Days Numbered for Northwest CEO?

Feb. 4 -- Will he stay or will he go?

That's the big question about Northwest Airlines CEO Doug Steenland as the carrier moves closer to emerging from bankruptcy.

The answer depends on whom you ask. One union official said Steenland is "tarnished" from labor conflicts. But others think Steenland will be rewarded for his cool determination and drive in achieving $2.2 billion in annual cost cuts the company said it needed to stay afloat.

In other recent legacy airline bankruptcies, the CEOs typically haven't kept jobs for long after the carrier got back its wings.

Delta Air Lines' CEO Gerald Grinstein, 74, plans to retire when the nation's third-largest carrier emerges from bankruptcy this spring. US Airways replaced two CEOs after exiting two bankruptcies in the past five years.

One theory is that the CEO who has talked tough with employees may not be the person to build bridges to help grow the company. Also, a company's needs often change, requiring an operations commander more than someone skilled in operating in crisis mode.

And what if it's the CEO who wants to move on? That's not the case at Eagan-based Northwest.

"My intent is to stay," Steenland said in an interview last week. "Obviously, I serve at the discretion of the board. Assuming that Northwest Airlines wants to have me stay on, I'll stay."

But Northwest's board of directors likely will include all or some new members who may want a change.

Beyond that, the CEO question "greatly depends on the new equity holders, which will be dominated by the old creditors and investors who came in when the firm was in distress, who typically make a cold-blooded decision on who's going to be the jockey for this horse," said Douglas Baird, a University of Chicago professor who specializes in bankruptcy law.

One source familiar with the situation says Northwest's creditors committee is satisfied with Steenland's performance. The airline has forecast a pretax profit of up to $270 million, excluding reorganization charges, for 2006.

"Where do you find the leader to take you to the promised land? This isn't an easy task," said Joel M. Koblentz, a senior partner at Morgan Howard Worldwide, an Atlanta-based executive-search firm that has worked with airlines.

The future of Northwest executives and directors likely will be spelled out in its disclosure statement, to be filed by Feb. 15 as part its reorganization plan.

Whoever is CEO must build credibility and win over employees, shareholders, customers, suppliers and the communities where they operate after the company comes out of bankruptcy, Koblentz said. Those skills may be different from those needed to deal with court, creditors and unions and to operate under financial constraints in bankruptcy, he said.

Despite what Steenland says, some observers predict he will leave soon after Northwest exits bankruptcy because they can't see him building a future with angry workers. Thousands of Northwest union workers saw wages, benefits and other cuts of up to 40 percent last year. Non-union workers also saw cuts.

Others say they've seen no indication Steenland is planning to leave.

"My gut feeling is that he'd stay," said Vaughn Cordle, chief analyst for AirlineForecasts in Washington, D.C. "These airlines still need to have continuity of management and seasoned airline managers who understand the industry."

It's happened before. United Airlines' CEO Glenn Tilton is still there a year after the carrier emerged from bankruptcy, but he took the job just three months before court protection was sought in 2002. Tiny Aloha Airlines and low-fare carrier ATA Airlines also have kept their CEOs after exiting bankruptcy early last year.

At Northwest, the CEO question is muddled by speculation about a merger between the airline and Atlanta-based Delta, which also is in bankruptcy, as well as overall industry consolidation.

In a merger, all bets are off.

Steenland said last week that Northwest has no plans to merge this year, though he sees industry consolidation as likely down the line.

Steenland took the helm of Northwest in October 2004 as the carrier was being battered by increased low-fare competition and rising fuel costs. He replaced Richard Anderson, who left to join Minnetonka-based UnitedHealth Group.

Some say Steenland, 55, is just a regular guy. He and his wife have lived in the same Minneapolis house near Lake Harriet for the past 15 years. He likes football.

Northwest's Andrew Fischer Newman, senior vice president of government affairs, describes him as smart, intense and a person who works "pretty much around the clock."

Others say Steenland never takes off his business hat and can come off as aloof. "He's not a people person," said a person familiar with the company. "He doesn't come across as friendly or even concerned."

Before joining Northwest in 1991, Steenland was a lawyer with a Washington, D.C., law firm handling transportation and government-relations matters.

In the early days at Northwest, Steenland was active in labor battles, including a near-bankruptcy in 1993 and a 1998 pilot strike.

In the past 17 months of bankruptcy, he has cut thousands of jobs, shrunk the airline's fleet and negotiated new labor and financing contracts.

Northwest employs more than 32,000 people, including about 11,600 in Minnesota versus about 21,000 in 2000.

Steenland and other Northwest executives likely will receive bonuses and stock when the new company comes out of bankruptcy.

Last year, Steenland's base salary fell 24 percent to $516,375 from 2004.

In 2005, he gave up $675,000 in incentive pay and $3.8 million in restricted shares, but he received $2.2 million in long-term incentive payments.

Steenland carries some baggage from labor strife, including a 15-month strike by mechanics and stalled contract negotiations with flight attendants.

In August 2005, he told the Pioneer Press that the 1,200 temporary replacement workers and 350 managers who replaced 4,400 striking mechanics days earlier were "the dream team of airline maintenance groups."

Last year, striking mechanics held picket signs with Steenland's name or photo, accusing him of hijacking the airline and outsourcing American jobs.

"Many workers will just hate him -- having nothing to do with him personally -- because they're now working longer hours for less money," Charles Craver, a George Washington University professor who specializes in labor and employment law. "You almost have to re-establish a good relationship between management and workers."

Labor strife has been the downfall of some leaders. David Siegel, the CEO who pulled US Airways out of its first bankruptcy in 2003, resigned a year later after reaching a logjam with the airline's unions as its financial condition worsened. He had swiftly overhauled the airline, but the unions balked at further concessions.

Last year, Steenland acknowledged that employee relations at Northwest have been strained in recent years, and he talked about the potential to fix that, stressing "respect for one another" and "openness to new ideas and new ways of doing things."

Northwest last year began an employee profit-sharing plan and enhanced its employee discount travel program.

Steenland knows that unhappy employees can cause havoc with customers. Northwest ranked last among seven carriers in the University of Michigan's latest American Customer Satisfaction Index.

"That's his No. 1 job -- to maintain employee morale so his customer-service rankings don't go down," analyst Cordle said about Steenland. "He has to improve morale and maintain a cost structure that allows the airline to grow. If he doesn't, he'll be replaced with someone else."

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