04/25/2003 - Updated 08:44 AM ET Northwest, unions differ over what concessions needed MINNEAPOLIS (AP) ? As American Airlines struggles to mend fences with its unions and avert bankruptcy, Northwest Airlines is using the threat of Chapter 11 to persuade employees to accept $1 billion in annual cuts. Northwest is in better financial shape than some competitors, though, and unions are questioning the duration of the proposed concessions. Northwest flight attendants plan to demonstrate Friday in New York, where the company is holding its annual shareholder meeting. Some employees have expressed anger that while they face layoffs and steep cuts, the airline's executives have been given bonuses ? another of the themes brewing at American. Until recently, Northwest executives hadn't even whispered the word "bankruptcy" while handing out pink slips, presenting their cost-cutting plan and reporting a $396 million first quarter loss. But chief executive Richard Anderson this week raised the possibility of a Chapter 11 filing. "As we have seen at United and US Airways, an airline in bankruptcy loses substantial control over its business," Anderson said in the company's monthly newsletter to employees. "The bankruptcy judge ... can force severe cuts in employee compensation, revoke union and vendor contracts and terminate pension plans." Northwest's rank-and-file already were angry, both by how long Northwest's cuts would last and because they don't allow for any givebacks if the industry outlook brightens. "They want to completely gut our contract for a period of 6 1/2 years with no guarantee of things being returned to normal after that time," Lacy Christensen, a flight attendant based in San Francisco, said in an e-mail sent to the Professional Flight Attendants Association, a union seeking to oust the Teamsters as representative of flight attendants at Northwest. Analysts believe all major carriers need to lower their labor costs, but they also said talk of bankruptcy at Northwest was premature. Ray Neidl, an analyst with Blaylock & Partners in New York, pointed out that Northwest had $2.3 billion in cash, most of it unrestricted, at the end of March ? enough to last them through the end of the year. Still, major carriers face immense challenges ahead and industrywide profitability is at least another year away, analysts said. The weak economy, the lingering effects of Sept. 11 and the war in Iraq have all taken their toll on passenger demand. To lure business and leisure travelers and stay competitive with low-cost carriers, major airlines have had to offer extremely low fares, further crimping their revenue base. Last month's outbreak of SARS in Hong Kong and southern China have caused traffic to the Pacific region to plummet and Northwest, one of the top U.S. carriers serving Asia, has suffered as a result. Industrywide, Pacific traffic was down nearly 26% in the first week of April compared with last year. Trans-Atlantic traffic, meanwhile, was off more than 25% and domestic traffic was down 15%. In attempt to reverse its fortunes, Northwest has presented separate proposals to each of its unions with cuts that would run through 2009 and save the carrier nearly $6.18 billion. Salaries, wages and benefits accounted for 38% of Northwest's total expenses last year. Under the proposals, base pay for pilots would drop 17.5%, while wages for mechanics would drop 16.7%, flight attendants 9.8% and ground workers 2%. Paul Volker, legislative officer for AMFA Local 33, called Northwest's proposed cuts a "scorched-earth policy." "Their idea of going on a diet to lose 6 pounds is to cut your arm off. It's just wrong," said Volker, who has worked for Northwest for 23 years, 17 as a mechanic. Still, the experience of employees at Northwest is not unique. US Airways achieved steep concessions from its workers in bankruptcy court and has since emerged a smaller airline. United recently gained tentative or permanent agreements with all of its unions on contracts enabling it to slash labor costs by $2.56 billion annually through 2008. American's unions approved $1.8 billion in annual concessions last week before reconsidering because of employee outrage over executive bonuses. Likewise, Northwest's rank-and-file are seething that Anderson and President Doug Steenland, the two top executives, got a $2.5 million bump in their combined compensation in 2002. That included a $250,000 bonus for Anderson, $200,000 for Steenland, and stock options. Anderson said the performance pay was justified because Northwest met its targets and outperformed the industry in 2002, "which is one of the reasons we are not in Chapter 11 and other airlines are." Jim Atkinson, president of Aircraft Mechanics Fraternal Association Local 33, said he presumed that Anderson would resort to bankruptcy if the airline didn't get concessions swiftly. "We have until July 1 or, to use their words, they 'will have to take alternate means of getting their money,'" Atkinson said. Northwest began serious cost-cutting in early 2001, months ahead of the Sept. 11 attacks. It has said its operation last year was about the same size as in 1996, but expenses were $1.2 billion higher and revenue was nearly $400 million lower. The airline expects to have about 40,000 employees by the end of the year, down from a peak of more than 53,000 just three years earlier. Northwest lost $1.22 billion in 2001 and 2002 and expects even greater losses in 2003. Just this week, Northwest said it would cut salaries and benefits of management by 5 to 15%. *************************************************** The owner of Roger's Trinbago Site/TnTisland.com Roj (Roger James) escape email mailto:ejames@xxxxxxxxx Trinbago site: www.tntisland.com Carib Brass Ctn site www.tntisland.com/caribbeanbrassconnection/ Steel Expressions www.mts.net/~ejames/se/ Site of the Week: http://www.pscutt.com TnT Webdirectory: http://search.co.tt *********************************************************