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As United flounders, Northwest weighs options
Experts say the expected bankruptcy of United Airlines will likely put downward pressure on wages at Twin Cities-based Northwest Airlines. Northwest has one of the state's largest payrolls, with nearly 20,000 employees. Aviation industry analysts say United's wages will likely drop in bankruptcy, and that payrolls at Northwest and other carriers could follow suit.

St. Paul, Minn. — A United bankruptcy, which is expected over the weekend, can affect Northwest in several key areas. Northwest officials declined to comment for this report. But they have said an industry with an oversupply of seats in the air would benefit if United shrinks as a result of bankruptcy. United already has plans to reduce capacity by 6 percent.

Northwest and United are close competitors on lucrative routes over the Pacific, and in the important Minneapolis-Chicago route. But experts say it's hard to know what decisions United will make regarding routes and capacity. Many agree, though, a bankruptcy will pressure wages at the nation's biggest carriers.

"If United is successfully restructured, there will be a serious change in the way the labor agreements look, because United's labor costs are totally out of control," says airline consultant Jon Ash, who runs Global Aviation Associates in Washington D.C.

"If that happens, it will give the other network carriers at least some leverage, if you will, with their own employees, to make some productive changes," says Ash.

Bobby dePace doesn't dispute that analysis, but he labels it dangerous, not productive. DePace is president of Northwest's largest union, the International Association of Machinists and Aerospace Workers District 143. The union is negotiating a new contract with Northwest, as United teeters on the edge of bankruptcy.

"If they do go bankrupt and then the bankruptcy judge says, 'The employees of United, you're going to now be making $15 an hour in order to make the company survive,' then Northwest would say, 'We need the same' from their own employees. That's the danger of United going bankrupt," says dePace.

Northwest officials said earlier this week the company hasn't made any formal decisions on the issue of concessions. DePace contends the the industry's current troubles, though real, are temporary. And he says that should be reflected in the new contract terms.

About a decade ago, Northwest's unions accepted concessions in a deal that kept the company out of bankruptcy. DePace says those contracts did not allow workers to share in the airline's prosperity as business improved.

"We learned from the last time that if it turns around in two months' time, three months' time, why do we have to lock ourseleves in a contract that kind of screws us for the next three years," says dePace. "So we want to wait, and as the airline gets out of this, you pay us accordingly."

DePace says United's troubles and US Airway's current bankruptcy may reduce the competiton Northwest and the other major carriers face. Others dispute that, pointing out that smaller, low-fare carriers like Southwest and ATA have made substantial gains in their combined market share in the past decade.

But others urge caution about the effect of United on Northwest's labor situation. University of Minnesota industrial relations professor John Budd says the effect of United will be significant, but shouldn't be overstated. He doubts it will trigger demands for $1 billion in concessions. But he says it will reinforce the industry's tough times, and temper worker expectations.

"The difficulty in labor negotiations over the last decade, not only at Northwest, but at a lot of other places, has been really trying to get worker expectations lowered," says Budd. "If anything, United bankruptcy should serve a very strong signal that -- if there were any doubters out there -- this is a very weak environment, and Northwest isn't going to be able to be very generous in the upcoming negotiations."

Budd says Northwest employees are already facing a concession. Starting next month, the company will require most employees to shoulder 20 percent of their health insurance premiums. But the industry's difficulties are not quelling union protests, and an arbitrator will hear the IAM's complaint about the premiums in late January.

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