Northwest Pilots Press for Share of Recovery

The head of the Northwest Airlines pilots union contends that the pilots' relationship with management recently hit a "new low" because management has failed to address pilot concerns about work rules and other issues since the airline's financial recovery began to gain momentum.

Dave Stevens, chairman of the Northwest branch of the Air Line Pilots Association (ALPA), said Friday in a memo to pilots obtained by the Star Tribune that ALPA has been working for months to get Northwest to reverse some aspects of its latest contract. Their concerns included "the most onerous work rule changes, which so adversely affect a pilot's schedule, days off, fatigue and health."

"Our efforts to improve quality-of-life issues have mostly fallen on deaf ears," Stevens wrote.

He also said Northwest resisted the pilots' request to sell another 20 percent of its bankruptcy claim unless the pilots agreed to three Northwest conditions. Those terms included endorsing Northwest's plan of reorganization and regional jet award to Mesaba Airlines, but Stevens said Northwest recently stopped linking those issues to the claim sale.

He emphasized that Northwest is "far ahead" of the projections in the business plan that it used to secure $1.4 billion in cuts from its entire workforce.

The pilots provided $608 million of the annual labor savings, which included a 15 percent pay cut in late 2004 and a 23.9 percent pay cut that was ratified by pilots in May 2006.

"We are disappointed that the pilots, only six months into a [multiyear] contract, are suggesting that the collective bargaining agreement be modified, based on current reductions in fuel prices and slight increases in revenue, both factors which fluctuate considerably," Northwest spokesman Bill Mellon said Monday.

All of the concessionary labor agreements "are essential components of our overall restructuring strategy, which was developed to fix Northwest Airlines permanently and to ensure its position as a long-term successful player in the airline industry," Mellon said.

Stevens forecast "a troubled future relationship" with the current management team.

Under the pilots' contract, the union has an $888 million claim in the Northwest bankruptcy. The pilots sold the first 20 percent of that claim last year at 85 cents on the dollar, which yielded about $150 million. Northwest has now given the green light for the pilots to sell another 20 percent of the claim.

Mellon said that Northwest agreed to allow the pilots to sell a portion of the claim early, so they could take advantage of high claim sale prices. Consequently, he said, the average Northwest pilot is expected to receive $60,000 from the sale of 40 percent of the claim. That money is expected to flow into pilots' retirement savings plans.

Also, Northwest has instituted a profit-sharing plan to recognize employee contributions to the airline's success, Mellon said. In December, Northwest CEO Doug Steenland estimated that Northwest would earn a pretax profit of $230 million to $270 million for 2006, which would allow the company to distribute $23 million to $27 million to employees in profit sharing. Today, Northwest is set to release fourth-quarter results and reveal the precise profit for 2006, which excludes reorganization items.

Stevens' memo suggests that pilots and management will continue to lock horns as the carrier prepares to exit bankruptcy by June. ALPA is one of nine organizations represented on the creditors committee in the Northwest bankruptcy, and the union has a seat on the board of directors.

In a separate memo to pilots on Monday, A. Ray Miller Jr., chairman of the Northwest pilots' Detroit council, pledged to monitor the amount of equity that Northwest executives secure in the restructured company.

"As Northwest and the industry recovers, we fully expect and will demand that we share in the rewards of the recovery," Miller wrote. He later added that "NWA management has every intention of benefiting and enriching themselves from our continued concessions."

John Budd, a human resources professor at the University of Minnesota, said Monday that the pilots and management will need to find common ground for a restructured Northwest to be successful.

"The pilots are arguably the airline's most important employee group, and in such a challenging economic environment, an airline's long-run viability depends on having the pilots on board," Budd said.

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