Alaska vs. NWA mechanics

[FlyBoeingJets]

Alaska Air mechanics approve four-year contract

Friday October 14

Mechanics working for Alaska Airlines have ratified a new four-year labor contract that includes pay raises and a no-furlough clause for the contract's duration. Other terms of the deal were not made public.
The Aircraft Mechanics Fraternal Association represents 700 aircraft technicians at the Seattle-based airline.
"We are pleased that, during a time of such uncertainty in the airline industry, we were able to work closely with Alaska to secure an agreement that provides both pay increases and long-term job security," said Louie Key, the union's Region 1 director, in a statement. The company, owned by Seattle-based Alaska Air Group Inc. (NYSE: ALK - News), said the contract recognizes that maintenance is "a core function of the company and provides job security to our aircraft technicians."

Northwest deal bad for union: experts

Monday October 17, 12:42 pm ET

By Kyle Peterson

CHICAGO (Reuters) - About 500 of the 4,400 striking Northwest Airlines (Other OTC:NWACQ.PK - News) mechanics would reclaim their jobs if the workers agree to the airline's latest contract proposal, but experts said on Monday that regardless of the vote, their union has suffered a humiliating defeat.
The Aircraft Mechanics Fraternal Association decided on Friday to let members vote on the bankrupt airline's latest contract offer. In August, the union ordered its members to strike after union negotiators rejected an airline proposal that would have saved 2,750 union jobs.
The union ordered its members to strike. The AMFA's action had little effect. The No. 4 U.S. airline continues flying with the use of temporary workers and outside vendors.
"It's pretty hard to say anything positive about it from a union perspective. I assume the leadership anticipates a strong negative vote," said Lowell Peterson, a labor attorney with Meyer, Suozzi, English & Klein.
"From the Northwest perspective, they've won the pennant, and they're waving their flag in the faces of the union," he said.
Peterson said he expects the members to vote down the proposal in a show of solidarity and resolve.
AMFA said the latest proposal, which offers no layoff protections, grants four weeks of severance pay for those workers not filling one of the 500 positions. An earlier proposal offered up to 26 weeks of severance to the laid off workers.
Union members will have two weeks to ratify or reject Northwest's proposal.
"When you look at the details, you will be hard pressed to find anything 'good'," AMFA said in a letter to its members
Northwest filed for Chapter 11 bankruptcy protection from creditors in September, joining the ranks of other major bankrupt airlines, UAL Corp's (OTC BB:UALAQ.OB - News) United Airlines and Delta Air Lines Corp (Other OTC:DALR.PK - News). The airline industry has been battered by soaring fuel costs and weak revenues.
Northwest has said it needs $1.4 billion in annual labor savings to restructure into a competitive airline. The carrier is on track to extract $203 million of that total from the mechanics.
So far, only the pilots and salaried and management workers have made initial concessions, but Northwest now wants more from them and is asking for big cuts from the flight attendants, customer-service agents and ramp workers.
Last week Northwest asked for court permission to void its labor contracts if its employee unions do not agree to concessions. "Clearly Northwest has the upper hand now because of Chapter 11," said Anthony Sabino, airline expert and professor at St. John's University. "That upper hand might become even more compelling as we go along."


I know one is in BK and the other not. But this is incredible. I can hardly believe the hardship being thrust upon NWA mechanics. Is it really necessary for NWA management to do that?

 

[FlyBoeingJets]

Didn't NWA get bought out quite a few years ago only to see most of their equity squeezed out of them as the new management put many assets on lease? Basically the "release" of equity compensated the investors of the takeover.

I guess I shouldn't be surprised at the mean spirited business practices.


Edit-- I found some of my answer on google search

-1989: Northwest is acquired in a leveraged buyout by an investor group headed by Al Checchi and Gary Wilson and including KLM Royal Dutch Airlines. Checchi becomes chairman.

