Northwest Under Gun to Cut Costs

Northwest has the highest labor costs in the industry -- by 25% to 30% -- for most of its unionized workforce, according to one consultant's estimate. But the airline has a healthy cash balance. At the end of March, the company had $2.1 billion in cash.

"Many employees looking at that kind of a cash balance will say: 'What's the problem?' " said Robert Mann, president of airline consulting firm R.W. Mann & Co.

But that cash is being depleted, said Mann, who has worked with airlines and unions in negotiations.

"I think there's a question of credibility and that's chiefly an issue of whether or not in the long term management and employees have developed a level of mutual trust," he said.

Northwest, in its letter to the mediation board, said it has lost $3.3 billion since the end of 2001, despite saving $1.7 billion annually through nonlabor cost cutting.

Northwest's stock price rose 50 cents, or 9%, to $6.09 on news that Merrill Lynch & Co. analyst Michael Linenberg raised his rating for Northwest shares from neutral to buy. He said he believes it is unlikely that Northwest will file for bankruptcy.