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NWA pushes for cost cuts
by Bill Catlin, Minnesota Public Radio
February 13, 2003

A Northwest jet takes off from the company's hub at Minneapolis-St. Paul International Airport. (MPR Photo/Bill Catlin)

Eagan-based Northwest airlines is launching a campaign to convince union leaders of the need to reduce labor costs. Company officials have told Wall Street they need to cut overall expenses by as much as $1.5 billion. Northwest has already cut almost 12,000 jobs and more than $1 billion in expenses in about two years. But labor leaders at the nation's fourth largest airline say the last round of concessions has bred strong resistance to another round of givebacks.

Eagan, Minn. — The airline industry is in the throes of dealing with the one-two punch of 9/11 and a weak economy. United Airlines and U.S. Airways are in bankruptcy and cutting labor costs. Delta is asking pilots to open up their contract. Northwest made began making its own case to pilots earlier this week.

The company maintains the industry has changed permanently. President Doug Steenland told an investor conference yesterday the industry's revenues last year fell $19 billion short of what they should have been, based on historical patterns. He says a good bit of that $19 billion won't come back. Steenland blames low cost carriers like Southwest Airlines, broad ticket pricing information on the Internet, and ever more price-conscious consumers.

“Just like customers are going from name brand department stores to Wal-Mart, they're going to the outlet stores, they're doing things where they're really making their decision on price. The airline industry is experiencing the very same phenomena, and the survivors of this business are going to have to get their costs in line to recognize this new reality,” says Steenland.

Pilots’ union spokesman Hal Myers says Northwest has yet to specify how much it wants to cut pilot costs. But he says it's not clear the industry has permanently changed.

“The jury I believe is still out on that. There certainly have been at the very least short-term changes. But it's a very dynamic situation, and any number of factors could change that picture,” says Myers.

For example, the collapse of US Airways or United Airlines in bankruptcy would likely help other carriers.

Northwest's other unions are playing variations on a theme of "No."

Northwest flight attendants union trustee Mollie Reiley says the union is willing to discuss creative solutions to protect jobs, but nothing that takes more money out of her members' pockets. She says the average flight attendant is paid in the low- to mid-$30,000 range.

“Do we want the carrier to survive? Absolutely. Is it worth having the carrier survive if we're making $20,000 a year? No, probably not,” says Reiley.

Reiley points out the company has already required most employees to begin shouldering one fifth of the cost of health insurance. And she sounds a common theme among Northwest's unions: workers still have a bad taste from contract battles after they gave concessions a decade ago. The impact of those now:

“Huge. Huge. Because what we did not see was, once a return to profitability, you know, we had a pilots strike, and we went for five years trying to get a deal. That's not the way you reward people for helping you out,” says Reiley.

Northwest's largest union, the International Association of Machinists and Aerospace workers begins talks on a new contract in weeks. District 143 President Bobby De Pace says right now he doesn't feel the union should give back anything. If management makes a convincing case, he says, the eventual payback should be automatic.

“If it has to be we help them for $10, as the airline turns around, we have to get it back. Not wait till another contract. It has to be instantly,” says De Pace.

It's not clear how much Northwest is seeking in wage cuts. The company's latest internal newsletter appears to spotlight work rules, which determine, for example, which job classes do particular tasks.

University of Minnesota Industrial Relations professor John Budd says it's clear labor doesn't want the industry's problems solved solely on their backs, even if they're not sure of the solution.

“I think it's going to be a huge management headache to try to figure out Northwest's problems and get all the different parties on board and make it a viable operation for the long term,” says Budd.

For his part, Northwest CEO Richard Anderson says in the company's internal newspaper, there's no doubt the company will restructure its costs. He says it will occur "either through an evolutionary process or through the more revolutionary process underway at United and US Airways."

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