed upon Northwest's business or operational practices, Northwest's business may be adversely impacted.

    Northwest operates its international routes under route certificates issued by the DOT. Substantial portions of Northwest's Pacific route certificates are permanent and do not require renewal by the DOT. Certain other international route certificates are temporary and subject to periodic renewal by the DOT. Northwest requests extensions of these certificates when and as appropriate. The DOT typically renews temporary authorities on routes when the authorized carrier is providing a reasonable level of service. With respect to foreign air transportation, the DOT must approve agreements between air carriers, including code-sharing agreements, and may grant antitrust immunity for those agreements.

    Northwest's rights to operate to foreign countries, including Japan, China and other countries in the Pacific and Europe, are governed by aviation agreements between the U.S. and the respective foreign countries. Many aviation agreements permit an unlimited number of carriers to operate between the U.S. and the respective foreign country, while other aviation agreements limit the number of carriers and flights on a given international route. From time to time, the U.S. or its foreign country counterpart may seek to renegotiate or cancel an aviation agreement. In the event an aviation agreement is amended or canceled, such a change could adversely affect Northwest's ability to maintain and/or expand air service to the respective 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 and Osaka. Additionally, slots for international flights are subject to certain restrictions on use and transfer.

    The European Commission ("EC") has commenced a review of all trans-Atlantic airline alliances, including the Northwest/KLM alliance. The EC is considering imposing certain regulatory conditions that may restrict the areas of permissible cooperation. If imposed, such regulatory conditions could adversely affect the alliance and Northwest's ability to maintain and/or expand trans-Atlantic air service.

    The DOT is conducting a review of the frequent flyer programs of the larger U.S. airlines. The focus of the review relates to limitations placed by carriers on the availability of award seats and the adequacy of consumer notices concerning such limitations. The outcome of this matter cannot presently be determined.

    Airport Access.  Four of the nation's airports, Chicago O'Hare, New York (LaGuardia and Kennedy International) and Washington, D.C. (Ronald Reagan National), have been designated by the FAA as "high density traffic airports," and the number of takeoffs and landings at such airports ("slots") have been limited during certain peak demand time periods. Currently the FAA permits the buying, selling, trading or leasing of these slots, subject to certain restrictions. Legislation passed in March 2000 will result in the elimination of slot restrictions at Chicago O'Hare on July 1, 2002 and at New York (LaGuardia and Kennedy International) on January 1, 2007. The Company believes these changes will not have a material adverse impact on its operations or operating results.

    Labor.  The 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 collectively along craft or class lines and imposing a duty upon air carriers and their employees to exert every reasonable effort to make and maintain collective bargaining agreements. The RLA contains detailed procedures that must be exhausted before a lawful work stoppage may occur. Pursuant to the RLA, Northwest has collective bargaining agreements with six domestic unions representing 11 separate employee groups. For current status of these agreements, see "Business—Employees" within Item 1. In addition, Northwest has agreements with four unions representing its employees in countries throughout Asia; such agreements are not subject to the RLA.

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    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 the interstate and foreign commerce of the national air transportation system. As a result of litigation and pressure from airport area residents, airport operators have taken local actions over the years to reduce aircraft noise. These actions include restrictions on night operations, restrictions on frequency of aircraft operations and various operational procedures for noise abatement. While to date Northwest has sufficient operational and scheduling flexibility to accommodate current local noise restrictions, its operations could be adversely affected if locally imposed regulations become more restrictive or widespread.

    In April 1999 the European Union ("EU") enacted a rule that would prohibit the registration in Europe of aircraft with "hushkits" after April 1, 2000. Northwest opposes such a rule as it could inhibit its operations in Europe as well as reduce the Company's fleet strategy options in relation to older aircraft, which are often retired and sold in Europe, Africa and Asia. The U.S. government has formally protested this regulation as a violation of the international noise standards established by the International Civil Aviation Organization ("ICAO"), and in March 2000, the U.S. filed a formal petition with the ICAO seeking sanctions against the EU to change this unilateral EU action. The petition is pending.

    Under the direction of the ICAO, world governments also have under consideration creation of a new, more stringent noise standard than that contained in the ANCA. The U.S. is a participant in these discussions. At a meeting of the ICAO Committee on Aviation Environmental Protection ("CAEP") held in January, 2001, a preliminary recommendation was made to adopt a new more stringent noise standard for newly manufactured aircraft, but to refrain from applying the new stringency standard to existing aircraft. This recommendation is subject to review and revision by the full ICAO in meetings scheduled later in 2001. If new standards are adopted and they are accompanied by a requirement to phase out non-compliant aircraft, it would reduce the Company's fleet strategy disposition options.

    Safety.  The FAA has jurisdiction over 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 or revocation for cause.

    The Company's aircraft require various levels of maintenance or "checks" and periodically undergo complete overhauls. Maintenance efforts are monitored closely by the FAA, with FAA representatives present at the Company's maintenance facilities. The FAA has issued several Airworthiness Directives ("ADs") which mandate changes to an air carrier's maintenance program for older aircraft. These ADs (which include structural modifications to certain aircraft) were issued to ensure that the oldest portion of the nation's transport aircraft fleet remains airworthy. The Company is currently, and expects to remain, in compliance with all applicable requirements under the FAA-issued ADs.

    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.

    Environmental.  The Company is subject to regulation under various environmental laws and regulations, which are administered by numerous state and federal agencies, including the Clean Air Act, the Clean Water Act and Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"). In addition, many state and local governments have adopted environmental laws and regulations to which the Company's operations are subject.

    In February 1998, the EPA and the FAA signed a Memorandum of Agreement ("MOA") to develop a voluntary process with the airline industry to reduce emissions that lead to ozone formation. The MOA includes a proposal with a voluntary engine retrofit program to reduce emissions from aircraft engines. As a result of the MOA, air carriers, the EPA, the FAA and local and state regulators have had discussions regarding the scope and content of a voluntary emissions reduction program. However, these discussions have not yet resulted in an agreed upon program.

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    Northwest has been identified, along with other airlines, as a potentially responsible party at various sites. Management believes that Northwest's share of liability for the cost of the remediation of these sites, if any, will not have a material adverse effect on the Company's financial statements.

    Civil Reserve Air Fleet Program.  Northwest is a participant in the Civil Reserve Air Fleet Program, pursuant to which Northwest has agreed to make available, during the period beginning October 1, 2000 and ending September 30, 2001, 22 747 aircraft, 10 747 freighter aircraft and 43 DC10 aircraft for use by the U.S. military under certain stages of readiness related to national emergencies.

Holding Company Reorganization

    In connection with the purchase of an interest in Continental in November 1998, NWA Corp. effected a holding company reorganization. As a result of this reorganization, Northwest Airlines Holdings Corporation, which was formerly known as Northwest Airlines Corporation and was at that time the publicly traded holding company ("Old NWA Corp."), became a direct wholly-owned subsidiary of the new holding company, NWA Corp. As a result, NWA Corp. is now the publicly traded holding company, which owns directly Old NWA Corp. and indirectly the holding and operating subsidiaries of Old NWA Corp. References in this Annual Report to NWA Corp., Common Stock and Series C Preferred Stock for time periods prior to November 20, 1998 refer to Old NWA Corp. and the Common Stock and Series C Preferred Stock of Old NWA Corp., respectively. See Note 1 to the Consolidated Financial Statements.

