Northwest Airlines Inc. said Tuesday that it needs $1.1 billion in concessions from its unions -- $150 million more than it sought several months ago.
The airline blamed high fuel prices and competitive fare reductions for having to bump up concessions it's seeking from seven labor unions.
Eagan, Minn.-based Northwest plans to ask the unions to freeze their pension programs, capping what the airline owes to more than 34,000 unionized employees. The airline proposes replacing the current pension plan with a defined-contribution plan, such as a 401(k). Northwest employs 8,400 people based at Detroit Metro Airport, most of whom are unionized.
"Airline officials are meeting with union representatives to discuss the new labor cost-savings and pension proposals with a goal of reaching agreements with all contract groups as soon as possible," the airline said in a statement Tuesday.
Metro Airport's dominant carrier warned in January that it would ask for larger cuts. The $1.1-billion figure includes $300 million in annual savings the airline realized in givebacks from pilots and salaried employees.
While the Air Line Pilots Association expected a second round of concessions, Tuesday's announcement means there will be more on the table. The pilots union expects to have to cut $307 million more in its second round of talks, the union told members in an e-mail Tuesday evening.
"Northwest pilots have already agreed to a 15-percent pay reduction in December 2004, so now we expect the other Northwest labor groups through negotiations with NWA management to reach agreements on their labor cost reductions," the e-mail read.
Northwest is in mediated talks with mechanics, baggage handlers and flight attendants. The carrier's new target for concessions is no surprise, said Jeff Gardner, vice president of the Professional Flight Attendants Association, which represents 11,000 Northwest attendants. More than 3,000 of them are based at Metro Airport
"We've been doing more with less for a very long time," Gardner said.
As for the reasons why the airline is seeking more concessions -- rising fuel costs and fare wars -- Gardner said Northwest needs to address those problems without involving employees.
"If fuel costs are the problem, then something needs to happen to lower those fuel costs," he said. He suggested the airline and the unions approach Congress about how to curb fuel costs.
The company's new goal should be adequate, said Helane Becker, an analyst at Benchmark Co. in New York. "The industry has done a remarkable job of cutting costs and at this point they really have to start focusing on the revenue side of the equation."
Northwest officials cite the progress that bankrupt United Airlines Inc. has made to cut costs.
In a December newsletter to employees, the airline wrote: "As United continues to restructure itself, the changes it experiences will clearly impact NWA."
United entered Chapter 11 bankruptcy in December 2002. In two rounds of cuts, the Elk Grove, Ill.-based company has achieved $2.5 billion in savings from unions and is on the way to reaching its most recent $725-million target in union concessions, said United spokeswoman Jean Medina. Recently, United received $180 million in annual savings from pilots and $131 million from flight attendants and is working on agreements with baggage handlers and mechanics,
Northwest shares fell 13 cents or 1.9 percent Tuesday to $6.61.
The airline's pilots already know how many layoffs they will endure, and other unions expect to learn by this week how a reorganized Northwest will affect their members.
Northwest Airlines Inc. wants to make sweeping changes to its pension plan to ease one of its major expenses and possibly make it easier for other major airlines to pay pension obligations.
The airline's board of directors will meet today to discuss a possible bankruptcy filing, according to unions for Northwest's flight attendants and pilots.
Northwest Airlines is within days of asking the judge overseeing its bankruptcy reorganization to impose new contracts on most of its unions.