Northwest Airlines Corp. pilots will hold an $888 million claim to be paid in stock when the carrier emerges from bankruptcy, the pilot's union said in a presentation to members.
Northwest pilots are voting through May 3 on the tentative agreement reached with the airline last month. The deal came after a strike threat and tough negotiations that blew past two deadlines set by a bankruptcy court judge.
The Northwest branch of the Air Line Pilots Association posted video of its March 27 presentation to pilots on its Web site late Tuesday that offers the closest look yet at which battles they won and lost in their talks with Northwest.
Pilot pay has been cut 39 percent since 2004, but their ability to secure stock in a reorganized Northwest will be a victory if pilots approve the deal.
The union believes Northwest will have $5 billion to $6 billion in unsecured claims, chief union negotiator Bill Dollaway said in the video. At $888 million, the pilots' share amounts to 13 percent of all the unsecured claims, and will be paid in shares in the reorganized company, Dollaway said.
"We did get the lion's share of it, and we got a lot more of it than anybody else is going to get," Dollaway said in the video.
Union attorney Richard Seltzer warns pilots on the video that other creditors may oppose their share because it gives pilots too much stock in the reorganized Northwest.
"I've heard that already from some creditors," Seltzer said in the video. "However, we believe it is extremely likely that in those circumstances the court would approve the agreement even if some creditors object" because Judge Allan Gropper has pressed the two sides to make a deal.
The tentative agreement also gives pilots profit-sharing, which Dollaway quipped was "schmuck insurance." The International Air Transport Association is projecting a $5.4 billion loss for U.S. airlines this year.
Pilots would also get so-called "success sharing," where the airline commits to pay them extra if it meets goals for on-time flights, customer satisfaction, and financial performance. Pilots would get money whether or not Northwest is profitable, he said.
"United has this program, and it has been paying," he said.
The agreement also calls for ALPA to keep its seat on Northwest's board of directors. Dollaway said the ground workers union and the union that used to represent flight attendants would both lose their seats on the board under their tentative agreements. The current flight attendant union has never had a board seat.
Pilot leaders have been split on the pact. The head of the union's Northwest branch, Mark McClain, is recommending approval. But the head of its largest local, in Detroit, is advising that pilots vote it down, and the union's leadership committee took no position on it.
As pilots and the airline negotiated into the early morning hours day after day in New York, Gropper repeatedly told them he wanted them to make a deal rather than have him allow Northwest to impose its terms on pilots.
Gropper appears to have involved himself in some of the contract's finer points, such as what size jets Northwest could fly using lower-paid pilots at a subsidiary, according to Dollaway's comments on the video.
That fight over the contract's "scope" was one of the key battles between pilots, who want to keep as much flying for themselves as possible, and the airline, which wanted to form a subsidiary for all jets under 100 seats.
"The judge's opinions on scope were quite blunt," Dollaway said. "He saw no interest in scope, nor benefit to the corporation. He understood that the corporation might be willing to enter into scope provisions to get a consensual agreement, but as far as he was concerned they were unnecessary and restrictive, and that shut the company's discussions of scope down with us for about five days.
"So they were pretty angry, they felt like they'd already overpaid before he uttered his sayings in chamber. In any case, we did get a great scope clause."
Pilots ended up agreeing that Northwest could form a subsidiary, but only for jets with 51 to 76 seats.
In New York on Wednesday, Gropper approved Northwest's request to extend its line of credit with U.S. Bank National Association, its largest creditor, and authorized the carrier's payment of undisputed state and local taxes.
Northwest spokesman Kurt Ebenhoch would not comment on the tax amount, or on details of the agreement with pilots.
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On the Net:
Pilots union: http://www.nwaalpa.org
Northwest Airlines: http://www.nwa.com
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Associated Press Writer Natasha Gural in New York contributed to this report.
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