Northwest Airlines Corp. says it is running out of money fast and seeks sweeping authority to reduce its labor costs, an expense that it says could force it to shut down Michigan's largest carrier.
Addressing a primary reason for its Chapter 11 bankruptcy filing, Northwest wants a federal judge to terminate its nine union contracts and allow the cash-strapped airline to impose lower wages on its 29,000 union workers if the carrier can't convince its unions to make $1.4 billion in concessions.
"Northwest cannot wait until the brink of extinction before seeking relief," the airline, which filed for bankruptcy protection Sept. 14, said in court papers filed Wednesday. "Northwest's remaining cash is being rapidly depleted."
Unions expected the filing, as little progress has been made in negotiations with the airline, which seeks wage cuts ranging from 5 percent to nearly 30 percent from its union workers.
"It was a matter of when the hammer was going to drop," said Bobby De Pace, district president of the union that represents Northwest's ground workers. "The reality of it all gets closer. It's starting to hit home."
In all, the airline needs to cut $2.5 billion in costs to emerge from bankruptcy. The airline wants $1.4 billion to come from its union contracts.
"Our court motion gives union leaders and Northwest management time to reach the necessary agreements, before the court would be compelled to intervene and impose new contracts," said Northwest CEO Doug Steenland in a statement Wednesday.
The next step is for a judge in New York to set a hearing date for Northwest's request. In a note to employees, Steenland said the process to reject contracts often takes less than 60 days. Meanwhile, the move ratchets up pressure on the airline and the unions to reach agreements.
Under bankruptcy law, Northwest could ask for permission to implement lower wages in the short term.
The airline has told the flight attendants union that it doesn't plan to make that request. But De Pace expects it.
Indeed, some of the language in Northwest's filing hints at that kind of a move.
In those court papers, Northwest, publicly acknowledges that liquidation is a prospect for the Eagan, Minn.-based carrier, which is housed at Detroit Metro Airport in a new $1.2-billion terminal where it handles more than 60 percent of the airport's traffic.
If Northwest, the filing says, "does not quickly reduce its costs, it may soon reach a point where reorganization would be out of reach. At such time, Northwest would have to begin an orderly liquidation, and approximately 35,000 employees would lose their jobs."
That is the kind of language Northwest would need to use in a filing to request immediate wage cuts, said John Pottow, a professor specializing in bankruptcy law at the University of Michigan Law School.
De Pace said Northwest's comments about liquidation hold some weight.
"Most of the time, I would tell you this is just a threat," But this time, he said, "I would say there is some truth to that. They do need money. I just hope we can come to a consensual agreement before they even think about doing that."
Northwest's proposals to unions cut wages and benefits and give the airline permission to outsource thousands of jobs.
The largest proportion of concessions and wage cuts is before pilots, who are being asked to take an average pay cut of 28.4%, part of $362.8 million in annual concessions.
Northwest wants a federal judge to terminate its nine union contracts and allow the cash-strapped airline to impose lower wages on its 29,000 union workers.
Northwest Airlines is seeking court approval to reject contracts with its pilots, flight attendants, ground workers and other employees.
Airline Workers United, made up of airline employees from carriers and labor activists from across the country, wants to help workers talk about their experiences with concessions, think of ways to...
Warning it can't wait until it's "on the brink of extinction" to cut its labor costs, bankrupt Northwest Airlines is seeking court approval to reject contracts.