Northwest Airlines hopes to launch a subsidiary carrier next year that will fly 105 jets with 70 or 100 seats by 2010.
The bankrupt, Eagan, Minn.-based airline says the planes will enable it to right-size its fleet, allowing it to make money serving many small and midsize markets.
"To operate at a profit, we must invest in these aircraft, and we must do so quickly," CEO Doug Steenland tells employees in the latest edition of the company newspaper, Passages.
It provides Northwest's most detailed outline thus far of its plans for the new airline, tentatively dubbed "NewCo." The proposal could put the airline on a collision course with its pilots union, which views the concept as a threat.
"Many cities ... are too small to profitably operate our Airbus fleet and too large for our 50-seat Canadair regional jets," explains Steenland. "We need 70- to 100-seat jets to serve these important cities. But many of the jets we do have in this category the DC-9s and the Avros are either approaching retirement or are not efficient."
NewCo would create jobs for laid-off pilots, says Northwest. Some 800 pilots could be flying for NewCo within four to five years. Other NewCo jobs might be handled by Northwest or NewCo employees or third-party vendors.
But Northwest pilots have said they could strike if Northwest launches the airline. The pilots complain the effort could cost them more than 1,000 jobs, as flying is shifted from higher-wage Northwest pilots to lower-wage pilots at the upstart airline.
NewCo doesn't create jobs for Northwest pilots, says union leader Mark McClain. It simply outsources them, he argues.
"NewCo is unacceptable," he says. "It's not something we care to bargain about."
The union is offering to fly 70- to 100-seat jets for Northwest at "competitive" rates, but Northwest doesn't seem interested in the pitch, says McClain.
NewCo pilots would make "roughly" $20,000 to $75,000, McClain understands. After 15 percent and 24 percent pay cuts, Northwest pilots' pay ranges from about $27,000 for beginners to $160,000 or so for the most experienced pilots flying the biggest jets. And Northwest is looking for a third round of cuts.
Northwest is in the final stages of its drive to wrest $1.4 billion in annual givebacks from its employees and win work rule changes that give it a freer hand in deciding who does certain work.
If it doesn't soon achieve negotiated deals with its pilots, flight attendants and ground workers, Northwest will ask the judge overseeing its bankruptcy to impose contracts on those workers.
At a trial scheduled to begin Jan. 17, unions and management would make their arguments for what wages and terms make sense in a contract drawn up by the judge.
Northwest complains that "scope" clauses in the contract for its pilots have frustrated plans to operate 70- to 100- seat planes at rates that make economic sense.
None of its peers operate 70-seat jets within their mainline systems, says Northwest.
American and Alaska airlines and US Airways all have separately owned regional carriers.
In addition, as a stand-alone carrier, NewCo will be better able to acquire financing through third parties, Steenland argues. Northwest will be spending billions of dollars to add new Airbus A-330s and Boeing 787 Dreamliners to its fleet. And it could be replacing aging cargo jets.
"Our resources will not be infinite," Steenland says.
NewCo would be a Northwest Airlink partner, as Mesaba and Pinnacle airlines are today, not a low-cost "airline within an airline." NewCo will operate some of the routes currently flown by Pinnacle and Mesaba. But Northwest indicated it would continue to work with the Mesaba and Pinnacle regional airlines on routes served by planes with fewer than 70 seats.
Northwest has its eyes on big regional jets such as the Embraer 170/190 and Bombardier CRJ700/900. Low-fare carrier JetBlue has firm orders for 100 100-seat Embraer 190s, with deliveries starting this year.
Northwest is planning on buying 60 70-seaters and 45 100-seaters.
Many of the 70-seat jets would replace 69-seat Avros, which have been flown by Mesaba not Northwest pilots. Others would replace 50-seat regional jets that have been flown for Northwest by Memphis-based Pinnacle.
Nineteen 100-seaters would replace 100-seat DC9-30s, some of which are about 30 years old. The other 100-seaters would be brought on to accommodate growth in target markets.
What is Northwest doing with its unwanted planes?
Well, the bankruptcy court has authorized it to reject or renegotiate leases on more than 200 planes. It won't say how many it has returned to leasing firms.
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