 

[FlyBoeingJets]

Northwest and Delta executives to make millions from bankruptcies

By Jerry Isaacs
19 September 2005

[SIZE=-1]Use this version to print[/SIZE][SIZE=-1] | Send this link by email | Email the author[/SIZE]
Over the last several years the top corporate executives at Northwest and Delta airlines negotiated retirement packages guaranteeing them millions in the event the companies declared bankruptcy and defaulted on their pension payments to employees. Both companies filed for Chapter 11 bankruptcy protection last Wednesday, in large measure to escape their pension obligations and seek the bankruptcy court’s backing for sweeping cuts in airline workers’ jobs, wages and benefits.
Since 2000, Delta has lost $10 billion, slashed 23,000 jobs and cut pay for pilots, managers and other employees. Three years ago the company spent more than $44 million setting up trusts to protect executives’ pension benefits from creditors in case of bankruptcy, saying the perk was needed to retain executives in hard times. Because transferring money to bankruptcy-proof trusts typically triggers big tax bills for the executives, Delta inflated the amounts to compensate for the extra taxes.
Retiring CEO Leo Mullin, who was paid $13 million in compensation in 2001, was given 22 years of instant seniority—although he worked for Delta for only five-and-half years—boosting his retirement package to $16 million. While incoming CEO Gerald Grinstein took a ceremonial pay reduction to bolster the company’s demands for sweeping employee wage and pension cuts, behind the scenes other executives were cashing in on the benefits of their golden parachutes.
Former CEO Ronald Allen, who was forced out in 1997, continued to draw $500,000 a year from Delta for consulting services up until 2005, although neither the company nor Allen would say whether he ever provided any such services. Allen’s exit package also included a $4.5 million cash severance payment and a $765,000-a-year pension that continues. He also got 10 years’ worth of perks, such as a 2,090-square-foot Buckhead, Georgia office, a car and club memberships provided by Delta.
When Northwest Airlines CEO Richard Anderson left the company last year, he took his pension in a lump-sum payment of $3,028,700. Anderson’s check covered three separate pensions he received from Northwest: the regular pension plan, his excess pension plan and his supplemental executive retirement plan, or SERP. Other top executives at Northwest, including current CEO Doug Steenland, also were guaranteed three pensions.
Union workers at Northwest have a pension plan based on years of service. For mechanics, custodians and cleaners—currently on strike against Northwest’s demands for the elimination of more than half their jobs and the replacement of traditional guaranteed pensions with 401(k) plans—that amounts to $85 a month for every year they work. According to the Aircraft Mechanics Fraternal Association (AMFA), a mechanic who retires at 65, after 40 years at Northwest, will collect about $40,000 a year.
The company’s 2005 proxy statement indicated that CEO Steenland will receive $947,417 a year if he retires at 65. Delta’s “supplemental plan” adds multipliers to boost the pensions of the company’s four top executives, crediting Steenland with 15 years of service for every five he works and paying him pension credits at twice the rate applied to regular salaried workers.
The company’s four top executives—Steenland and executive vice presidents Tim Griffin, Phillip Haan and Andrew Roberts—will receive a total of $2,476,100 in annual pension benefits. This is enough to fund the pensions of 90 flight attendants with comparable years of service.
In addition to their pension benefits, Northwest’s top five executives (the above-mentioned, plus Executive Vice President and General Counsel Barry Simon) have taken in $32,000,721 in compensation since 2002, not including other perks such as lifetime health-care coverage and travel benefits. The five also sold more than $1 million worth of stock in the months leading up to the bankruptcy announcement, as did big investors, like professional financier and former NWA Board of Directors member Al Checchi, who sold 1,650,240 shares from April 23 to May 3, raking in $8,439,884.
The New York Times reported Thursday that the timing of Northwest’s bankruptcy filing allowed the company to protect its assets while executives reneged on a payment of $65 million into the employee pension fund, which is already underfunded by $3.8 billion. If Northwest skipped the payment before filing for bankruptcy, it would have been in violation of federal pension laws, and the government-run Pension Benefit Guaranty Corporation (PBGC) could have placed a lien on the airline’s assets, giving itself a better chance of recovering some of the money.
Instead, the newspaper noted, “ince Northwest filed for bankruptcy first, then skipped the pension contribution, the government has no legal power to place a lien on its assets. It makes the pension guarantor—and the employees and retirees whose interests the government represents—into unsecured creditors for the $65 million. Unsecured creditors generally fare poorly in bankruptcy, recovering just pennies for every dollar they are owed.”
If the PBGC takes over Northwest’s pension plans pilots would suffer the loss of half or more of their pensions because the PBGC caps payments at $45,613 a year for plans canceled in 2005. Other unionized workers could also see drastic reductions.
Northwest also wants to freeze its current defined benefit pension plans and switch to defined contribution plans, such as 401(k)s, which are cheaper for employers but don’t provide workers the guaranteed benefits of traditional pensions.
Delta’s pension funds are in even worse shape. If the company defaults on its obligations it would set a record, surpassing the size of the United Airlines pension collapse earlier this year, and further staggering the overburdened pension guarantee board. According to board officials, Delta’s pension plan has promised benefits worth $17.5 billion, but it only has $6.9 billion in assets. With its bankruptcy filing the company is expected to press for even more drastic cuts than it outlined in its corporate restructuring plan last year, when it announced plans to cut $5 billion and 7,000 jobs by next year.
The looting of airline workers’ pension funds is but one example of how the assets of the major airlines have been squandered over the last several decades to enrich the airline bosses and big investors. It also underscores the widespread parasitism that pervades the boardrooms of corporate America.
The top personnel of the airline industry are chosen—and highly compensated—not because of their ability to manage complex organizations or to lay out a long-term corporate strategy. Instead a definite social type has risen to the top, whose only qualifications are its acuity for slashing tens of thousands of jobs and guaranteeing the quickest and largest payoffs to Wall Street.
Northwest’s CEO Steenland began his career working for the Office of General Counsel for the secretary of the Department of Transportation when the Democratic administration of President Jimmy Carter was preparing the deregulation of the airline industry. He later joined a top law firm in Washington DC, which represented Pan American Air Lines during the merger frenzy that preceded the company’s bankruptcy declaration, and later represented an investor group that organized the leveraged buyout of Northwest Airlines in 1989.

