Session 2005 MPR Budget Balancer Mike Mulcahy's Capitol Letter Minnesota Legislature Web site Bonding Budget Education Health Care Social issues Transportation Audio Senators get long-awaited chance to question Northwest CEO (story audio) Former Senate Majority Leader Roger Moe was involved in many of the discussions with NWA and the state. Photos Appearing by popular demand... Steenland: "No choice" but to lower labor costs Senators on the job More from MPR NWA mechanics fight back on airport, outsourcing (03/18/2005) NWA mechanics in Twin Cities could see ranks cut 30 percent by year-end (03/17/2005) To Northwest Airlines, aging DC-9s look better every day (02/21/2005) Resources Northwest Airlines Tools E-mail this page Print this page Sponsor

Senators get long-awaited chance to question Northwest CEO
by Jeff Horwich, Minnesota Public Radio
April 12, 2005

Northwest Airlines CEO Doug Steenland went before the Senate Transportation Committee to explain why the airline needs to shrink its labor costs and grow its hometown airport. (MPR Photo/Jeff Horwich)

Lawmakers on the Senate Transportation Committee got a long-awaited chance Tuesday to question the CEO of Northwest Airlines. Doug Steenland agreed to appear after the committee took the highly unusual step of voting to subpoena him. Steenland's testimony covered airport expansion, job agreements with the state, and outsourced aircraft maintenance. But he did not come in for the grilling some had expected.

St. Paul, Minn. — The back-and-forth between the Senate Transportation Committee and Northwest CEO Doug Steenland seemed downright genteel after the events that put him in the chair.

Two weeks ago, committee chair Sen. Steve Murphy, DFL-Red Wing, complained he was tired of being "straight-armed" by Northwest. The airline would send letters and agree to private meetings, but rarely sent anyone to testify in person. The committee called for a subpoena of Steenland in a bipartisan 12 to 1 vote.

A deal with Senate leaders allowed Steenland to appear voluntarily. Face-to-face, Murphy took a gentler tack. "We do appreciate you being here today," he told Steenland. "It's my hope to see you around here more often. I think that would put a lot of members on the committee more at ease."

Steenland's scheduled hour stretched into a two-hour tutorial on the state of Northwest and -- in particular -- two of its current priorities: Shrinking the cost of its labor force, and growing the size of its home airport in the Twin Cities.

The total Northwest workforce is down 28 percent since 2000, and Steenland made it clear there is more to come. The airline wants another $800 million in annual cost savings from wages, pensions, and possibly job cuts.

Steenland says low-cost carriers and other airlines restructuring under bankruptcy are forcing Northwest to respond. "There is a new labor cost structure in the U.S. airline industry. We have no choice, (and) we must now lower our labor costs to compete effectively with these other airlines and to return to profitability."

Northwest has an agreement to maintain a certain number of jobs in the state, dating from the early '90s when lawmakers stepped in to ease financial pressures on the company. After up to 900 additional job cuts the airline expects in the Twin Cities this year, Northwest would be 1,700 jobs short of the total number of Minnesota employees it agreed to maintain.

Steenland said a provision in the agreement allows for employment below that level when business conditions demand it. "When you look back and you look at the circumstances of the last four years and you take into account all that has happened externally and within Northwest as a whole, clearly these provisions give us leeway with respect to the job covenant total," Steenland said.

Steenland ostensibly came before the committee to discuss a proposed expansion of Minneapolis-St. Paul International Airport. Northwest designed the expansion, and announced it with Governor Pawlenty in September. The plan would accommodate 60 percent more passengers by the year 2020, with Northwest expected to handle the bulk of them.

Sen. Satveer Chaudhary, DFL-Fridley, asked why lawmakers should direct passenger dollars to benefit a company in such difficult financial condition. "I thought I heard you say earlier in your testimony that Northwest wouldn't find it prudent to plan for growth at the moment," Chaudhary said. "My question is, why would we expand the airport in such a manner when Northwest itself doesn't anticipate growth?"

Steenland answered that right now Northwest expects flat growth only for this year. He said the airline's business plan is built for long-term success, including a dominant role in the Midwest and a route network with its partners that reaches 900 cities worldwide.

Chaudhary brought up Northwest mechanics in the Twin Cities, who have lost thousands of jobs since 2001 with cuts continuing this year. He asked why the mechanics weren't included in such a bullish forecast.

The answer, Steenland said, is outsourcing -- which has become a fact of life in the industry. Northwest needs to make the shift "because we need to be competitive and we need to get our costs in line, and recognize that virtually all of our competitors do third-party maintenance work where the work is done for less money."

The president of the local mechanics union criticized the hearing as "a lot of softballs and generalities," and complained the committee treated Steenland, quote, "like royalty." Senators say they look forward to having Northwest keep in touch better in the future.