Union employees at Northwest Airlines can expect the hammer as the carrier's restructuring efforts shift to bankruptcy court, where they face the specter of abrogated contracts, reduced pension payouts, layoffs and worthless stock.
Leaders of the carrier's unions Wednesday expressed disappointment, even contempt, for the company's move as they vowed to protect their interests in court.
"We're disappointed obviously," said Bob Krabbe, a union official with the Professional Flight Attendants Association, which represents 9,700 workers at Northwest. "I think this goes to what we've been saying all along that this is the end result of executives' poor planning. Their plan is more focused on union busting than running an airline."
"It's a sad day for Northwest," said Mark McClain, chairman of the executive council of the Air Line Pilots Association at Northwest. "A lot of us have given decades of our lives to this airline. This is not where you want to see it end up. Now, here we are. It's a tragedy."
The filing Wednesday was long telegraphed by Northwest, though many thought it would not come until mid-October, just ahead of rules changes. Executives emphasized they hope to continue working with unions to get new agreements that allow the company to pare its costs.
While a bankruptcy shouldn't immediately affect pay and benefits, the pilots union warned members that Northwest could seek emergency short-term relief during which new terms would be imposed while contracts are renegotiated. That was the case with United Airlines.
Overseeing the process will be a New York bankruptcy judge who, as a lawyer, took part in a series of high-profile bankruptcies involving LTV, Pan Am and Manville Corp.
The unions now will be under greater pressure to reach agreements on pay cuts and work-rule changes with the airline.
If not, the bankruptcy judge can reject the contracts and impose new terms.
If that happens, the terms likely would be onerous. "We could take a big hit with wages, work rules and not get any pension at all," said Bobby De Pace, president of District 143 of the International Association of Machinists. The union represents the airline's 14,200 baggage handlers, customer service agents and clerical workers.
What is his greatest fear now? "The unknown," he said. "Now we have to worry about everything." Companies use bankruptcy to shed expenses. At the top of the list: labor costs.
"The effect of bankruptcies is to give all the workers so much of a hair cut that they are still willing to come to work, but they are just willing to come to work," said Douglas Baird, a bankruptcy expert at the University of Chicago.
The IAM, like the flight attendants, is in mediated talks with Northwest. The pilots, the only union to agree to concessions, had agreed to consider a second round of cuts.
In the past few weeks, a spike in fuel costs prompted Northwest to hike its annual labor savings target to $1.4 billion, and each union was advised of the new target. However, the pilots and ground workers proposed concessionary packages that, while significant, were "substantially short" of what Northwest believed it needed, according to the bankruptcy filing.
The flight attendants union, meanwhile, told the company that "it was not willing to entertain a request for a labor cost savings agreement," asserting that it lacked sufficient financial information to consider the request, the filing said.
The Chapter 11 filing will have no impact on the relationship between Northwest and the striking Aircraft Mechanics Fraternal Association, said Northwest chief executive Doug Steenland. AMFA won't be a party to the bankruptcy process because it does not have a contract with the airline, he said. "When the strike began, the contract was terminated," Steenland said.
With the mechanics union on strike, the head of its negotiating committee said it couldn't be any worse in bankruptcy. "I don't see why it would be worse," said Jim Young, head of the mechanics union negotiating team.
As he sees it, the mechanics at bankrupt United Airlines were able to reach a deal with management that was "much, much better" than the cuts that Northwest was seeking from its mechanics, Young said.
In fact, he says, the mechanics might be better off. "If the labor group is on the floor, under a current contract, then the company has more leverage in bankruptcy to get what they are looking for," he said. "We are not in that position."
Northwest started hiring permanent replacements for the striking mechanics this week. "The replacements may not want to stick around given the uncertainty of Northwest's future," Young said.
Copyright 2005 Associated Press