 

[FlyBoeingJets]

part II

Steenland is particular adept at working the halls of Congress to lift regulations on pension funding and any other restrictions on profit-making, and at making use of the services of the labor bureaucracy to cut labor costs. “Since the biggest input is the wages, salaries, and benefits line, this puts a lot of attention on working with our employees in knowing what we need to do to survive in the long term,” he commented.
Last year, in the midst of concession talks with the pilots union, Steenland hired Barry Simon as the company’s executive vice president and general counsel. Simon was a top executive in the Seabury Group, a New York consulting firm whose “restructuring” clients have included Air Canada, US Airways, America West Airlines and Continental.
Simon earned his credentials as an executive at Continental and Eastern airlines, where he served under corporate raider and union-buster Frank Lorenzo. In 1983 Continental filed for bankruptcy—despite the airline’s $60 million in cash reserves—in order to exploit a provision in the Bankruptcy Code allowing Lorenzo to abrogate his contracts with the unions. Simon directed Continental’s legal strategy when it emerged from bankruptcy a second time in 1991.
Simon also played a leading role in the bankruptcy of Eastern Airlines, which stopped flying in 1991 following the bitter strike by unionized mechanics. At the time, Lorenzo and his team stripped the airline of valuable assets and sold them at fire-sale prices to Continental.
The 1980s and 1990s saw the emergence of junk-bond dealers and corporate raiders in the airline industry like Lorenzo and Carl Icahn (who bankrupted Trans World Airlines, among others, and who is now worth $5.8 billion—no. 55 on the list of the world’s richest people).
Today, after nearly a quarter of a century of betrayals by the trade union bureaucracy (from the striking air traffic controllers in 1981 to the present scabbing organized by the airline unions against the striking Northwest mechanics), the corporate executives running the airlines feel even less restraint than their predecessors did when slashing workers’ jobs, wages and benefits and looting company assets to enrich themselves.
See Also:

 

[FlyBoeingJets]