Risk Factors Relating to Northwest and NWA Corp.

Indebtedness

    The Company has substantial levels of indebtedness. As of December 31, 2000, the Company had long-term debt and capital lease obligations of $3.80 billion. Of this indebtedness, 21% bears interest at floating rates. The amount of long-term debt that matures in 2001 is $191 million. Additionally, $143 million matures in 2002, $129 million in 2003, $486 million in 2004 and $348 million in 2005. As of December 31, 2000, future minimum lease payments under capital leases were $106 million for 2001, $208 million for 2002, $87 million for 2003, $62 million for 2004 and $51 million for 2005. These levels of indebtedness do not include the mandatory obligation to redeem $232 million of convertible preferred stock in 2003.

    In addition, Northwest operates in a capital-intensive industry. Periodically, Northwest is required to make significant capital expenditures for new aircraft and related equipment. There can be no assurance that sufficient financing will be available for all aircraft and other capital expenditures not covered by commercial financing.

Labor Agreements

    Approximately 90% of the Company's employees are members of collective bargaining units. Under direction from the National Mediation Board ("NMB"), the Company was in mediated negotiations with the Aircraft Mechanics Fraternal Association ("AMFA"), which represents the Company's mechanics. On February 9, 2001, the NMB released Northwest and AMFA from mediated negotiations after AMFA rejected the NMB's offer of binding arbitration. The NMB notified Northwest and AMFA that a 30-day "cooling off" period would begin on February 10, 2001, and that beginning at 11:01 PM CST on March 11, 2001 either side could resort to self-help remedies which could include, but are not limited to, a strike by the members of AMFA.

    On March 9, 2001, President Bush, following the recommendation of the NMB, announced the establishment of a Presidential Emergency Board ("PEB"). The establishment of a PEB stopped any self-help remedies and started the process during which the PEB reviews the positions advocated by Northwest and AMFA and proposes a solution, which is anticipated to be by mid-April. If the PEB resolution is not accepted by both parties (or if the parties do not reach some other agreement), and unless

12

Congress takes additional action, either party will be permitted to resort to self-help remedies 30 days after the PEB makes its recommendation to the President. A prolonged work stoppage, if it were to occur, could have a material adverse impact on the Company. The Company cannot predict the outcome of the negotiations at this time.

Risks Regarding Alliances

    Northwest is currently a party to numerous alliances with other airlines, and may enter into additional alliances in the future. Northwest's ability to grow its route network by entering into alliances depends upon the availability of suitable alliance candidates and the ability of Northwest and its alliance partners to meet business objectives and to perform their obligations under the alliance agreements. Northwest's ability to successfully achieve the anticipated benefits of its alliances depends upon many factors, including disapproval or delay by regulatory authorities or adverse regulatory developments, competitive pressures, customer acceptance of the alliance and Northwest's and its alliance partners' ability to modify certain contracts that may restrict certain aspects of the alliances.

Foreign Currency Exposure

    Northwest conducts a significant portion of its operations in foreign locations. As a result, Northwest has operating revenues and, to a lesser extent, operating expenses, as well as assets and liabilities, denominated in foreign currencies. Fluctuations in such foreign currencies, especially the Japanese yen, can significantly affect Northwest's operating performance. From time to time, Northwest uses financial instruments to hedge its exposure to the Japanese yen.

Risk Factors Related to the Airline Industry

Industry Conditions and Competition

    The airline industry is highly competitive. Airline profit levels are highly sensitive to adverse changes in fuel costs, average fare levels and passenger demand. Passenger demand and fare levels have historically been influenced by, among other things, the general state of the economy, international events, airline capacity and pricing actions taken by other airlines.

    Northwest's competitors include all the other major domestic airlines, as well as foreign, national, regional and new entrant airlines, some of which have more financial resources or lower cost structures than Northwest. On most of Northwest's routes, it competes with at least one of these carriers. Northwest uses yield inventory management systems to vary the number of discount seats offered on each flight in an effort to maximize revenues while remaining price competitive with lower-cost carriers. These competitors' low-cost fares could affect the Company's operating results.

    In recent years, the major U.S. airlines have formed marketing alliances with other U.S. and foreign airlines. Such alliances generally provide for code-sharing, frequent flyer program reciprocity, coordinated scheduling of flights to permit convenient connections and other joint marketing activities. Such arrangements permit an airline to market flights operated by other alliance members as its own. This increases the destinations, connections and frequencies offered by the airline, which provide an opportunity to increase traffic on that airline's segment of flights connecting with alliance partners. Other major U.S. airlines have alliances or planned alliances that may be more extensive than Northwest's alliances. Northwest cannot predict the extent to which it will be disadvantaged by competing alliances.

    The airline industry is both cyclical and seasonal in nature. Due to seasonal fluctuations, the Company's operating results for any interim period are not necessarily indicative of those for the entire year. The Company's second and third quarter operating results have historically been more favorable due to increased leisure travel on domestic and international routes during the spring and summer months.

    In addition, Northwest operates in an industry which may undergo consolidation. Any business combination could significantly alter the industry conditions and competition within the airline industry.

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Any business combination involving Northwest could adversely affect Northwest's operations because, for example, of difficulties in integrating operations and personnel.

Aircraft Fuel

    Because fuel costs are a significant portion of Northwest's operating costs (16.2% for 2000), significant changes in fuel costs would materially affect its operating results. Fuel prices continue to be susceptible to, among other factors, political events, and Northwest cannot control near or long-term fuel prices. Northwest may experience higher fuel prices or have to curtail scheduled services due to a fuel supply shortage that may result from a disruption of oil imports or other events. A one-cent change in the cost of a gallon of fuel (based on 2000 consumption) would impact operating expenses by approximately $1.8 million per month. Changes in fuel prices may have a greater impact on Northwest than some of its competitors because of the composition of its fleet.

Regulatory Matters

    Airlines are subject to extensive regulatory requirements. In the last several years, the FAA has issued a number of maintenance directives and other regulations. These requirements impose substantial costs on airlines. Northwest expects to continue to incur expenditures to comply with the FAA's noise and aging aircraft regulations.

    Additional laws, regulations, taxes and airport rates and charges have been proposed from time to time that could significantly increase the cost of airline operations or reduce revenues. Congress and the DOT have also proposed the regulation of airlines' responses to their competitors' activities. The ability of U.S. carriers to operate international routes is subject to change because the applicable arrangements between the U.S. and foreign governments may be amended from time to time, or because appropriate slots or facilities may not be available. Northwest cannot give assurance that laws or regulations enacted in the future will not adversely affect it.

Forward-Looking Statements

    Certain of the statements made in "Item 1. Business," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this report are forward-looking and are based upon information available to the Company on the date hereof. The Company through its management may also from time to time make oral forward-looking statements. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company is hereby identifying important factors that could cause actual results to differ materially from those contained in any forward-looking statement made by or on behalf of the Company. Any such statement is qualified by reference to the following cautionary statements.

