Northwest wants more from pilots
Terry Fiedler, Star Tribune September 30, 2005
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Northwest Airlines told its pilots union this week that it now wants $358 million in annual cost reductions, 11 percent more than its prior proposal, and an amount that the head of Northwest's pilot union called "extreme."
"In our domestic fleet, [the proposal] would put us below all of our legacy peers, in or out of bankruptcy, and below regional carriers such as Comair," said Capt. Mark McClain, chairman of Northwest's Air Line Pilots Association (ALPA). "For what's proposed for people in our domestic fleet, some could make more money driving a truck, and that's not union rhetoric. That's the truth."
Pilots would take base pay cuts of 28.4 percent as part of the new proposal, given to the pilots Tuesday. Northwest has also asked the union to take an additional, temporary 5 percent reduction during the period the company is in bankruptcy.
Northwest is seeking a total pilot staff reduction of 1,290, including the previously disclosed layoff of 400 pilots in the next eight months.
In addition to pilot concessions, Northwest wants $195 million in annual savings from its flight attendants and $190.4 million from ground workers. For the sacrifice, the airline has proposed that all employees would participate in a profit-sharing plan that would pay out 10 percent of all pretax profit, excluding extraordinary items, in excess of $1 million.
Northwest spokesman Kurt Ebenhoch confirmed that the company was seeking $358 million in cost savings from pilots, and added that Northwest is offering "a menu of ways that those cost savings can be achieved. The specific combination of ways those cost savings are achieved are the subject of negotiations."
The new round of concessions would come on top of a $265 million cut in December that resulted in a 15 percent pay reduction for pilots. In the past several weeks, Northwest had been asking for $322 million more in cost savings from a 22.3 percent pay cut and pilot job cuts of as many as 1,181. There are about 5,200 active Northwest pilots and more than 500 on furlough. Their current pay range is $35,000 to $208,000 a year.
According to an ALPA memo to members, the company continues to push the use of a separate, lower-cost subsidiary to operate airplanes with 76 to 100 seats, and it contends that it needs the savings from the move to allow it to afford DC-9 replacement aircraft. ALPA continues to resist that idea. The ALPA memo said that "continued outsourcing of our product is not, in our view, the way to economically provide a consistent, high-quality product."
McClain believes that the latest proposal is the company's beginning position in negotiations. "This is all theoretical and speculative until we see a business plan that includes long-term viability. Northwest has not shown us that yet."
A key part of a viable plan would be "charging a ticket price that covers the cost of production," he said. "They have managed for market share and liquidity, not profitability."
McClain said the union has just begun talks with management about the possibility of an "early-out program" for senior pilots that would give them a yet-to-be determined benefit in exchange for leaving the airline.
ALPA expects Northwest to file a motion in bankruptcy court rejecting the current contract that would allow for up to a 51-day period to negotiate a settlement. If one can't be reached, the court will decide what needs to be done, McClain said.
ALPA also believes it has a good chance to be selected by the court as a member of the credit committee for unsecured creditors.
Elections for ALPA officers will be held Oct. 14. McClain declined to comment as to whether he would seek reelection.
Terry Fiedler is at tfiedler@startribune.com.
Sorry I am such a poor paster. I tried to post the PDF file from the union but I must be challenged.
Deli