Debt is not 'our friend'
http://www.twincities.com/images/common/spacer.gif
Northwest Airlines was driven into bankruptcy by crushing debt — a legacy of the Checchi-Wilson buyout
http://www.twincities.com/images/common/spacer.gif
[SIZE=-1]BY DAVE BEAL[/SIZE]
[SIZE=-1]Pioneer Press[/SIZE]
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The list of culprits sharing the blame for the Northwest Airlines bankruptcy seems as long as the runway for a supersonic jetliner.
Soaring fuel expenses, fare wars, high labor costs, overcapacity, and on and on.
Typically, Northwest's towering debt load seldom merits more than passing mention.
Let there be no mistake about it, though. Whatever its causes were, Northwest's heavy debt is the overwhelming factor that led the airline to file for a Chapter 11 bankruptcy 11 days ago. And this debt is the legacy of the 1989 buyout of Eagan-based Northwest by investors Al Checchi and Gary Wilson.
If you followed this saga then but find that it has slipped from your memory today, you're excused. So much has occurred in the airline industry since then that it is difficult to sort out the things that really count.
Then there's the spin. Wilson and Checchi spent considerable effort to persuade us that their buyout was just about the smartest move the industry has seen since Charles Lindbergh flew across the Atlantic.
Thus, a refresher course is in order.
Northwest, founded in St. Paul in 1926, has been a hometown triumph for much of its existence.
Basically, there were two pre-Chapter 11 Northwests: before Checchi-Wilson and after Checchi-Wilson.
At the end of 1988, the company had long-term debt of $372 million. On Dec. 31, 2004, the company reported long-term debt of $8.4 billion.
Other airlines also have high debt levels today, but Northwest's ranks close to the highest. As of June 30, Northwest's total debt-to-assets ratio was 62.4 percent. Delta's was slightly higher (65.3 percent), but Continental's (54.2 percent), American's (48.3 percent) and Southwest's (14.6 percent) were lower.
For decades before the buyout, Northwest was distinguished for its prudent financial management. Almost always, the company had low debt or no debt at all. Debt advocates argue that debt can be cheaper than equity financing, and interest is tax-deductible.
ONCE MADE MONEY
Still, almost always, the old Northwest — unlike the Checchi-Wilson Northwest — made money. According to its corporate history, written in 1986, it was one of just two major U.S. airlines that remained profitable from the start of deregulation in 1978 through 1984. That was quite a feat, given the recessionary early 1980s.
The company was widely known for its spartan spending habits.
Farsighted management enabled its managers to build up a route structure that girdles the globe.
Then came the leveraged buyouts of the 1980s. Financial engineers bought companies by saddling them with debt, then slashed costs to pay off the greatly increased debt.
Sometimes the outcomes turned out well. Some of the acquired companies had been poorly managed. Many became more efficient to pay off the debt.
But as the decade wore on, the better deals got picked over. Flawed deals began to prevail.
After the Checchi-Wilson deal got done, United Airlines looked like it would be next. Then lenders for the United deal wised up. Instead, employees bought United.
So the Northwest deal went down as the last of the big leveraged buyouts of the 1980s. Its $3.6 billion value, mostly debt-financed, ranked it 10th among the decade's LBOs, according to Mergerstat.
Things were unsettled at Northwest when Wilson showed up. The company had just come through a merger with Twin Cities-based Republic. Integrating the two companies proved to be a rocky experience.
Then, like a bolt out of the blue, investor Marvin Davis launched a bid for the company. Northwest's stock went into play. Checchi and Wilson came in with a better offer.
They enlisted an eager lender, Bankers Trust, which hoped to use this deal to move into the big leagues of finance.
They trumped Davis by offering an astounding $121 per share. Northwest's directors could refuse only at the risk of being pilloried by their shareholders.
The old Northwest's financing practices looked very old-fashioned to financial engineers like Checchi and Wilson. They saw the company as a treasure chest packed with hidden assets crying out to be unlocked.
There was that real estate in Tokyo, which was valued at more than $450 million but was carried on Northwest's books at a pittance. Their conclusion: Sell it.
And those planes: It was just plain silly for Northwest to own them. They decided to sell them, too.
Then they used the proceeds to help pay down that towering debt. (In fairness, other airlines stepped onto this primrose path as well.)
The deal gave Checchi and Wilson a large equity stake in Northwest for a mere $40 million. They set up a management company that steered millions of dollars to them.
"Debt is our friend," Checchi declared.
No matter that this deal meant exponentially greater debt. Northwest would simply grow out of it, was the thinking. Greater revenue would generate more money to pay off the higher debt. Northwest would fly ever higher.
WAVING RED FLAGS
Of course, there was a problem with this theory. The airline industry is notoriously cyclical. Given that characteristic, many warned that it was not smart to leverage an airline.
Among those waving red flags was Phil Baggaley, a credit analyst for Standard & Poor's Corp.
"In one stroke it takes them from being one of the least debt-burdened airlines to one of the most debt-burdened in absolute terms," Baggaley told the Pioneer Press at the time. "It's going to mean a dramatic change at Northwest, which has traditionally had one of the more conservative balance sheets in the industry.
"I think the main concern is what will this do to the company's earnings and how will their cash flow compare with their debt obligations."
Soon we had the answer. The economy turned down again, the airline industry declined even more and Northwest began losing piles of money. The company averted bankruptcy in 1993, but only by wringing concessions from its workers, and winning a taxpayer-backed bailout from the state of Minnesota and the Metropolitan Airports Commission.
Northwest swung back later in the decade. The management got better but most importantly, the economy surged so this highly cyclical industry surged even more.
Then came another recession, the Sept. 11, 2001, terrorist attacks, and other bad tidings. Weakened by its sky-high debt, Northwest filed for bankruptcy.
It's true, as Baggaley has noted, that other big carriers have also been borrowing heavily in recent years, but there's something else about Northwest.
While Checchi has checked out of the airline, Wilson remains as chairman for now. This summer, he was busily selling his stock, at prices far above what he paid for it and far above its post-Chapter 11 trading levels.
Wilson has reported conducting the sales under a fully legal "stock-trading plan." That may seem fine to some in business. But to put the matter gently, it looks unseemly to employees and stockholders who are about to get their heads handed to them in this bankruptcy.
Purely and simply, Northwest did not have enough money to pay its bills. The Checchi-Wilson era's debt meant bankruptcy, which should go down as a very dirty word in the annals of Northwest.