    It is not reasonably possible to itemize all of the many factors and specific events that could affect the outlook of an airline operating in the global economy. Some factors that could significantly impact expected capacity, load factors, revenues, expenses and cash flows include the airline pricing environment, fuel costs, labor negotiations both at the Company and other carriers, low-fare carrier expansion, capacity decisions of other carriers, actions of the U.S. and foreign governments, foreign currency exchange rate fluctuations, inflation, the general economic environment in the U.S. and other regions of the world and other factors discussed herein, including those identified in "Risk Factors" above.

    Developments in any of these areas, as well as other risks and uncertainties detailed from time to time in the Company's Securities and Exchange Commission filings, could cause the Company's results to differ from results that have been or may be projected by or on behalf of the Company. The Company cautions that the foregoing list of important factors is not inclusive. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These statements deal with the Company's expectations about the future and are

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subject to a number of factors that could cause actual results to differ materially from the Company's expectations.

Item 2.  PROPERTIES

Flight Equipment

    The Company operated a fleet of 424 aircraft at December 31, 2000, consisting of 335 narrow-body and 89 wide-body aircraft. The diversity of the fleet accommodates both the Company's domestic hub-and-spoke system and its international routes and enhances the Company's ability to match its aircraft to its route network requirements more efficiently.

    As of December 31, 2000, 298 aircraft were owned and 126 aircraft were leased. The Company currently operates 20 Airbus A319 aircraft, of which eight are owned and twelve leased, with an average age of 11 months; 70 Airbus A320 aircraft, of which 35 are owned and 35 leased, with an average age of 7.1 years; 48 Boeing 757 aircraft, of which 15 are owned and 33 leased, with an average age of 11.3 years; 35 Boeing 747 aircraft, of which 16 are owned and 19 leased, with an average age of 16.1 years; 10 Boeing 747 freighters, of which 5 are owned and 5 leased, with an average age of 20.0 years; 25 Boeing 727 aircraft, all of which are owned, with an average age of 22.2 years and that are scheduled to be retired by mid-2003 and replaced with additional A319 and A320 aircraft; 172 DC9 aircraft, of which 159 are owned and 13 leased, with an average age of 30.1 years; and 44 DC10 aircraft, of which 35 are owned and 9 leased, with an average age of 24.9 years. The Company also acquired two used 747 aircraft, which will be converted to freighters and are scheduled to begin revenue service in the summer of 2001.

    In January 2001, the Company entered into agreements to purchase 52 new aircraft, some of which will be used to replace most of the DC10 fleet. The aircraft consist of 24 A330 aircraft, 20 Boeing 757 aircraft, two Boeing 747-400 aircraft and six A319 aircraft. Deliveries of the A330 aircraft will begin in 2003 and continue through 2006, deliveries of the 757 aircraft will begin in 2002 and continue through 2004 and the A319 aircraft and 747 aircraft will be delivered in 2002. Financing commitments from the manufacturers have been arranged for most of these aircraft.

    The DC9 aircraft have considerable remaining technological life, based upon the cycle life (capacity for number of landings) expected by the manufacturer and other factors. The Company also believes that these aircraft have economic value for the Company given its route network and maintenance programs. The Company estimates that its DC9 aircraft could fly on average approximately 12 additional years beyond 2000 based upon the manufacturer's expected cycle life for such aircraft and their projected annual utilization by Northwest.

    For further information related to the Company's aircraft leases and commitments see Notes 4 and 10 to the Consolidated Financial Statements.

Other Property and Equipment

    Northwest's primary offices are located at or near the Minneapolis/St. Paul International Airport. The Company owns a 160-acre site east of the Minneapolis/St. Paul International Airport containing the Company's corporate offices. Additional owned buildings include reservation centers in Baltimore, Detroit, Tampa and Chisholm, Minnesota; and a data processing center in Eagan, Minnesota. The Company owns property in Tokyo, including a 1.3-acre site in downtown Tokyo and a 33-acre land parcel, 512-room hotel and flight kitchen located near Tokyo's Narita International Airport.

    Northwest leases the majority of its airport facilities, support services buildings and sales and reservations offices. These leases generally run for periods of less than one year to 30 years and contain provisions for periodic adjustment of lease rates. At most airports that it serves, Northwest has entered into use agreements which provide for the non-exclusive use of runways, taxiways and other facilities. Landing fees under these agreements normally are based on the number of landings and weight of aircraft. The Company leases reservations centers in or near Minneapolis/St. Paul, Honolulu, Los Angeles, New

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York City and Seattle. Maintenance bases under operating leases are located in Minneapolis/St. Paul, Atlanta, Georgia and Duluth, Minnesota. The Company also operates 55 city ticket offices. In certain cases, the Company has constructed a facility on leased land, which reverts to the lessor upon expiration of the lease. These facilities include cargo buildings in Anchorage, Boston, Los Angeles, New York (JFK), San Francisco and Honolulu; support buildings at the Minneapolis/St. Paul International Airport; a line maintenance hangar in Seattle; and a two-bay DC10 hangar in Detroit that was completed in 1999.

    Northwest is managing and supervising the design and construction of a $1.2 billion terminal at Detroit Metropolitan Wayne County Airport, which will offer 97 gates, 106 ticket-counter positions, a fourth parallel runway, over 80 shops and restaurants, four WorldClubs, an 11,500-space parking facility, covered curbside drop-off areas and 18 luggage carousels. It has been funded by the County's issuance of general airport revenue bonds payable primarily from future passenger facility charges and federal and State of Michigan grants. Northwest entered into agreements with the County in which it will lease space in the new terminal for a term of 30 years.

Item 3.  LEGAL PROCEEDINGS

    Chase v. Northwest Airlines and Airline Reporting Corporation (U.S. D.C. Eastern District of Michigan, Civ. Action No. 96-74711).  Northwest is a defendant in an antitrust class action filed in U.S. District Court for the Eastern District of Michigan in October 1996. The action purports to be brought on behalf of a class defined as all persons who purchased tickets on Northwest flights into Northwest's hubs at Detroit, Minneapolis/St. Paul and Memphis from October 11, 1992 to the present. The complaint alleges that Northwest's imposition of restrictions prohibiting the sale of "hidden city" tickets constitutes monopolization in violation of the Sherman Act. The complaint also alleges that the Airline Reporting Corporation ("ARC"), the clearinghouse that processes travel agent sales of airline tickets, has entered into an agreement with Northwest to enforce Northwest's restrictions on "hidden city" ticketing and that the alleged agreement between ARC and Northwest is an unlawful agreement in restraint of trade in violation of the Sherman Act. The complaint seeks injunctive relief, unspecified damages for the class, and costs and attorneys' fees. The attorneys for the plaintiff in Chase have also filed three additional class actions in the same court against other airlines and Northwest with parallel allegations similar to those in Chase, including allegations that the defendant airlines conspired to deter hidden city ticketing. These cases are: Keystone Business Machines, Inc. v. U.S. Airways and Northwest Airlines (U.S. D.C. Eastern District of Michigan, Civ. Action No. 99-72474), BLT Contracting, Inc. v. U.S. Airways, Northwest Airlines and the Airline Reporting Corporation (U.S. D.C. Eastern District of Michigan, Civ. Action No. 99-72988), and Volk and Nitrogenous Industries Corp. v. U.S. Airways, Northwest Airlines, Delta Air Lines, and the Airline Reporting Corporation (U.S. D.C. Eastern District of Michigan, Civ. Action No. 99-72987). All have been assigned to the Judge in the Chase case. Northwest believes these cases are without merit and intends to defend against them. Discovery is complete. In November 2000, the plaintiffs filed their class certification motion and defendants filed their summary judgment motion. The motions are pending.

