Warning it can't wait until it's "on the brink of extinction" to cut its labor costs, bankrupt Northwest Airlines is seeking court approval to reject contracts with its pilots, flight attendants, ground workers and other employees.
Northwest wants the judge overseeing its bankruptcy reorganization to set a deadline for the airline and the unions to reach negotiated settlements. If they don't, Northwest will ask judge Allan Gropper to impose contracts on the unions.
"Time has now run out," Northwest warned in its request to Gropper.
If it does not quickly reduce its labor and other costs, the Eagan, Minn.-based airline said it may face "an orderly liquidation" that would cost about 35,000 remaining employees their jobs.
Both the airline and unions could propose contract terms to the judge.
Unions expect Gropper will set a December deadline, at the latest, for negotiated contracts.
Northwest says that it now has the highest labor costs in the U.S. airline industry, even though it's in its third year of trying to wring wage and other concessions from its unions.
Northwest is about $900 million short of its $1.4 billion target for cutting its annual labor costs.
Meanwhile, it has lost more than $3 billion since the beginning of 2001. As it enters the typically slow fall and winter travel seasons, it expects losses could hit $8 million a day.
Northwest has been seeking pay cuts ranging from 5 percent for some employees to as much as 28 percent for its pilots, who can earn more than $200,000 a year.
Northwest also is planning to lay off thousands of employees as it scales back service and shrinks its fleet.
On Wednesday, Northwest said it expects its first-quarter 2006 flying will be down 11 percent to 13 percent compared with the same quarter in 2005.
Previously, the carrier had signaled its flying in this -- the fourth -- quarter would be down about 8 percent.
Eventually, Northwest's big-jet flying could be reduced by as much as 15 percent or more, it says.
CEO Doug Steenland insists that Northwest is committed to reaching negotiated agreements with all of its unions if possible.
But Northwest is following the same path that United Airlines and US Airways took in their bankruptcies, seeking to use the threat of court-imposed contracts to force negotiated deals.
At both carriers, employees contemplated striking. But they didn't. They reluctantly accepted deep wage and benefit cuts and work rule changes.
At United, for instance, 94 percent of the members of the International Association of Machinists and Aerospace Workers authorized a strike if their contract was scrapped.
It was undone. And there was no strike.
In the end, unions at both United and US Airways figured they were better off negotiating givebacks rather than have them imposed on them.
"If you can work to shape those concessions in a way that will better meet the needs of your work group, that is better than just having the company determine how you will take those cuts," said Sara Dela Cruz, spokeswoman for United's 15,000 flight attendants.
Northwest has been leaning on its unionized workers for big wage cuts and other givebacks since February 2003.
So far, it has $250 million in initial concessions from its pilots, along with about $200 million in annual savings with the contract imposed on mechanics after they struck the airline in August.
Northwest is not looking to undo the mechanics contract, saying it already provides the savings it needs.
Meanwhile, management and salaried employees will give wage and other concessions worth about $71 million a year. That includes $35 million in givebacks made last December and $36 million in savings revealed Wednesday.
Gropper is expected to hold a hearing within a week or two on Northwest's request to reject contracts.
Northwest will no doubt contend that existing contracts are onerous and will force it out of business, says John Remington, a professor of industrial relations at the University of Minnesota's Carlson School of Management.
The unions, in turn, will argue their case.
"We will prepare to defend our contract in court but the best possible outcome for everyone will be to reach an agreement at the bargaining table," said Joe Tiberi, spokesman for the International Association of Machinists.
Northwest can't just impose its will on workers, said Peter Fiske, a spokesman for Northwest's flight attendants union.
"This does not mean the bankruptcy judge immediately throws out our contract and gives in to the company's demands," he said.
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