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Northwest management wage cuts on hold
by Jeff Horwich, Minnesota Public Radio
June 26, 2003

Northwest officials say hard times for the airline industry mean cuts are needed from employees at all levels. But Northwest now says a management wage cut expected in July will not happen until unions agree to cuts as well. (MPR Photo/Jeff Horwich)

Northwest Airlines says it will not cut managers' pay in July, as many union leaders and others expected. Northwest says the five to 15 percent pay cuts are on hold until at least one major union agrees to concessions. Unions say that could actually make those discussions more difficult.

St. Paul, Minn. — CEO Richard Anderson announced the cuts in an April memo to Northwest's salaried employees. At the time, Anderson said Northwest managers would need to "share in the salary and benefit reductions needed" to keep the carrier out of bankruptcy. Anderson wrote that the Northwest business plan "assumes that labor cost reductions including compensation reductions for salaried employees will be implemented July 1." The management wage cuts, he said, would range between five and 15 percent.

Union leaders say they took this as a firm commitment to cut the wages of Northwest's 3,000 salaried workers. News organizations also reported it as such, and Northwest did not mention that the cuts had any conditions attached.

But Northwest officials, asked to confirm details of the cuts, said they would not happen. Officials say the cuts were always contingent on at least one union agreeing to concessions. None of them have.

	Recent ground workers rally

Northwest officials had no further comment. Labor leaders like Bobby De Pace reacted with disappointment. De Pace is president of Northwest's largest union, representing almost 20,000 ground workers. The union is currently in the midst of regularly scheduled contract negotiations.

"(It's) definitely a surprise, and it's the wrong thing to do," De Pace said. "Northwest, if they want to lead, has to lead by example. And if they are in as desperate shape as they say they are, then without a doubt the management people should be the first ones to give, without any other unions. Because they're the leaders. And if they're going to play a wait-and-see game, then I couldn't take them serious."

A spokesman for the Air Line Pilots Association at Northwest, Will Holman, says executives lost an opportunity to demonstrate leadership. The pilots are the one union to say, based upon their financial analysis of the company, that concessions may be necessary at some point. But Holman says Northwest management should not expect pilots to make the first move.

"If senior Northwest management, or any other Northwest stakeholder, believes that pilots will contribute alone while others sit on the sidelines, then they are very wrong," Holman said.

As Northwest has struggled through a difficult economy, thousands of unionized workers have been laid off. But airline analyst Joel Denney with Piper Jaffray says management has not been immune from cuts. Salaried employees have seen their headcount fall by 24 percent since 2001.

"I'm not sure if it's four or five rounds they've been through, but they've been through a number of rounds of trying to become leaner on the corporate level over the last two years," Denney said.

Denney says placing conditions on the latest management pay cut may be an effort to show resolve, and strengthen Northwest's hand in negotiations. Jeff Matthews, lead negotiator for the Aircraft Mechanics Fraternal Association, agrees. Matthews is one labor official who is not surprised that the management cut is postponed.

"I don't know how they could actually justify imposing cuts on their managers when organized labor groups haven't agreed to anything yet," said Matthews.

Matthews says mechanics will not discuss any concessions until they complete their own financial analysis of Northwest, probably within a month. But more than a quarter of the members of the mechanics union are already laid off, which is the highest proportion among the major unions.

Other unions are also signaling their intent to move slowly on Northwest's concession proposals. Pilots and ground workers are focusing instead on their regularly scheduled contract talks this year. And an official with the new flight attendants' union says they have no plans to discuss their contract until it comes up for review in 2005.

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