    Midwestern Machinery Co., Inc. v. Northwest Airlines, Inc. (U.S. D.C. District of Minnesota, Civ. Action No. 97-1438).  In June 1997, Midwestern Machinery Co. and several individuals filed an antitrust class action against Northwest in the U.S. District Court for Minnesota. The complaint alleges that Northwest's acquisition of Republic Airlines in 1986 resulted in a substantial reduction in competition in violation of Section 7 of the Clayton Act. Northwest believes the lawsuit to be without merit and intends to defend against the claim. In February 2001, the Court granted the plaintiff's motion for class certification. Discovery is ongoing.

    Duncan v. Northwest Airlines, Inc. (U.S. D.C. Western District of Washington, Civ. Action No. C98-130Z).  In January 1998, a purported class action was filed against Northwest in Superior Court for King County, Washington by a current Northwest flight attendant for injunctive relief and damages for injuries allegedly sustained by Northwest flight attendants from exposure to second-hand smoke on Northwest trans-Pacific flights. Northwest removed the case to federal court. Northwest has answered the complaint and is

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responding to plaintiff's discovery. On November 20, 2000, plaintiff filed her motion for class certification. Northwest filed its response in February 2001 and also filed motions for summary judgment.

    Hall v. United Air Lines, et al. (U.S. D.C. Eastern District of North Carolina, Civ. Action No. 7-00 CV-123-BR(1)).  In October 1999, a purported class action was filed in State Court in North Carolina by a North Carolina travel agent, on behalf of herself and similarly situated North Carolina travel agents, challenging actions by most major airlines, including Northwest, to reduce travel agent base commissions from 8 percent to 5 percent and alleging several state law theories of liability, including conspiracy. In June 2000, the plaintiff filed a voluntary dismissal and then filed a new case in federal court. The new case is a class action, now apparently on behalf of a nation-wide class of travel agents, alleging an unlawful agreement among airlines to reduce commissions in violation of the Sherman Act and is based on the same factual allegations. Northwest believes the case to be without merit and intends to defend against the claim.

    McCoy-Johnson v. Northwest Airlines (U.S. D.C. Western District of Tennessee, Civ. Action No. 2-99-CV-2994GV).  In November 1999, a purported class action was filed against Northwest by a Northwest passenger in federal court alleging violations of Section 2 of the Sherman Act. The plaintiff alleges that Northwest has monopolized or attempted to monopolize air transportation into and out of its three domestic hubs through a variety a exclusionary practices. The plaintiff purports to sue on behalf of all similarly situated passengers who purchased tickets on Northwest for travel into or out of its three hubs since at least as early as April 1995. Northwest believes the case to be without merit and intends to defend against the claim. The case is now in discovery. In March 2001, a second case, Rodney v. Northwest Airlines (U.S. D.C. Western District of Tennessee, Civ. Action No. 2-01-CV-2167GV), was filed in the same court as a related case by the same counsel. The allegations in the Rodney case are substantially the same as those in the McCoy-Johnson case.

    Spirit Airlines v. Northwest Airlines (U.S. D.C. Eastern District of Michigan, Civ. Action No. 00-71535).  In March 2000, Spirit Airlines filed a Sherman Act monopolization complaint against Northwest in the U.S. District Court for the Eastern District of Michigan alleging that Northwest had monopolized, or attempted to monopolize, air transportation service between Detroit and Philadelphia and between Detroit and Boston in 1996 by engaging in predatory pricing and other actions to exclude Spirit from those markets. Northwest believes the case to be without merit and intends to defend against the claim. Northwest has filed an answer and the parties are proceeding with discovery.

    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 is currently a party (including those described above) will not have a material adverse effect on the Company's consolidated financial statements taken as a whole.

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 2000.

MANAGEMENT

Executive Officers of the Registrant

    On February 19, 2001, John H. Dasburg announced that he will resign from his position as President and Chief Executive Officer of the Company effective March 31, 2001. The Company has announced that, effective April 1, 2001, Richard H. Anderson will become Chief Executive Officer of the Company and Douglas M. Steenland will become President of the Company. The executive officers of the Company, together with their ages and business experience, are set forth below:

    John H. Dasburg, age 58, has served as President and Chief Executive Officer and a director of NWA Corp. and Northwest since 1990. Mr. Dasburg joined Northwest in November 1989 as Executive Vice

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President—Finance and Administration and was appointed President and Chief Executive Officer in November 1990. Prior to joining Northwest, Mr. Dasburg served as President of Marriott's Lodging Group and as an Executive Vice President of Marriott Corp. Mr. Dasburg serves on the boards of directors of KLM, The St. Paul Companies, Inc., the Mayo Foundation and Genuity, Inc.

    Richard H. Anderson, age 45, has served as Executive Vice President and Chief Operating Officer of NWA Corp. and Northwest since December 1998. He was Executive Vice President—Technical Operations and Airport Affairs from April 1998 to December 1998 and Senior Vice President—Technical Operations and Airport Affairs from January 1997 to April 1998. From July 1994 to December 1996, he was Senior Vice President—Labor Relations, State Affairs and Law. He joined Northwest in 1990 as Vice President—Deputy General Counsel. Prior to joining Northwest, Mr. Anderson was Staff Vice President and Deputy General Counsel of Continental. Mr. Anderson also serves on the board of directors of Mesaba Holdings, Inc.

    Douglas M. Steenland, age 49, has served as Executive Vice President and Chief Corporate Officer of NWA Corp. and Northwest since September 1999. Mr. Steenland was Executive Vice President—Alliances, General Counsel and Secretary from January 1999 to September 1999 and Executive Vice President, General Counsel and Secretary of NWA Corp. and Northwest from June 1998 to January 1999. From July 1994 to June 1998, he served as Senior Vice President, General Counsel and Secretary. He joined Northwest as Vice President, Deputy General Counsel and Secretary in July 1991. Prior to joining Northwest, Mr. Steenland was a senior partner at the Washington, D.C. law firm of Verner, Liipfert, Bernhard, McPherson and Hand. Mr. Steenland also serves on the board of directors of Mesaba Holdings, Inc.

    Mickey P. Foret, age 55, has served as Executive Vice President and Chief Financial Officer of NWA Corp. and Northwest since September 1998. He also serves as Chairman and Chief Executive Officer of Northwest Airlines Cargo Inc. Mr. Foret rejoined Northwest in May 1998 as Special Projects Officer of NWA Corp. and Northwest. He previously served as Executive Vice President and Chief Financial Officer of NWA Corp. and Northwest from September 1993 to May 1996. From June 1996 to September 1997, Mr. Foret served as President and Chief Operating Officer of Atlas Air, Inc.

