CNMI: Flying lower all the time

It would be dandy indeed if Northwest Airlines could, as rumored, put more seats on the Japan to Saipan route. Northwest has long been a favorite airline of mine, the staffers are polite and professional, and my pals and I are loyal and grateful customers.

But, overall, don’t count your Spam before it’s canned. I am already worrying in advance about 2006 (it sucks to be me), and the airline industry is on my list of screaming-Mimi paranoias.

Overall, actually, the U.S. economy tops my list of potential disasters for 2006; the nation is saddled with debt, is sitting atop the demographic and economic time bomb of illegal immigration, and is also standing on an insane real estate bubble caused by a lethal dose of liquidity.

Talk about a perfect storm. It is possible that the fuel shock will trigger the inevitable slide, but I’m still contemplating an eventual currency (dollar) crisis. Either way, now or later, the U.S. will transition into a poorer, European-style economy…and thus the sun sets on the West.

Indeed, the masses in most nations want to live off of each other, and no free market can survive for long in a democracy once voting becomes legalized looting…as opposed to New Orleans looting, where we have showcased the wards of the state in all their intellectual and moral resplendence: Yes, there is your democracy, Sir, behold your glorious masses who now hold the levers of electoral power in the Great Society.

The CNMI has already gone the electoral looting route, of course, but hopefully it has learned its lesson and will opt for better times in November.

Anyway, back to airlines, and our all-important Northwest in specific. The company reported a $225 million loss for the second quarter of this year. It also lost a reported $4 million per DAY on average for the first half of the year. And that, mind you, is before fuel prices took their latest rocket-ride toward the heavens. Northwest is the fourth largest airline in the United States.

According to projections published in the Wall Street Journal (Aug. 23), Northwest stands to lose $750 million in 2006 if oil prices are $65 per barrel. Oil is now flirting at the $70 per barrel level.

Meanwhile, all eyes in the industry are on the mechanic’s strike at Northwest. The company was prepared for that event, and hired replacement workers.

I took a glance at Northwest’s stock prices. Eyeballing a chart, I see that its stock peaked in 1998 at about $65 per share. Yesterday’s opening price: $4.94 per share.

Gloomy observers of the industry are placing bets to see if Northwest or rival Delta file bankruptcy first. This isn’t to say that Northwest won’t, or can’t, increase its seats to Saipan, but I don’t think that we can take anything for granted these days. Fuel was already sky-high before hurricane Katrina knocked out U.S. oil rig capacity, so we’re already looking at a scary baseline.

Meanwhile, don’t forget there is a wartime economic context to everything in general. Any surprises are bound to be bad ones. You may recall that I’ve been warning readers about high oil prices and dollar weakness for a long time now, though I had no idea that oil would overshoot the $50 per barrel mark so drastically.

It’s too bad the CNMI squandered its wealth, reputation, and credibility, because the world is re-ordering itself in front of our very eyes. We are at the dawn of Asia’s century, yet here we are, lucky to be on Asia’s doorstep, but unwilling to choose a free market path to prosperity. Saipan’s decisions over the past few years have been truly and comically asinine. The Commonwealth is lucky to have Northwest as an ally, since the CNMI has so few friends left.

(Ed Stephens Jr. is an economist and columnist for the Saipan Tribune. E-mail him at Ed4Saipan@yahoo.com.)