Pilots vote `no confidence' in NWA execs; Northwest pilots union leaders, already upset over executive stock awards, passed a resolution criticizing management's operational decisions.

June 19, 2007

Leaders of the Northwest Airlines pilots union gave the airline's executives a vote of "no confidence" on Friday and plan to carry that message directly to the company's board of directors.

"We didn't give up 40 percent of our pay and commit to a severely degraded lifestyle to watch it be squandered by poor management," said Monty Montgomery, a 20-year Northwest pilot and spokesman for the Air Line Pilots Association.

The union's executive council unanimously passed a resolution stating that "Northwest pilots have little or no confidence in the manner in which Northwest is being managed."

Specifically, the pilots criticized top management for creating a pilot staffing shortage this summer, which they contend will lead to canceled flights or other schedule disruptions. "The net impact of management's decisions will be a loss of passenger goodwill and a loss of revenue," the pilots said in their resolution.

Although the resolution carries no legal force, it is one more indicator of the dire state of labor relations at the airline, which exited bankruptcy on May 31. Northwest employees have been harshly critical of stock awards recently made to top Northwest executives. Employee outrage over executive compensation has led other airline CEOs to be forced out of their positions.

In response to the pilots' resolution, the airline defended the tenure of Northwest CEO Doug Steenland.

The Northwest board "has expressed its confidence in Doug Steenland's leadership by retaining him as president and chief executive of the company," the carrier said in a statement Friday night.

The airline emphasized that the board's decision to keep Steenland was made in consultation with creditors in the bankruptcy case, and those creditors are now "new owners" of the company through the stock they received.

"This decision follows Northwest's successful restructuring and emergence from bankruptcy as a much stronger and now profitable airline," Northwest said.

But Montgomery said the Northwest pilots union wants the new board of directors to hold management accountable for what union leaders believe are bad operational decisions.

"We feel that the need for a [leadership] change will make itself apparent in a very short time," Montgomery said.

The resolution does not call for the removal of Steenland or executive vice presidents at the airline. But the "no confidence" language comes very close to suggesting that action.

"If things progress as we feel they are going to this summer, we feel that the board will take action with the executive management team," Montgomery said. "We are hoping for an improvement in our [airline's] leadership."

Steenland has acknowledged the need to repair labor relations. Employees have taken $1.4 billion in annual concessions, and pilot labor costs have been slashed by $608 million per year.

Steve Zoller, a Northwest pilot, is the only union representative on the new Northwest board, which is now chaired by Roy Bostock, who works for a private investment company. Bostock succeeded longtime chairman Gary Wilson, who left the board at the end of the bankruptcy.

The union's executive council has directed Dave Stevens, union chairman, and A. Ray Miller, union vice chairman, to communicate with the board about pilot concerns about the airline's management.

Pilots also are unhappy that Steenland received an estimated $26.6 million stock and options package and that executive vice presidents will each receive stock and options awards in the $10 million to $13.5 million range. Most members of the pilots union consider those awards to be "outrageous," Montgomery said.

Wall Street analysts also have noted the bad state of Northwest's labor-management relations. Veteran Calyon Securities analyst Ray Neidl cited it as his "main concern" about Northwest's future.

Northwest and its unions have had bitter clashes for decades.

At other airlines, some conflicts with labor have led to the resignations or ousters of chief executives. In 2003, Delta CEO Leo Mullin departed after criticism over executive compensation. Shortly after American Airlines workers agreed to major concessions in 2003, it was revealed that executives had received bonuses and large pension benefits. That uproar prompted Don Carty to resign as American's chief executive.

In late 2003, pilots at US Airways demanded the ouster of CEO David Siegel, who left the carrier a few months later.

Liz Fedor - 612-673-7709

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