    Stephen E. Gorman, age 45, was elected Executive Vice President—Technical Operations and Flight Operations of the Company effective February 27, 2001. From January 1999 to February 2001, he served as Senior Vice President—Technical Operations, and from April 1996 to January 1999, he served as Vice President—Engine Maintenance Operations. Prior to joining Northwest, Mr. Gorman was Vice President—Operations for Aviall, Inc. (aviation parts and services). Mr. Gorman serves on the board of directors of Rohn Industries, Inc.

    J. Timothy Griffin, age 49, has served as Executive Vice President—Marketing and Distribution of Northwest since January 1999. From June 1993 to January 1999, he served as Senior Vice President—Market Planning and Systems. Prior to joining Northwest in 1993, Mr. Griffin held senior positions with Continental Airlines and American Airlines.

    Philip C. Haan, age 45, has served as Executive Vice President—International, Sales and Information Services of Northwest since January 1999. From December 1995 to January 1999, he served as Senior Vice President—International Services. Mr. Haan joined Northwest in 1991 as Vice President—Revenue Management.

    Thomas Momchilov, age 51, joined Northwest as Senior Vice President—Human Resources in January 2000. Prior to joining Northwest, Mr. Momchilov served as Corporate Vice President, Human Resources for Reynolds and Reynolds (computer systems and business services) from 1988.

    James G. Mathews, age 50, joined Northwest as Vice President—Finance and Chief Accounting Officer in November 2000. From May 1997 to October 2000, Mr. Mathews served as Chief Financial and Administrative Officer of CARE-USA (an international relief and development agency) and from 1992 to 1997 Mr. Mathews held various executive positions at Delta Air Lines, including Corporate Treasurer.

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PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

    The Company's common stock is quoted on the Nasdaq National Market under symbol NWAC. The table below shows the high and low sales prices for the Company's common stock during 2000 and 1999:

    As of February 28, 2001, there were 1,356 stockholders of record.

    Since NWA Corp.'s 1989 acquisition of Northwest, NWA Corp. has not declared or paid any dividends on its common stock and does not currently intend to do so. Under the provisions of certain of the Company's bank credit agreements, NWA Corp.'s ability to pay dividends on or repurchase its common stock is restricted. Any future determination to pay cash dividends will be at the discretion of the Board of Directors, subject to applicable limitations under Delaware law, and will be dependent upon the Company's results of operations, financial condition, contractual restrictions and other factors deemed relevant by the Board of Directors.

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Item 6:  SELECTED FINANCIAL DATA

NORTHWEST AIRLINES CORPORATION

(1)

1998 was affected by labor-related disruptions which included work actions, a 30-day cooling off period, an 18-day cessation of flight operations due to the pilots' strike, a seven-day gradual resumption of flight operations and a rebuilding of traffic demand.

(2)

Excludes the effects of the 1997 extraordinary loss ($.10 per basic share and $.08 per diluted share) and the 1996 preferred stock transaction ($.75 per basic share and $.68 per diluted share).

(3)

No dividends have been paid on common stock for any period presented.

(4)

All statistics exclude Express Airlines I, Inc.

(5)

Excludes the estimated revenues and expenses associated with the operation of Northwest's fleet of 747 freighter aircraft and MLT Inc.

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Item 7:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    Northwest Airlines Corporation ("NWA Corp." and, together with its consolidated subsidiaries, the "Company") reported net income of $256 million for the year ended December 31, 2000, compared with $300 million in 1999. Diluted earnings per common share were $2.77 in 2000 compared with $3.26 in 1999. Operating income was $569 million in 2000 compared with $714 million in 1999. Higher fuel prices negatively impacted the year ended December 31, 2000 by approximately $622 million on a pre-tax basis compared to 1999.

    In the fourth quarter of 2000, the Company recorded a non-recurring pre-tax, non-cash fleet disposition charge of $125 million related to the accelerated retirement of a portion of its DC10 fleet. Diluted earnings per share, excluding this non-recurring charge were $3.63.

    Substantially all of the Company's results of operations are attributable to its principal indirect operating subsidiary, Northwest Airlines, Inc. ("Northwest"), which accounted for approximately 95% of the Company's 2000 consolidated operating revenues and expenses and the following discussion pertains primarily to Northwest.

Results of Operations—2000 Compared to 1999

    Operating Revenues.  Operating revenues increased 11.1% ($1.14 billion). System passenger revenue increased 10.9% ($935 million), excluding Express Airlines I, Inc. ("Express"), primarily attributable to a 3.9% increase in scheduled service ASMs and a 6.6% increase in passenger revenue per ASM ("RASM"). ASMs increased primarily due to the net addition of 14 aircraft in 2000. System passenger load factor increased to a record 76.6% for the year ended December 31, 2000. Express revenues were $130 million and $104 million for the years ended December 31, 2000 and 1999, respectively.

    The following analysis by market is based on information reported to the U.S. Department of Transportation ("DOT") and excludes Express:

    Domestic passenger revenue increased due to a higher passenger load factor, more capacity and higher yields. Domestic passenger load factor increased 2.1 points to a record 72.9%, primarily due to favorable industry market conditions. Capacity increased as a result of additional aircraft.

    Pacific passenger revenue was higher due to increased capacity and higher yields driven by Asia's recovering economic environment. The average yen per U.S. dollar exchange rate for the years ended December 31, 2000 and 1999 was 108 and 115, respectively, a 6.5% strengthening of the yen. The yen per U.S. dollar exchange rate was 117 at February 28, 2001. Pacific passenger load factor increased 1.5 points to a record 81.7% as the Company continued to experience increased demand.

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    Atlantic passenger revenue increased as a result of more capacity and a higher passenger load factor. Capacity increased as a result of new flying, including the initiation of Detroit-Italy service and higher frequency in Minneapolis/St. Paul-Amsterdam service, as well as improved operational performance.

    Cargo revenue increased 17.1% ($125 million) due to a 7.1% increase in cargo ton miles and a 9.4% increase in cargo revenue per ton mile. The Company's tenth Boeing 747 freighter entered service in August 2000. Also in 2000, the Company acquired two additional Boeing 747 aircraft, which are being converted into freighters and are scheduled to begin revenue service in the summer of 2001. Other revenue increased 6.2% ($53 million) due to a higher volume of business for MLT Inc., which was partially offset by lower KLM joint venture alliance settlements.

    Operating Expenses.  Operating expenses increased 13.4% ($1.28 billion). Operating capacity increased 4.0% to 103.52 billion total service ASMs due to planned capacity increases. Operating expense per total ASM increased 7.1%, excluding the fleet disposition charge, and increased only .7% when the impact of higher fuel prices is also excluded.