 

[whymeworry?]

It's amazing how ignorant the public is, including the workers in our own industry, when it comes to the corporate terrorism that occurs everyday in this country. We're at war against an enemy that wants to see all of us dead, meanwhile corporate boardrooms are raping and piliging no different than the enemies we fight. They destry lives just as the enemy does, the only difference is, US corporations stop short of actually killing.

A DAL/ UAL/ U/ NW pilot puts in 40 years of managing the companies assets (it's customers and aircraft) and in plain sight he gets his pension stolen right out from under him while the executives who stole it publically laugh all the way to the bank. One would think our beloved U.S. press might expose these kind of atrocities but no, they are more consumed with the Scott Peterson trial, Natalie Hollaway case, or whatever else they spend 75% of the time reporting on.

Then you get pilots who bend the rules and bust their ass to "help the company" because it's the "right thing to do" and it's being "professional". Yeah, like how professional the employees are being treated, right?

Our US corporate system has become a complete joke. Now I know why the Europeans laugh at us, and rightfuly so. What pathetic corruption we have occuring right in front of our eyes. And guess what? Washington approved all of this.

 

[whymeworry?]

I forwarded this article to Bill Oreilly asking him to expose the greed within the boardroom. It is doubtful he will pick up on this story, nor will he reply. But if enough of us respond, perhaps someone on the mainstream media will expose these crooks.

BTW, I have no bias here, other than that I am an airline employee. I do not work for NW or DAL nor have i ever applied there. I simply think this kind of rape and pillage by airline executives is wrong and needs to be exposed.

 

[JohnDoe]

quote:
"Our US corporate system has become a complete joke. Now I know why the Europeans laugh at us, and rightfuly so. What pathetic corruption we have occuring right in front of our eyes. And guess what? Washington approved all of this."


Every time I see somebody talk about our supposed "free market economy" on here I have to laugh (not you whyme). When companies can hide in chap 11 for years on end, gaining the benefits that they do, it is not a "free-market" economy. They would be allowed to die, and the companies that can actually make it work would thrive.

 

[PHXFLYR]

It's amazing how ignorant the public is, including the workers in our own industry, when it comes to the corporate terrorism that occurs everyday in this country. We're at war against an enemy that wants to see all of us dead, meanwhile corporate boardrooms are raping and piliging no different than the enemies we fight. They destry lives just as the enemy does, the only difference is, US corporations stop short of actually killing.

A DAL/ UAL/ U/ NW pilot puts in 40 years of managing the companies assets (it's customers and aircraft) and in plain sight he gets his pension stolen right out from under him while the executives who stole it publically laugh all the way to the bank. One would think our beloved U.S. press might expose these kind of atrocities but no, they are more consumed with the Scott Peterson trial, Natalie Hollaway case, or whatever else they spend 75% of the time reporting on.

Then you get pilots who bend the rules and bust their ass to "help the company" because it's the "right thing to do" and it's being "professional". Yeah, like how professional the employees are being treated, right?

Our US corporate system has become a complete joke. Now I know why the Europeans laugh at us, and rightfuly so. What pathetic corruption we have occuring right in front of our eyes. And guess what? Washington approved all of this.

Well, that's what we get for not voting for the "other guy"...maybe. By the way great post. Especially the part with regards to the "tabloid press corps"


PHXFLYR

 

[FlyBoeingJets]

When guys do their interview planning I hope they research the company (management, cost structure and other financials) and industry (Corporate, Cargo, government contract, or airline) as much as they research the salary, domicile and time to Captain.

I remember seeing a bunch of angry posts about Alaska after the contract fiasco they just had. I'd much rather be enduring the result of their negotiation/arbitration than what my Delta and NWA buds are experiencing right now.