Labor Peace Eludes Northwest and Mesaba

Bankruptcy judges have given Northwest Airlines and its feeder airline, Mesaba Aviation, permission to impose the cuts they want on their workers. But both carriers are finding out that it's not quite that simple.

Court orders barring strikes, like the one issued by a bankruptcy judge in Mesaba's case on Monday night, only apply to immediate walkouts. The unions could still strike if they convince the National Mediation Board that no deal is possible and a cooling-off period expires. And lenders generally prefer to see consensual deals even when the airline has been able to impose what it wants on workers, analysts said.

Both carriers have said they will keep negotiating, although no new talks were planned as of Tuesday.

Mesaba Aviation Inc. was set to impose pay cuts and other changes on pilots, flight attendants, and mechanics on Thursday if they don't agree make a deal. Mesaba, a unit of MAIR Holdings Inc., successfully argued that a work stoppage would force it to liquidate and won a judge's order barring walkouts. The unions promised an appeal but acknowledged that it would take weeks or months.

Northwest Airlines Corp., also in bankruptcy, imposed new terms on its flight attendants on July 31, and a judge has blocked them from striking. Their appeal of the strike injunction won't be heard until Nov. 28, almost four months after they began working under the terms that provoked a vow to stage random, limited walkouts.

Northwest also imposed new terms on its mechanics last year after it replaced strikers. Their union is voting on a tentative agreement that would formally end the walkout.

'Lenders are always concerned about potential lingering conflicts, and if some type of consensus or agreement can be reached, the lenders are often more comfortable in moving forward with the financing that's necessary,' said John Kasarda, a business professor at the University of North Carolina who specializes in aviation issues.

He called labor peace 'a soft asset that has hard value.'

Bill Hochmuth, who tracks airline credit quality for Thrivent Financial for Lutherans, said secured airline loans are less exposed to the ups and downs of operational problems that can come from labor strife. Still, he said, 'As far as I'm concerned operations are going to run much smoother when you have happy employees and management.'

Northwest filed the court papers for its debtor-in-possession and bankruptcy exit loan on July 18, the day after it reached a tentative agreement with flight attendants -- and about two weeks before those workers rejected the agreement.

Northwest's ability to line up those loans before it had a ratified deal with flight attendants shows that lenders are willing to take some risks with labor issues, said Standard & Poors airline analyst Philip Baggaley. But its agreements with pilots and ground workers require similar concessions from flight attendants, and that isn't assured yet.

'If Northwest agreed to scale back the concessions being asked of the flight attendants and that triggered a revision of the various other agreements, that could pose a problem,' Baggaley said.

Northwest and the Association of Flight Attendants met last week and are waiting to see whether a federal mediator will order more talks or declare an impasse, said union spokesman Ricky Thornton.

'Our position has not changed. Northwest's position has not changed. So we're still kind of in the same spot there. We do believe we're at an impasse,' he said. If the National Mediation Board agrees it could start a process that could lead to a 30-day cooling-off period in advance of a potential strike.

Mesaba, meanwhile, is far more financially strapped than Northwest, and is quarreling simultaneously with all of its major unions.

'We understand we need to negotiate, and we understand we need consensual agreements, but not at any cost,' said Tom Wychor, head of the Mesaba branch of the Air Line Pilots Association. 'If this company thinks we are going to roll over, that is not going to happen.'

Mesaba spokeswoman Elizabeth Costello said the company is willing to talk both before and after its planned imposition of a new contract after 12:01 a.m. CDT Thursday.

'If we end up having to impose on Thursday, our intent is still to work toward negotiated, consensual agreements,' she said. 'We understand that that's in the best interest of everyone involved.'

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