Schwanker
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- Dec 17, 2001
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Interesting read from the TheStreet.com with respect to employees, Midwest, and defending their hubs. Schwanker
NWA SOFTENS A HARDLINE
CHARLOTTE, N.C. -- Northwest Airlines (NWA - Cramer's Take - Stockpickr) may have shed a lot of things during its 20 months in bankruptcy, but one thing it kept was its tough-guy image.
The airline has long been known for aggressively protecting its hubs in Detroit, Memphis and Minneapolis, and its hostile labor relations have stood out even in an industry in which hostile labor relations are the norm. Both characteristics have re-emerged since Northwest's bankruptcy case ended on May 31.
Yet a curious thing has happened in the past month, as CEO Doug Steenland extended an olive branch to labor, even giving back some of the concessions that pilots made during the last round of contract negotiations.
A Strong Hub Defense
Terry Trippler, who runs Minneapolis-based TripplerTravel.com, says Northwest "realizes it has got to settle its labor problems." At the same time, he says: "I would hate to compete with them. They push the envelope again and again."
Trippler was surprised this month to see Northwest repeatedly described as a "passive investor" after the carrier teamed up with TPG Group in a deal to acquire Midwest (MEH - Cramer's Take - Stockpickr - Rating).
"I've followed this airline for 38 years, and when I think of Northwest, the one word that does not come to mind is 'passive,'" he says. "The management of Midwest may be giddy right now, but it's only a matter of time until Northwest will be calling the shots."
The acquisition of a stake in Midwest adds a new dimension to the widespread industry practice of hub protection, which generally includes route and pricing decisions. For instance, on Sept. 5, Northwest will begin service between New York's LaGuardia Airport and Dallas. The route announcement came a few weeks after Dallas-based American Airlines (AMR - Cramer's Take - Stockpickr - Rating) said it would begin LaGuardia-Minneapolis service.
In the Midwest deal, Northwest helped to block a bid by low-cost carrier Airtran (AAI - Cramer's Take - Stockpickr - Rating) to establish a Milwaukee hub. It might have threatened Northwest's hubs in Minneapolis, 300 miles to the northwest, or Detroit, 250 miles to the southeast. In effect, in exchange for its undisclosed investment, Northwest bought hub-protection insurance.
More Mr. Nice Guy
On the labor front, Northwest ran into problems within weeks after emerging from bankruptcy, as crew shortages caused it to cancel 1,000 flights in June and several hundred more in July.
Northwest and its pilots disagreed on the reason for the shortages. According to Trippler, Northwest pushed too hard in revising the pilot contract during bankruptcy. "The pilots told them what would happen, that this would lead to [pilot] fatigue," he says. "But Northwest had won every labor battle, and this time they gambled and lost."
Early in August, the two sides made a deal that rolled back some contract provisions in an effort to reduce the crew shortages. That came days after Steenland said, on a conference call, that bankruptcy restructuring had involved immense changes for employees and that Northwest needs to "devote the time and resources necessary to rebuild and repair some of the damage."
Later, Steenland wrote conciliatory letters to leaders of the unions representing its flight attendants and the International Association of Machinists. "Over the last several weeks, I have been emphasizing Northwest's commitment to collaborate with all employees," he wrote. He called for meetings aimed at finding "cost-neutral ways to improve their working environment as well as their overall quality of life."
It's easy to recall that Northwest's labor history has included five pilot strikes since 1969 as well as a misguided 2005 strike by mechanics. Still, it's not out of the question that the situation -- and even the image -- can change.
"We would like to see more of a spirit of cooperation," says pilot spokesman Monty Montgomery. "The recent letter of agreement is a good sign, but there's still a long way to go. You can't overcome years of negative experience with one letter of agreement."
NWA SOFTENS A HARDLINE
CHARLOTTE, N.C. -- Northwest Airlines (NWA - Cramer's Take - Stockpickr) may have shed a lot of things during its 20 months in bankruptcy, but one thing it kept was its tough-guy image.
The airline has long been known for aggressively protecting its hubs in Detroit, Memphis and Minneapolis, and its hostile labor relations have stood out even in an industry in which hostile labor relations are the norm. Both characteristics have re-emerged since Northwest's bankruptcy case ended on May 31.
Yet a curious thing has happened in the past month, as CEO Doug Steenland extended an olive branch to labor, even giving back some of the concessions that pilots made during the last round of contract negotiations.
A Strong Hub Defense
Terry Trippler, who runs Minneapolis-based TripplerTravel.com, says Northwest "realizes it has got to settle its labor problems." At the same time, he says: "I would hate to compete with them. They push the envelope again and again."
Trippler was surprised this month to see Northwest repeatedly described as a "passive investor" after the carrier teamed up with TPG Group in a deal to acquire Midwest (MEH - Cramer's Take - Stockpickr - Rating).
"I've followed this airline for 38 years, and when I think of Northwest, the one word that does not come to mind is 'passive,'" he says. "The management of Midwest may be giddy right now, but it's only a matter of time until Northwest will be calling the shots."
The acquisition of a stake in Midwest adds a new dimension to the widespread industry practice of hub protection, which generally includes route and pricing decisions. For instance, on Sept. 5, Northwest will begin service between New York's LaGuardia Airport and Dallas. The route announcement came a few weeks after Dallas-based American Airlines (AMR - Cramer's Take - Stockpickr - Rating) said it would begin LaGuardia-Minneapolis service.
In the Midwest deal, Northwest helped to block a bid by low-cost carrier Airtran (AAI - Cramer's Take - Stockpickr - Rating) to establish a Milwaukee hub. It might have threatened Northwest's hubs in Minneapolis, 300 miles to the northwest, or Detroit, 250 miles to the southeast. In effect, in exchange for its undisclosed investment, Northwest bought hub-protection insurance.
More Mr. Nice Guy
On the labor front, Northwest ran into problems within weeks after emerging from bankruptcy, as crew shortages caused it to cancel 1,000 flights in June and several hundred more in July.
Northwest and its pilots disagreed on the reason for the shortages. According to Trippler, Northwest pushed too hard in revising the pilot contract during bankruptcy. "The pilots told them what would happen, that this would lead to [pilot] fatigue," he says. "But Northwest had won every labor battle, and this time they gambled and lost."
Early in August, the two sides made a deal that rolled back some contract provisions in an effort to reduce the crew shortages. That came days after Steenland said, on a conference call, that bankruptcy restructuring had involved immense changes for employees and that Northwest needs to "devote the time and resources necessary to rebuild and repair some of the damage."
Later, Steenland wrote conciliatory letters to leaders of the unions representing its flight attendants and the International Association of Machinists. "Over the last several weeks, I have been emphasizing Northwest's commitment to collaborate with all employees," he wrote. He called for meetings aimed at finding "cost-neutral ways to improve their working environment as well as their overall quality of life."
It's easy to recall that Northwest's labor history has included five pilot strikes since 1969 as well as a misguided 2005 strike by mechanics. Still, it's not out of the question that the situation -- and even the image -- can change.
"We would like to see more of a spirit of cooperation," says pilot spokesman Monty Montgomery. "The recent letter of agreement is a good sign, but there's still a long way to go. You can't overcome years of negative experience with one letter of agreement."
