Northwest Executive Seeks Labor Cost Cuts

Northwest Airlines Corp. will lose more than $1 billion in 2006 if it does not get $1.4 billion annually in labor costs from pilots and flight attendants as it seeks to emerge from bankruptcy, a company official testified Wednesday.

"If we achieve the labor savings we are seeking, losses will be $400 million (in 2006)," David Davis, senior vice president of finance and controller at Northwest Airlines, told a New York bankruptcy court.

Davis, who is involved with developing the carrier's operational budget, said Northwest would lose $1.1. billion in 2006 without the cuts in benefits and wages it wants from pilots and flight attendants.

Northwest wants to cut $2.5 billion in costs, including $1.4 billion annually in labor costs.

Karen Schultz, a spokeswoman for the flight attendants union, has said that the flight attendants union has agreed to $195 million in wage and benefit cuts and so-called productivity changes that extend work hours for the flight attendants.

It was the second day of hearings focused on Northwest's request to do away with agreements with pilots and flight attendants.

Davis said the airline has lost more than $4 billion between 2001 and the third quarter of 2005. Of the $4 billion, $1.5 billion was lost in 2005.

To counter these losses, the carrier has looked to sell new debt since 2001 and raise money through the sales of certain assets. But last year, the airline ran out of assets to sell and was unable to sell more debt, contributing to a drop in Northwest's cash balance, according to Davis.

If that drop in its cash balance continues, it could hobble Northwest, said Davis, adding that it could prompt the carrier's vendors to demand more cash up front or hurt its ability to weather quick spikes in fuel prices. Also, credit card issuers may ask for money to be set aside for tickets purchased by passengers using credit cards.

Northwest, which filed for bankruptcy protection in September, raised $1.6 billion through asset sales since 2001. The airline has raised $2.3 billion through the sale of company debt used for purposes other than the purchase of aircraft.

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