MPR: Northwest employees wait for job cuts

Northwest employees wait for job cuts
By Andrew Haeg
Minnesota Public Radio Business Reporter
September 17, 2001

Northwest Airlines is preparing to announce it will lay off thousands of employees. Already the company has said it will cut its flight schedule by 20 percent. The moves come as Northwest and other major carriers are struggling with lost revenues and sharply lower passenger demand resulting from last week's terror attacks in New York and Washington. Congress will resume discussion later this week on a plan to bail out the airlines with billions of dollars in direct aid and loan guarantees.

FALLOUT
Twin Cities airport officials say the decline in air travelers since last week's terror attacks in New York and Washington is cutting into expansion plans. Airports Director Jeff Hamiel says the Metropolitan Airports Commission has approved plans to delay some construction projects. Listen to his comments.

Northwest Airlines, with 21,000 employees in Minnesota, is the state's largest private employer. The terror attacks on the World Trade Center and Pentagon have plunged the entire airline industry into crisis. Other carriers including American Airlines, Continental, and US Airways have already announced they're laying off tens of thousands of workers.

Analysts say unless Congress steps in with a big financial aid package, several airlines, including Northwest, could face bankruptcy. Analysts are predicting Northwest will lay off about 10,000 employees, or a little less than 20 percent of its total workforce.

Bob DePace, president of the International Association of Machinists District 143, which represents 19,000 Northwest reservation agents, clerical staff and other ground employees, says he expects to learn more about the extent of the layoffs at an upcoming meeting with company officials. But DePace says he understands why his members may have to lose their jobs. "We have to remember we're at war. And any time that happens, you cannot anything good coming from it as far as jobs and stuff. We're in the war mode," DePace told Minnesota Public Radio Thursday.

Northwest's mounting troubles were glaringly evident as Wall Street reopened for trading. The company's stock plummeted more than 30 percent on the day, shaving more than $600 million from the company's total market value.

The sell-off came as investors recalculated Northwest's prospects in the wake of the terror attacks, and arrived at a rather glum conclusion.

Northwest lost about $23 million a day during last week's two-day, industry-wide shutdown. Now that flights have resumed, the company faces a dramatic increase in expenses, from higher security and insurance costs, and a sharp decrease in revenues, as skittish passengers delay or cancel travel plans.

Northwest does have roughly $1.3 billion in cash, which, according to one analyst is enough to get it through a couple months or more of hard times. US Bancorp Piper Jaffray airline analyst Joel Denney says the picture looks bleak, but just how bleak remains to be seen.

"I think it will be very difficult for the airlines to survive in the absence of some bailout agreement. I just don't see how they could."

- Darryl Jenkins
George Washington University
Listen to extended interview

"We really don't know until we get into this another week or two to see what is the trend? How are the planes filling up? Are they able to balance capacity with demand to get the planes back to a level of load factor or how full the planes are where they can be profitable," according to Denney.

The airline declined to comment on its financial troubles.

Darryl Jenkins, the director of the Aviation Institute at George Washington University in Washington D.C., says only the hope for Northwest and the rest of the airline industry to remain viable is a massive infusion of government support. "I think it will be very difficult for the airlines to survive in the absence of some bailout agreement. I just don't see how they could," Jenkins says.

The House of Representatives failed last week to approve an airline bailout package that would have provided $2.5 billion in direct aid, and $12.5 billion in loan guarantees.

Congress is now considering a new plan to double the direct aid figure. Rep. Jim Oberstar, D-Minn., the ranking Democrat on the House Transportation Committee, says Congress must act swiftly. "If we put this package together quickly this week, and restore public confidence in security and in financial ability to of airlines to meet their obligations, acquire new aircraft and continue flying, I think we can avoid widespread bankruptcy. But without a package this week, I think airlines are on the verge of financial liquidation," Oberstar said.

The House will convene a full hearing of the Transportation Committee on Wednesday to consider legislation to prop up the airline industry. The House is expected to vote on the package either Thursday or Friday.

Andrew Haeg covers business issues for Minnesota Public Radio. Reach him via e-mail at ahaeg@mpr.org.

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