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Northwest Softens Stance in Contract Negotiations -- Airline Will Reduce Number of Jobs It Plans to Outsource

Posted on: Wednesday, 18 January 2006, 12:00 CST

By Jane Roberts robertsj@commercialappealcom

On the eve of a hearing to void labor contracts with three of its unions, Northwest Airlines has softened its requirements for cost savings, including reducing the number of jobs it planned to outsource.

In a filing late last week, Northwest said it would provide certain job guarantees and other protections if pilots would agree with a company plan for a subsidiary airline with planes carrying up to 100 passengers.

Northwest also said it could reduce the number of foreign flight attendants it plans to hire for international routes if Northwest flight attendants would take necessary pay cuts.

Northwest originally said it wanted to replace 75 percent of its flight attendants on international routes with foreign workers who speak the languages of its passengers on Far East routes.

The carrier has now amended the request to a 50-50 mix if the flight attendants' union would agree to wage reductions to make up the difference in pay.

Late Saturday, Northwest's ramp and ticket agents agreed to a proposal based on changes in the number of jobs the carrier planned to outsource.

"Our negotiators were able to convince Northwest to move off some of their initial proposals," said Bobby DePace, president of the International Association of Machinists and Aerospace Workers, which represents Northwest's 14,000 ramp workers, customer-service agents and clerical employees. "Many of our ideas are contained in the company's settlement proposal."

Northwest and IAM asked the judge to postpone the union's portion of the trial until ratification results are known.

Starting today , Northwest will try to convince bankruptcy judge Allan Gropper that its labor contracts must be voided in order for it to emerge profitably from bankruptcy.

Unions representing the flight attendants and pilots are set to argue that the airline has not negotiated in good faith and in fact is seeking cuts that would make them the lowest paid in the industry.

In the case of its pilots, Northwest wants them to relinquish the contractual right to fly Northwest routes with 70 to 100 passengers so it can farm the work out to lesser-paid pilots in a subsidiary Northwest plans to start called NewCo.

Northwest has said it would drop plans for NewCo if its pilots would give up rights in their current contract guaranteeing them the smaller routes.

"We rejected that proposal," said Will Holman, spokesman for the Air Line Pilots Association. "Our pilots own that flying. ALPA has offered to fly 77-seat aircraft at competitive rates and work rules."

Northwest says it needs to cut $1.4 billion in labor costs in order to emerge from bankruptcy as a "viable competitor."

"We believe that our case is solid, and in fact, people outside the company say we're doing what must be done to ensure competitiveness in the new airline marketplace that we face," Northwest president and chief executive Doug Steenland told workers in a recorded phone message.

Northwest will presents its proposals to the court first, followed by proposals from the two unions.

The judge will have 30 days from the start of the hearing to rule on whether the contracts should be nullified.

The hearing could last several weeks. Steenland expects Northwest "will be able to demonstrate to the bankruptcy court judge that we have met the standards set forth in Section 1113(c)."

Northwest has lost more than $4 billion since 2001. It has recouped the loss by selling off assets, pledging assets and borrowing money on an unsecured basis.

The carrier also received a $434 million government grant following the Sept. 11, 2001, terrorist attacks, $209 million in tax relief and to stabilize a deferral on the $454 million in pension obligations.

Its ability to borrow money is exhausted, and it has no more unencumbered assets it can sell.

Even if it receives the full amount it seeks from its workers, Northwest says it will lose roughly $230 million in 2006, excluding reorganization costs.

Besides labor savings, Northwest must find $400 million in other savings or revenue enhancements by 2010, when it projects it will be showing a 6.5 percent pre-tax profit margin.

-Jane Roberts: 529-2512

Source: Commercial Appeal, The

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