Northwest Airlines and its unions will settle their differences "one way or the other" by the end of the year, forecasts pilot union leader Mark McClain.
"We'll have a successful reorganization -- or liquidation," McClain said in an interview Thursday. But he said he's confident that Northwest, which is in bankruptcy, and its unions, creditors, vendors and other key parties can devise a successful reorganization plan.
"The only other option is: We go out of business," said McClain. Soon, he expects, the Eagan, Minn.-based carrier will ask the judge overseeing its Chapter 11 reorganization to set a deadline for reaching giveback deals with its unions.
From its four biggest unions, the airline is looking to extract about $1.2 billion in wage and other labor savings annually. So far, after leaning on those unions for more than two years, Northwest only has pilot givebacks that it values at $250 million. And the airline wants another $358 million from that group.
Typically, the deadline for contract settlements comes no more than51 days after a company requests it, the union indicated.
And McClain feels that request could come from Northwest any day now. "Nothing beats a deadline like a deadline," he said.
If the Northwest bankruptcy judge sets deadlines for new labor contracts to be reached and new pacts are not negotiated, then the judge can allow management to impose contracts.
But if Northwest tries to force a contract on pilots that they deem unacceptable, they could strike. That would, no doubt, ground Northwest, perhaps permanently.
As it stands now, Northwest is aiming to extract$608 million in annual wage, work rule and other savings from its pilots, up $36 million from its previous target.
Northwest's pitch hasn't changed much from the prior one, which came before it raised its overall target for labor-cost savings from all employees from $1.1 billion to $1.4 billion.
The airline is still looking to cut loose about 1,100 of the 5,200 pilots now flying for it. The 400 layoffs announced last week were part of that proposed Northwest target, McClain said.
Pay cuts in the latest proposal are up several percentage points to an average of28 percent. (That includes the 15 percent pay cut the pilots agreed to last December.)
Pilots, under the Northwest proposal, would earn from about $24,000 to $160,000 a year, McClain said. That would make Northwest pilots among the lowest-paid in the industry, he lamented.
"It's a very aggressive proposal," he said.
Northwest has yet to reveal its vision for its future, McClain said.
"We don't have their business plan," he said. "We don't know what Northwest management's long-term vision is for the airline. We haven't heard of any decisive changes in its core strengths (such as its trans-Pacific service)."
Preserving employee pensions will be critical to assuring Northwest's future, McClain said. If Northwest does not make good on its pension obligations, it will enrage its workers.
Prospects are good, McClain believes, for Congress to pass legislation that would give Northwest many more years, perhaps up to 25, to make payments to its pension plans. They're underfunded by $3.8 billion by the company's estimate.
Northwest is on the hook to pay $800 million into the plans in 2006 and $1.7 billion in 2007. But Northwest has warned that it doesn't have the money to make such huge payments. If it doesn't get more time to kick cash into the plans, the airline says it probably would have to terminate the plans, leaving them with the government agency that insures pensions.
Copyright 2005 Associated Press