Frustrated in its efforts to wring $1.4 billion in wage concessions and other givebacks from its employees, Northwest Airlines is within days of asking the judge overseeing its bankruptcy reorganization to impose new contracts on most of its unions.
Northwest has signaled it will make that request "if not by Friday then by next week,'' Bob Krabbe, assistant contract administrator for the flight attendants union, said Wednesday.
"It's a normal part of the bankruptcy process,'' he said. "The company has to continue to negotiate with us. Â… But (the request) starts the clock ticking."
When Northwest asks the bankruptcy judge assigned to its case to undo union contracts, the judge likely will give Northwest and the unions about 60 days to hammer out deals. If they don't, the judge can terminate existing contracts and impose new ones.
It would be a good bet they would include hefty wage cuts and other givebacks that Northwest argues it needs to keep flying.
"This legal process can move very quickly,'' CEO Doug Steenland told employees in a message last week. "This is the same legal process that has already occurred in the United and US Airways bankruptcies and Â… we anticipate will happen in the Delta bankruptcy."
At United Airlines and US Airways, several union contracts were settled at the last minute, as a judge stood ready to dictate deals.
That Northwest would emulate those two carriers doesn't surprise Bobby De Pace, president of District 143 of the International Association of Machinists, which represents some 14,200 Northwest customer service agents, baggage handlers and other ground workers.
"Naturally, we're expecting it,'' De Pace said. "We want a consensual agreement. Â… If they come in being reasonable, then maybe we can do something."
But if Northwest "comes in guns blazing, saying, 'This is the way it will be and if you don't like it, we'll just go to the judge,' '' talks may not go so well, said De Pace.
Northwest's three-year campaign to cut its annual labor costs has not been very successful.
The airline has $35 million in savings from management and salaried employees and $250 million from its pilots. In addition, it is saving $203 million a year with the contract recently imposed on mechanics after the union representing them struck Northwest.
But that still leaves Northwest about $900 million short of its labor cost-cutting goal. And the airline complains that it now has the highest labor costs in the industry. That's not the end of its woes, of course.
Northwest has lost about $3 billion since the start of 2001. Fuel prices are at record highs and ticket pricing is soft because of intense competition.
Northwest already has announced plans to lay off thousands of employees in coming months.
The airline also is looking for average pay cuts of 28 percent for its pilots.
From its top-paid baggage handlers, clerks and other ground workers, Northwest wants 12.5 percent wage cuts. And it's seeking pay cuts of up to 20 percent from flight attendants.
Management employees will also take additional cuts in pay and benefits, insists Steenland. They took 15 percent pay cuts in a first-round of givebacks. In the next several days, they'll learn what they must give up in a second round, Steenland said.
Fuel prices just keep going up and up, Steenland said in a Monday message to employees.
"The cost of refining crude oil into jet fuel has increased by over 400 percent recently," he said. "It's one of the many negative repercussions of Hurricanes Katrina and Rita."
Considering the cost of refining oil into jet fuel, Northwest's per-barrel cost for oil is $125.
The average price of jet fuel in September was $2.16 a gallon, up from $1.35 in January.
For many of the nation's airlines, fuel is becoming their greatest expense, topping labor, says the Air Transport Association, a trade organization representing U.S. airlines.
"The price of jet fuel has never been this high,'' Steenland said.
In response, Northwest matched a rival carrier's fare increase over the weekend. It has announced a 10 percent reduction in domestic flying this quarter. And it's weighing a hike in fuel surcharges on international flights.
Yet on Wednesday, Northwest was advertising "everyday low fares" on several routes out of the Twin Cities on which it faces low-fare rivals.
For instance, Northwest was touting $59 flights (each way) between the Twin Cities and Chicago and $107 flights (each way) between the Twin Cities and San Francisco.
The newspaper ads ran to "make travelers aware of the fact Northwest offers fares that are competitive with those offered by the low-cost carriers serving the Twin Cities," said airline spokesman Kurt Ebenhoch.
The number of seats Northwest offers at the low fares is limited, he noted.
Martin J. Moylan covers airlines and can be reached at email@example.com or 651-228-5479.
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