Saturday, February 22, 2020
More from MPR


Mechanics union: Talks with Northwest are at a standstill
Larger view
Ted Ludwig, president of the Twin Cities area mechanics union, says he thinks the union has put enough concessions on the table in its talks with Northwest Airlines. The union has followed the airline in asking that an impasse be declared in their contract talks. That could pave the way for a strike. (MPR file photo)
Northwest Airlines mechanics have asked the National Mediation Board to declare their contract negotiations with the airline are at an impasse. If the board grants the request, a strike could occur after a 30-day cooling off period. The union's move came on a day when the company's CEO said, the company would have to consider bankruptcy unless it can reduce its labor costs.

St. Paul, Minn. — Both sides in the talks want out. Last month the National Mediation Board turned down the airline's request to declare a stalemate. Now, the Aircraft Mechanics Fraternal Association, or AFMA, says it also wants to be released from talks.

"It boils down to that we don't think Northwest is serious about getting to a negotiated settlement," says Ted Ludwig, president of the Twin Cities local of the mechanics union.

Ludwing says the union thought it had made sufficient concessions to Northwest's demands.

"We offered them what we thought was great -- going from no concessions to, 'OK, we'll give $143 million a year.' That was a huge step for us, because they were asking for $176 million," says Ludwig.

Northwest says the union's proposal doesn't provide adequate cost reductions for the future, especially since the offer would return wages to earlier levels after just two years of reductions.

At this point, the question is whether the National Mediation Board will declare the talks at an impasse, now that both sides contend they are.

University of Minnesota labor relations expert John Remington says the chances are better for the board to start the 30-day countdown to a strike.

With fuel prices remaining high, and the competitive landscape out there, I would expect (a bankruptcy filing) sometime this year or into early next year.
- Airline industry analyst Joel Denney

"I think it's more likely that the request would be granted, certainly, if both the carrier and the union are anxious to get it resolved," says Remington.

If the board does start the 30-day clock ticking soon, a strike could occur in early to mid-August, before the end of the busy summer travel season.

The contentious negotiations with the mechanics union are part of the company's push to reduce labor costs by more than $1 billion, and avoid filing for bankruptcy. Northwest has lost $3 billion since the start of 2001, and it owes that much in payments to its pension plans.

Northwest's CEO Doug Steenland has argued that bankruptcy is not the best option for the company. But Steenland indicated this week that bankruptcy could be on the horizon.

"We made a filing with the Securities and Exchange Commission on Friday, in which we basically said if we're unsuccessful in realizing labor cost restructurings, we're going to have to consider the Chapter 11 bankruptcy option," says Steenland.

Steenland says Northwest hasn't set a deadline yet for declaring bankruptcy. Joel Denney, an analyst with the investment bank Piper Jaffray, says if the company can't achieve its desired labor cuts, bankruptcy is a very real option.

"With fuel prices remaining high, and the competitive landscape out there with the rest of the industry, I would expect it to be done sometime this year or into early next year," says Denny. "They're not going to be continuing these discussions two years from now."

Denney adds that Northwest will only keep losing money as its labor negotiations continue.

It's not clear when the National Mediation Board will rule on the mechanics' request to be released from negotiations. Last Friday the union announced it is holding a strike vote. Union members have until July 19 to cast their ballots.