In Bankruptcy, Radical Changes Brew for Northwest, Unions

The bankrupt carrier is pressing to shift midsize jet flying and some baggage handling work to subsidiaries, angering pilots and ground workers.


For each of its big unions Northwest Airlines Corp. has a big idea, each one so odious to workers that they're threatening a strike that could put it out of business.

The bankrupt carrier is pressing to shift midsize jet flying and some baggage handling work to subsidiaries, angering pilots and ground workers. And it wants to shift thousands of U.S. based, union-covered flight attendant jobs to foreign hires.

The centerpiece is the idea for a new regional carrier, which Northwest has dubbed "NewCo" for now. "NewCo represents the cornerstone of our domestic renewal," said Tim Griffin, executive vice president for marketing and distribution, in a recent newsletter to employees. Northwest declined to provide anyone to discuss NewCo.

Northwest is trying to negotiate those changes into new contracts along with steep pay cuts and other givebacks by workers. If talks fail it will ask a bankruptcy court judge to allow it to reject its union contracts and impose new terms. A trial on the issue is set to begin Tuesday in New York.

Northwest has said little about its plans for ground workers and flight attendants. But it laid out its regional airline subsidiary idea in the newsletter to employees, saying it hopes to launch the carrier next year with a fleet of new 70- to 100-seat jets. NewCo could have as many as 105 aircraft by 2010, and would fly under its own Federal Aviation Administration operating certificate.

Northwest President and Chief Executive Doug Steenland said the jets are the perfect size for 20 percent of Northwest markets, which include more small cities than any other carrier. "To operate at a profit, we must invest in these aircraft, and we must do so quickly," he wrote.

He also said that as a stand-alone carrier NewCo could borrow the money for its new jets, which might be tough for debt-laden Northwest. Northwest needs to save its money for new Airbus A330s and Boeing 787s for its international fleet, he wrote.

Northwest said most other airlines use outside carriers for flying the smaller jets. Northwest said its current pilot contract makes that too expensive. The contract reserves that flying for mainline pilots and bars shifting it to regional partners, who generally pay pilots less. Northwest has instead accomplished that flying with old DC-9 aircraft, some of which will soon reach mandatory retirement age, or multiple flights with smaller planes.

Northwest has sweetened the pitch by promising to staff NewCo with pilots it furloughed in the industry downturn that began in 2001.

UAL Corp.'s United Airlines used to have a limit on how many 70-seat aircraft it could use, but it got rid of the limit in bankruptcy court concessions from pilots, said airline consultant Robert Mann.

Pilots say NewCo looks just like something US Airways Group Inc. did during one of its own trips to bankruptcy court, when Northwest's current chief financial officer, Neal Cohen, held the same position at US Air.

In late 2002, it convinced pilots to allow a new division for handling regional jet flying. The new division, MidAtlantic Airways, employed laid-off pilots, just as Northwest promises with NewCo.

But they ended up making much less than they had at US Airways - their top scale dropped from about $120,000 a year to $58,000 a year - and its planes are now being sold off to Republic Airways Holding, Inc., a regional carrier that is continuing to fly them under the US Airways Express name.

Northwest pilots worry they'd suffer the same fate at NewCo.

"MidAtlantic was a disaster, and he (Cohen) was one of the principal architects," said Capt. Mark McClain, who runs the Northwest branch of the Air Line Pilots Association. "It was sold off at bargain-basement prices. There are lawsuits. Everybody got left holding an empty bag. When we see the same guy doing the same thing here, that causes tremendous concern."

Darryl Jenkins, who teaches airline management at Embry Riddle Aeronautical University in Daytona Beach, Fla., said the cutoff between mainline flying and regional flying is second only to pay in importance to pilots.

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