Northwest Airlines opening talks with pilots, ground workers on cost cuts Liz Fedor, Star Tribune Published June 10, 2003 NWA10 The drive for labor concessions at Northwest Airlines shifts into a higher gear this summer as the company opens contract talks with its pilots, who are the airline's highest-paid employees, and ground workers, who belong to its largest union. CEO Richard Anderson is attempting to reduce labor costs by $950 million a year, but the majority of these cuts must be negotiated because 91 percent of Northwest employees belong to unions. If Northwest fails to reach cost-cutting labor agreements by the end of the year, there is a "very real risk" it would have to file for bankruptcy, said Joel Denney, an airline analyst with U.S. Bancorp Piper Jaffray in Minneapolis. But Denney predicts bankruptcy will be avoided. "In the end they are going to come to the common belief that they are not fighting each other. They are fighting for survival," Denney said. While Northwest's employee unions could force the company into bankruptcy by refusing to accept concessions, Denney said he thinks Northwest employees won't want to risk their compensation and pensions by turning them over to a bankruptcy judge. That occurred at United Airlines and US Airways. Contracts for Northwest's pilots and ground workers represent the biggest percentage of the airline's total payroll costs and could set the framework for employee concessions across the company. Northwest management argues that the Eagan-based carrier must cut its operating costs to compete with low-cost carriers, such as Southwest and JetBlue, and major airlines that already have cut their costs. Northwest's unions have retained independent experts to analyze the company's finances. The Northwest chapter of the Air Line Pilots Association (ALPA) opens quarterly meetings today in Bloomington, and leaders will talk about proposals the union will present to the company in mid-July. In February, Northwest said it wanted to cut annual pilot costs by $442 million. The pilots have taken several months to respond, because the union said the company has sufficient cash to continue operating in the short term. The pilots' contract runs through mid-September, and the company proposed abolishing a 5.5 percent raise that's set to take effect in September. The International Association of Machinists and Aerospace Workers (IAM) also is preparing for negotiations. IAM, which represents about 15,700 Northwest workers, has a contract that came open in February, when the company and union exchanged opening proposals. In April, Northwest executives gave IAM a concessionary proposal, but the union's negotiators said the cuts have been "unequivocally" rejected by members they've contacted. "We are ready and waiting to go. We don't intend to take a back seat to anybody," said Bobby DePace, IAM District 143 president, who was reelected last week. Union members at Northwest, the nation's fourth-largest airline, are skeptical about the size of Northwest's concession proposals. But the unions are taking a deliberate approach to assessing management requests. That's in contrast to the frenzied atmosphere at American Airlines in April, when labor and management agreed on concessions on the brink of a bankruptcy filing. "We do not automatically accept the most negative predictions made by management or Wall Street brokerage firms," the Northwest pilots union said last week in a memorandum. "We also do not simply choose to believe only information which supports our most optimistic hopes. Our decision-making process must be and will be fact-based." The pilots union gave its members a detailed analysis of Northwest's liquidity -- cash and liquid assets readily convertible into cash. Northwest ended the first quarter with an unrestricted cash balance of $2.15 billion. The union said it is doubtful that management will allow Northwest's cash balance to fall below $1.5 billion, because the airline continues to lose money and has large pension and debt obligations. Northwest ALPA said there is "no hard and fast answer" to define the minimum amount of cash reserve that's needed to keep Northwest out of bankruptcy court. Airline analyst Denney said it's more critical to focus on the long-term outlook for Northwest's financial condition. Denney said he has heard some people say there isn't a need to worry because Northwest is sitting on a ton of cash. "That's a little bit like people jumping out of a plane and finding out both of your chutes don't work. And you say, 'Great news, I'm at 10,000 feet, they are down at 5,000.' The end result is the same," he said. *************************************************** 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/ Mas Site: www.tntisland.com/tntrecords/mas2003/ Site of the Week: http://www.natalielaughlin.com/ TnT Webdirectory: http://search.co.tt *********************************************************