    Salaries, wages and benefits increased 6.4% ($217 million) due primarily to wage and benefit increases from settled contracts with collective bargaining units and an increase in average full-time equivalent employees of 2.6%. Aircraft fuel and taxes rose 57.2% ($681 million) due to an increase of 55.0% in average fuel cost per gallon to a record 82.99 cents, net of hedging transactions, and 3.6% higher fuel gallons consumed as a result of higher capacity. Hedging transactions reduced fuel costs by $119 million in 2000. Commissions decreased 9.9% ($73 million) primarily due to lower rates resulting from changes to the Company's commission structure, which were effective in October 1999, and a lower percentage of commissionable transactions partially offset by commissions on higher passenger revenues. Internet sales represented approximately 8.0% of passenger revenue in 2000 compared with approximately 5.0% in 1999. Aircraft maintenance materials and repairs increased .8% ($5 million) due to a 1999 non-recurring credit of $34 million related to lower than anticipated costs associated with outside aircraft maintenance, offset by lower scheduled engine and airframe overhauls in 2000. Higher scheduled engine and airframe overhaul costs are expected in 2001. Depreciation and amortization increased 23.4% ($117 million) due to the fleet disposition charge of $125 million related to the accelerated retirement of a portion of the DC10 fleet recorded in the fourth quarter. See Note 1 to the Consolidated Financial Statements for additional discussion of the fleet disposition charge. Aircraft rentals increased 19.2% ($68 million) due to additional leased aircraft. Other expenses (the principal components of which include outside services, selling and marketing expenses, passenger food, personnel expenses, advertising and promotional expenses, communication expenses and supplies) increased 10.7% ($242 million) due primarily to increased business for MLT Inc. and higher variable costs associated with expanded capacity.

    Other Income and Expense.  Interest expense decreased 7.7% ($29 million) primarily due to reduced borrowings and lower interest rates. Earnings of affiliated companies increased 9.5% ($8 million) due largely to the Company's share of higher Worldspan earnings. Other income increased primarily due to a $58 million gain from the sale of a portion of Northwest's investment in priceline.com in 2000, partially offset by a $48 million gain from the sale of a portion of Northwest's investment in Equant N.V. during 1999.

Results of Operations—1999 Compared to 1998

    The year ended December 31, 1998 was affected by labor-related disruptions, which included a pilots' strike. Because of these events, year-over-year comparisons are not useful to measure the underlying operating and financial performance of the Company. However, for continuity of reporting, the traditional comparisons are presented. The Company estimated the impact in lost revenue and incremental expenses to be approximately $1.04 billion on a pre-tax basis for the year ended December 31, 1998.

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    Operating Revenues.  Operating revenues increased 13.6% ($1.23 billion). System passenger revenue increased 14.3% ($1.08 billion), excluding Express, primarily attributable to an increase in scheduled service ASMs and an increase in passenger RASM, both of which resulted from improved operational performance in 1999 and the recovery from the 1998 labor disruptions. The increase in passenger RASM was partially offset by the residual effects of lower premium traffic in early 1999 and lower Atlantic yields caused by industry wide capacity growth throughout 1999. Express revenues were $104 million and $94 million for the years ended December 31, 1999 and 1998, respectively.

    The following analysis by market is based on information reported to the DOT and excludes Express:

    Domestic passenger revenue increased due to more capacity and higher yields. Capacity increased as a result of normalized aircraft utilization and improved operational performance.

    Pacific passenger revenue was higher due to increased yields caused by the recovery from the 1998 labor disruptions and a 15.7% strengthening of the yen. The average yen per U.S. dollar exchange rate for the years ended December 31, 1999 and 1998 was 115 and 133, respectively. Capacity was decreased in 1999 in response to the continued weak Asian economic environment and increased competition and was offset by the recovery from the labor disruptions. Passenger load factor increased 4.3 points in 1999 as the Company began to experience an increase in demand in the second half of 1999.

    Atlantic passenger revenue increased due to an increase in capacity, which resulted primarily from new flying and was partially offset by decreased yields caused by overall industry wide capacity growth. The new flying included increases in Minneapolis/St. Paul-Amsterdam and Detroit-Amsterdam service.

    Cargo revenue increased 15.3% ($97 million) due to a 19.5% increase in cargo ton miles which was partially offset by a 3.5% decrease in cargo revenue per ton mile due to the weaker Asian economic environment. The Company's ninth Boeing 747 freighter entered service in September 1999. Other revenue increased 6.1% ($49 million) due to a higher volume of business for MLT Inc. and increased passenger charters, which was partially offset by lower KLM joint venture alliance settlements.

    Operating Expenses.  Operating expenses increased 3.5% ($326 million). Operating capacity increased 8.9% to 99.57 billion total service ASMs which contributed to the 5.4% decrease in operating expense per total service ASM. Salaries, wages and benefits increased 4.0% ($132 million) due primarily to wage and benefit increases from settled contracts with collective bargaining units and an increase in average full-time equivalent employees of 2.7%, partially offset by 1998 provisions for retroactive compensation related to collective bargaining agreements.

    Aircraft fuel and taxes increased 8.6% ($94 million) due to an 8.6% increase in fuel gallons consumed. Commissions increased 6.4% ($44 million) due to higher revenues, partially offset by a lower effective commission rate caused by a shift in revenue mix, a decrease in the percentage of commissionable ticket sales and changes to the Company's commission rate structure which were effective in October 1999. Aircraft maintenance materials and repairs decreased 16.6% ($126 million) due to fewer engine and

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airframe overhauls and lower than anticipated costs associated with outside aircraft maintenance. Depreciation and amortization increased 1.4% ($7 million) due to additional owned aircraft and aircraft modifications. Additionally, 1998 included a fleet disposition charge of $66 million for the accelerated retirement of seven of the Company's oldest Boeing 747 aircraft. Other expenses increased 6.0% ($129 million) due primarily to increased business for MLT Inc. and increased variable costs associated with increased capacity, which were partially offset by reduced claims and advertising and promotions.

    Other Income and Expense.  Interest expense increased 15.2% ($50 million) primarily due to additional borrowings. Earnings of affiliated companies increased $75 million, mostly from the Company's recognition of its share of Continental and Worldspan earnings. Other income increased primarily due to a $48 million gain from the sale of a portion of Northwest's investment in Equant N.V.

Liquidity and Capital Resources

    At December 31, 2000, the Company had cash and cash equivalents of $693 million and borrowing capacity of $1.12 billion under its unsecured revolving credit facilities, providing total available liquidity of $1.81 billion.

    Operating activities in 2000 generated $893 million. The decrease of $366 million in operating cash flows from 1999 was due primarily to higher than normal sale proceeds of frequent flyer miles in excess of revenues and an $84 million dividend from Worldspan, both in 1999, with higher pension contributions, a $27 million dividend from Worldspan and a decrease in working capital in 2000. Cash flows from operating activities were $1.26 billion for 1999 and $88 million for 1998. Net cash used in investing and financing activities during 2000, 1999 and 1998 was $949 million, $990 million and $348 million, respectively.

    Investing Activities.  Investing activities in 2000 consisted primarily of the purchase of ten Airbus A319 aircraft, seven AVRO RJ85 aircraft and two used Boeing 747-200 aircraft (which will be converted to freighters), costs to commission aircraft before entering revenue service, aircraft modifications, deposits on ordered aircraft, facilities improvements and ground equipment purchases, partially offset by the sale of a portion of the Company's investment in priceline.com.

