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Northwest Airlines asks that labor contracts be rejected

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Northwest Airlines outlined new targets for union concessions in the filing, and said salaried and management employees would also take a second round of pay and benefit cuts soon. (File photo: JEFF KOWALSKY/AFP/Getty Images)
Northwest Airlines has launched a legal process in bankruptcy court that could wipe out the carrier's contracts with its union workers. The filing asks a federal judge to impose $1.4 billion in cost cuts on Northwest's union workers unless the airline and labor leaders reach agreements on new concessionary contracts.

Minneapolis, Minn. — Each of Northwest's unions knew the motion was coming and all of the them, apart from the striking mechanics, have already engaged in preliminary contract talks with Northwest since its bankruptcy filing.

University of Minnesota labor relations professor John Remington says he expects the court will grant Northwest's request and set a 30-day deadline for the talks. Remington says the negotiations will take on a dramatic new urgency.

"This is a legal time limit; not one that the parties have self-imposed,that really forces the parties to move directly into hard bargaining. The other thing is it's being overseen by a federal bankruptcy judge who ultimately is going to have a determination as to whether or not one of both parties are being reasonable in what they're attempting to do," according to Remington.

Remington says if the company and the unions fail to agree on new contract terms by the deadline, the judge would take on the arduous task of deciding what concessions should be imposed on Northwest's union workers.

Northwest officials declined to discuss the court filing. In a news release the company says the motion gives union leaders and management time to reach agreements before a judge would be compelled to intervene.

Northwest says its goal is to reach consensual agreements with all of its unions. The airline stated its filing would serve as a "backstop," in case management and the unions can't reach agreements in the necessary time frame.

In arguing for help from the court, Northwest states in its filing that if it is unable to quickly reduce labor costs it faces liquidation which would mean the loss of jobs for its 35,000 employees.

The airline told the court it's projecting its current daily losses of $4 million will likely double going into the slower winter travel months. Northwest says it will lose more than $1 billion this year.

Northwest says the airline industry has forever changed in large part due to increasing competition from low cost carriers and the Internet which has made it easy for consumers to find the lowest priced tickets.

The trends have is dramatically reduced ticket prices and have eaten into the profit from traditionally lucrative business travel.

As revenues have fallen, the cost of fuel has sky-ocketed.

In a recently recorded telephone message to employees, Northwest CEO Doug Steenland, underscored the urgent need to rapidly adopt a cost structure in-line with low-fare airlines.

"We must move quickly, particularly in the light of current fuel costs. All contract employees will receive details of the proposals from their unions. Management employees will receive details of their share of labor cost reductions from their supervisors and human resources," Steeland said.

According to Northwest's court documents, management employees will face total salary and incentive pay cuts of between 30 and 40 percent as part of the reorganization and previous cost saving measures.

Representatives of two of the airline's three largest unions, the Airline Pilots Association and the International Association of Machinists, were unavailable to comment.

The spokesman for Northwest's flight attendants' union, Peter Fiske, expressed optimism the flight attendants will be able to come to an agreement to cut their costs by the $195 million Northwest is calling for. Fisk says his union would much rather negotiate a deal than have the issue settled in court.

"We never want to leave our future or our destiny in the hands of a third person, third body or third entity. And with our goal of working towards a consensual agreement, we hope that at the end of the day and as this process gets to its ending point that the judge will see that we have all along bargained in good faith and it just boils down to question of what our flight attendants can afford," he said.

Northwest's striking mechanics union is not mentioned in Northwest's motion to reject union contracts. The airline says the contract terms it imposed on those workers at the start of their strike, meet its cost savings goals. Mechanics union leaders and Northwest meet on Thursday to discuss the status of their contract dispute.

In making its case for labor cost cuts, Northwest says it's aggressively working with suppliers to bring down costs and looking closely at the routes it flies with an eye toward cutting flights that have become unprofitable given the high cost of fuel.

Northwest says the elimination of flights could reduce its schedule by 15 percent or more. But the airlin says those cuts will likely have only a minimal impact on passengers in its core hubs, including Detroit and Minneapolis-St. Paul.