Northwest Under Gun to Cut Costs

Because its competitors have found ways to shed labor costs, Detroit Metro Airport's dominant carrier now has the highest labor costs in the industry and is one of the last to extract hundreds of millions of dollars in concessions from its union...


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.

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