    In addition to the purchased aircraft discussed above, the Company took delivery of nine Bombardier CRJ200 aircraft and two used DC10 aircraft during 2000. These aircraft were financed with operating leases.

    On January 22, 2001, the Company sold to Continental 6.7 million shares of Continental Class A Common Stock held by the Company for $450 million in cash. Subsequently, Continental effected a recapitalization as a result of which the Company's remaining 2.0 million shares of Continental Class A Common Stock were converted into 2.6 million shares of Continental Class B Common Stock. In conjunction with these transactions, the term of the alliance agreement between Northwest and Continental was extended through 2025. Subsequent to year-end, the Company sold the remaining 2.6 million shares for $132 million. See Note 13 to the Consolidated Financial Statements for additional discussion of these transactions.

    Investing activities in 1999 consisted primarily of the purchase of seven Airbus A320 aircraft, ten Airbus A319 aircraft, four Boeing 747-400 aircraft, 11 AVRO RJ85 aircraft and two used DC10 aircraft, the purchase off lease of four DC9-50 aircraft, costs to commission aircraft before entering revenue service, engine hushkitting, aircraft modifications, deposits on ordered aircraft and ground equipment purchases.

    Investing activities in 1998 consisted primarily of the purchase of 13 Airbus A320 aircraft, ten AVRO RJ85 aircraft, and three used DC10 aircraft, costs to commission aircraft before entering revenue service, engine hushkitting, aircraft modifications, deposits on ordered aircraft and ground equipment purchases. On November 20, 1998, NWA Corp. issued 2.6 million shares of common stock and paid $399 million in

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cash to acquire the beneficial ownership of 8.7 million shares of Class A Common Stock of Continental. The Company funded its investment in Continental with cash from its general working capital.

    Financing Activities.  Financing activities in 2000 consisted primarily of payment of debt and capital lease obligations, including $165 million in term loan prepayments, and the long-term leveraged operating lease financing through sale and leaseback of ten Airbus A319 aircraft and three AVRO RJ85 aircraft.

    The Company's secured credit facilities were replaced on October 24, 2000. The new $1.125 billion unsecured agreement consists of (i) a $725 million five-year revolving credit facility, (ii) a $150 million 364-day revolving credit facility renewable annually at the option of the lenders and (iii) a $250 million 364-day revolving credit facility renewable annually at the option of the lenders; however, to the extent any portion of the $250 million facility is not renewed for an additional 364-day period, the Company may borrow up to the entire non-renewed portion of the facility and all such borrowings mature in October 2005. The credit facilities are available to finance the working capital needs of the Company and for other general corporate purposes.

    During 2000, the Company completed an offering of $522 million of pass-through certificates to finance the acquisition of 13 new Airbus A319 aircraft delivered or scheduled for delivery through May 2001 and to refinance six Boeing 757 aircraft delivered in 1996. The cash proceeds from the pass-through certificates were deposited with an escrow agent and enable the Company to finance or refinance (through either leveraged leases or secured debt financing) the acquisition of these aircraft. If leveraged leases are obtained for these aircraft, under which the aircraft will be sold and leased back to Northwest, the equipment notes, which are the assets of the pass-through trusts, are not direct obligations of NWA Corp. or Northwest. At December 31, 2000, the Company had $174 million in proceeds held in escrow and not recorded as an asset or direct obligation of NWA Corp. or Northwest.

    Financing activities in 1999 consisted primarily of the public issuance of $200 million of unsecured notes, the public issuance of $143 million of 40-year senior unsecured quarterly interest bonds (which are callable after five years), the long-term leveraged operating lease financing through sale and leaseback of four Boeing 747-400 aircraft, seven Airbus A320 aircraft, two Airbus A319 aircraft and ten AVRO RJ85 aircraft and various secured aircraft and ground equipment financings, offset by full repayment of the $825 million revolving credit facilities and $562 million of aircraft delivery bridge financing, and the payment of scheduled debt and capital lease obligations.

    During 1999, the Company completed three public offerings totaling $1.22 billion of pass-through trust certificates to finance the acquisition of 39 new aircraft delivered in 1999 and 2000.

    Financing activities in 1998 included the Company's repurchase of its remaining Common Stock held by KLM, the public issuance of $400 million of unsecured notes, the incurrence of $240 million of debt secured by six Boeing 757 aircraft, the payment of debt and capital lease obligations, and the sale and leaseback of 13 A320 aircraft and four AVRO RJ85 aircraft. During the third quarter, in anticipation of potential labor disruptions, the Company borrowed the $2.08 billion available under its then existing credit facilities, and subsequently repaid such borrowings. In October 1998, the Company borrowed $835 million to fund its cash requirements.

    On May 1, 1998, NWA Corp. purchased from KLM the remaining 18.2 million shares of NWA Corp. Common Stock held by KLM. The Company had previously agreed to repurchase the shares over a three-year period ending in September 2000. The purchase price of $780 million was paid with a combination of $337 million of cash and three senior unsecured 7.88% notes, all of which have been repaid.

    See Note 3 to the Consolidated Financial Statements for maturities of long-term debt for the five years subsequent to December 31, 2000.

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    Capital Commitments.  In January 2001, the Company entered into agreements to purchase 52 new aircraft, some of which will be used to replace most of the DC10 fleet. The aircraft consist of 24 A330 aircraft, 20 Boeing 757 aircraft, two Boeing 747-400 aircraft and six A319 aircraft. Deliveries of the A330 aircraft will begin in 2003 and continue through 2006, deliveries of the 757 aircraft will begin in 2002 and continue through 2004 and the A319 aircraft and 747 aircraft will be delivered in 2002. Financing commitments from the manufacturers have been arranged for most of these aircraft.

    The current aircraft delivery schedule, including the aircraft discussed above, provides for the acquisition of 117 aircraft over the next six years, with 22 aircraft in 2001. See Note 10 to the Consolidated Financial Statements for additional discussion of aircraft capital commitments. Other capital expenditures, including costs to commission presently owned aircraft that have not yet entered revenue service and aircraft modifications, are projected to be approximately $310 million in 2001, which the Company anticipates funding primarily with cash from operations.

    The Company currently has an effective shelf registration statement for the issuance of $975 million of unsecured debt and equipment trust certificates.

    Working Capital.  The Company operates, like its competitors, with negative working capital, which aggregated to $1.50 billion at December 31, 2000. This position is primarily attributable to the $1.31 billion air traffic liability for advance ticket sales.

Other Information

    Labor Agreements.  Approximately 90% of the Company's employees are members of collective bargaining units. Under direction from the National Mediation Board ("NMB"), the Company was in mediated negotiations with the Aircraft Mechanics Fraternal Association ("AMFA"), which represents the Company's mechanics. On February 9, 2001, the NMB released Northwest and AMFA from mediated negotiations after AMFA rejected the NMB's offer of binding arbitration. The NMB notified Northwest and AMFA that a 30-day "cooling off" period would begin on February 10, 2001, and that beginning at 11:01 PM CST on March 11, 2001 either side could resort to self-help remedies which could include, but are not limited to, a strike by the members of AMFA.

    On March 9, 2001, President Bush, following the recommendation of the NMB, announced the establishment of a Presidential Emergency Board ("PEB"). The establishment of a PEB stopped any self-help remedies and started the process during which the PEB reviews the positions advocated by Northwest and AMFA and proposes a solution, which is anticipated to be by mid-April. If the PEB resolution is not accepted by both parties (or if the parties do not reach some other agreement), and unless Congress takes additional action, either party will be permitted to resort to self-help remedies 30 days after the PEB makes its recommendation to the President. A prolonged work stoppage, if it were to occur, could have a material adverse impact on the Company. The Company cannot predict the outcome of the negotiations at this time.

    Detroit Midfield Terminal.  The Company is managing and supervising the design and construction of a $1.2 billion terminal at Detroit Metropolitan Wayne County Airport. The new terminal is scheduled to open in December 2001 and will offer 106 ticket-counter positions and 97 gates as well as over 80 shops and restaurants, four WorldClubs, an 11,500-space parking facility and luggage handling systems. The new terminal has been funded by the issuance of general airport revenue bonds by Wayne County payable primarily from future passenger facility charges and federal and State of Michigan grants. The Company and the County have entered into agreements pursuant to which the Company will lease space in the new terminal for a term of 30 years from the date the terminal opens.

    Mesaba Holdings, Inc.  On November 1, 2000, the Company offered to purchase all of the outstanding common stock of Mesaba Holdings, Inc. not already owned by the Company at a price of $13 per share,

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or an aggregate purchase price of approximately $190 million. Mesaba's Board of Directors has formed a special committee to evaluate the offer.

Item 7a.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    The risk inherent in the Company's market risk sensitive instruments and positions is the potential loss arising from adverse changes in the price of fuel, foreign currency exchange rates and interest rates as discussed below. The sensitivity analyses presented do not consider the effects that such adverse changes may have on overall economic activity nor do they consider additional actions management may take to mitigate its exposure to such changes. Actual results may differ. See Note 14 to the Consolidated Financial Statements for accounting policies and additional information.

    Aircraft Fuel.  The Company's earnings are affected by 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 flight operations. The Company also manages the price risk of fuel costs primarily utilizing futures contracts traded on regulated exchanges and fuel swap agreements. Market risk is estimated as a hypothetical 10% increase in the December 31, 2000 cost per gallon of fuel based on projected 2001 fuel usage, which would result in an increase to aircraft fuel expense of approximately $180 million in 2001, compared to an estimated $110 million at December 31, 1999. As of December 31, 2000, the Company had hedged approximately 12% of its first quarter 2001 fuel requirements, compared to 20% of the first quarter of 2000 and 24% of the full year 2000 at December 31, 1999.

    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. From time to time, the Company uses financial instruments to hedge its exposure to the Japanese yen. The result of a uniform 10% strengthening in the value of the U.S. dollar from December 31, 2000 levels relative to each of the currencies in which the Company's revenues and expenses are denominated would result in a decrease in operating income of approximately $70 million for the year ending December 31, 2001, net of gains realizable from yen hedge instruments outstanding at December 31, 2000, compared to an estimated $53 million decrease at December 31, 1999. This is due to the Company's foreign currency-denominated revenues exceeding its foreign currency-denominated expenses.

    The Company also has a foreign currency non-cash exposure. The result of a 10% weakening in the value of the U.S. dollar would result in a decrease to other income caused by the remeasurement of net foreign currency-denominated liabilities of an estimated $17 million in 2001 compared with an estimated $14 million at December 31, 1999. This sensitivity analysis was prepared based upon projected foreign currency-denominated revenues and expenses and foreign currency-denominated assets and liabilities as of December 31, 2000 and 1999.

    In 2000, the Company's yen-denominated revenues exceeded its yen-denominated expenses by approximately 54 billion yen (approximately $525 million) and its yen-denominated liabilities exceeded its yen-denominated assets by an average of 11 billion yen (approximately $100 million) compared with 45 billion yen (approximately $386 million) and eight billion yen (approximately $70 million), respectively, in 1999. In general, each time the yen strengthens (weakens), the Company's operating income is favorably (unfavorably) impacted due to net yen-denominated revenues exceeding expenses and a non-operating foreign currency loss (gain) is recognized due to the remeasurement of net yen-denominated liabilities. The Company's operating income in 2000 was favorably impacted by approximately $70 million due to the average yen being stronger in 2000 compared to 1999 and in 1999 by approximately $45 million due to the average yen being stronger in 1999 compared to 1998. The average yen to U.S. dollar exchange rate, including hedge activity impact, during December 31, 2000, 1999 and 1998 was 104, 117 and 132, respectively. The Japanese yen financial instruments utilized to hedge net yen-denominated cash flows resulted in gains of $23 million in 2000 and losses of $14 million in 1999. As of December 31, 2000, the

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Company had entered into forward contracts to hedge approximately 38% of its anticipated 2001 yen-denominated sales, compared to 31% at December 31, 1999, which also represents approximately 100% of the Company's excess of yen-denominated revenues over expenses in 2000 and 2001.

    Interest.  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. The Company has mitigated this risk by limiting its floating rate indebtedness to approximately 21% and 34% of long-term debt and capital leases at December 31, 2000 and 1999, respectively. The Company used financial instruments to hedge its exposure to interest rate fluctuation on the variable rate portion of its pass-through certificates issued in 2000. If long-term floating interest rates average 10% more in 2001 than they did during 2000, the Company's net interest expense would increase by approximately $6 million, compared to an estimated $10 million for 2000 measured at December 31, 1999. If short-term interest rates average 10% more in 2001 than they did during 2000, the Company's interest income from cash equivalents and short-term investments would increase by approximately $9 million compared to an estimated $4 million for 2000 measured at December 31, 1999. These amounts are determined by considering the impact of the hypothetical interest rates on the Company's floating rate indebtedness, cash equivalent and short-term investment balances at December 31, 2000 and 1999.

    Market risk for fixed-rate indebtedness is estimated as the potential increase in fair value resulting from a hypothetical 10% decrease in interest rates and amounts to approximately $70 million during 2001, compared to an estimated $77 million for 2000 measured at December 31, 1999. The fair values of the Company's indebtedness were estimated using quoted market prices or discounted future cash flows based on the Company's incremental borrowing rates for similar types of borrowing arrangements.

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Item 8:  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

To the Stockholders and Board of Directors
Northwest Airlines Corporation

    We have audited the accompanying consolidated balance sheets of Northwest Airlines Corporation as of December 31, 2000 and 1999, and the related consolidated statements of operations, common stockholders' equity (deficit), and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

    In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Northwest Airlines Corporation at December 31, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States.

ERNST & YOUNG LLP

Minneapolis, Minnesota
January 18, 2001

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NORTHWEST AIRLINES CORPORATION

CONSOLIDATED BALANCE SHEETS
(In millions)

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

30

NORTHWEST AIRLINES CORPORATION

CONSOLIDATED BALANCE SHEETS
(In millions, except share data)

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

31

NORTHWEST AIRLINES CORPORATION

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

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

32

NORTHWEST AIRLINES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)

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

33

NORTHWEST AIRLINES CORPORATION

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