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Tower Air
10-17-2005, 10:39 AM
NWA says high labor costs could put it out of business

October 13, 2005
BY JEWEL GOPWANI
FREE PRESS BUSINESS WRITER
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.
Proposed NWA cuts
Northwest Airlines wants court permission to reject its contracts.
Union Overall cuts Proposed average wage cuts, current wages
Air Line Pilots Association $611.8 million, including $250 million in cuts already made. 28.4%; top pay is $232.18 based on in-flight hours and other factors.
Professional Association of Flight Attendants $195 million. 17.5%; top pay is $49.10 per hour in flight and other factors.
International Association of Machinists and Aerospace Workers (ground workers) $190.4 million. 5%-12.5%, depending on duties, hourly wages unavailable.
source: Northwest bankruptcy court filing
"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% to nearly 30% 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% 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.
"We have been preparing for expedited negotiations. We continue to meet with NWA management and believe we can reach a negotiated settlement, but only if management doesn't overreach in negotiations," said Will Holman, spokesman for the Air Line Pilots Association.
Northwest also wants to cut about $80 million in medical costs for retirees. The airline wants current retirees under age 65 to pay half the cost of benefits. For pilots, it wants to eliminate medical coverage for retirees older than 65.
Typically, requests to reject contracts in bankruptcy lead to quicker agreements as the two sides try to settle before a judge has a chance to make a decision, Pottow said.
Northwest on Wednesday also detailed cuts for salaried workers that will take effect in December.
Northwest eliminated merit pay raises of 2.5% that were supposed to be given Oct. 1. Northwest plans a 5% salary cut for all employees until the airline emerges from bankruptcy and increasing medical premiums for salaried workers. The same cut has been proposed to unionized employees.
Northwest points to low-cost carriers as the model for the airline's new labor structure
The company says that this year the average compensation for Northwest's employees is 62% above the average paid to employees of low-cost carriers.
If Northwest gets all of the concessions it wants, the airline's cost to carry one passenger one mile would go from 4 cents to 2.6 cents.
http://www.freep.com/money/business/nwa13e_20051013.htm

T-Bird76
10-17-2005, 11:23 AM
If this was a year and half ago you could have replaced Northwest's name with United or US Airways because they said the same exact thing. Sure NW is in trouble but I don't see them shutting down. More then likely the court will approve their requests and the employees will take huge loss like US's employees did. The real issue is will the employees sit back and take it or will they play games like US's employees did during the holidays which could destroy NW.

cancidas
10-17-2005, 01:46 PM
tommy, our PHL employees did not destroy the airline. our reputation may have been damaged for a few months after but now we're a whole new airline. be happy for US!!!

T-Bird76
10-17-2005, 02:03 PM
tommy, our PHL employees did not destroy the airline. our reputation may have been damaged for a few months after but now we're a whole new airline. be happy for US!!!

Matt I never said US's employees destroyed US, NW is having far more labor problems them US ever did. The example I used simply illustrates what can happen when management plays hard ball.

IslipWN
10-17-2005, 02:58 PM
i dont think its gonna happen

K9DEP
10-17-2005, 03:25 PM
SO if Northwest did go out of buisness their gigantic fleet would be sold or scattered?
But if they did have to sell their planes they could give Jetblue the A330's, American/FedEx back some DC-10's and American could get thier A-buses , anything oter than that could go to Independence.




Yes I know, Im Retarded :(

Matt Molnar
10-17-2005, 04:21 PM
Pretty sure AA doesn't want any more Scarebuses.

Art at ISP
10-17-2005, 05:05 PM
First of all, it is just posturing in public to try toget the judge to okay cancellation of the contracts. I seriously doubt that an airline the size of NW would be allowed to just shut down.

The same thing was said time and time again during US' 2 trips through the BK courts. Those of you who read US Aviation should know that well.

I am intimately familiar with the PHL debaucle last Christmas, as our organization FFOCUS supported both customers and employees during those times, and we actually lost our contact with US management after we openly criticized them in the press for their failure to accept responsibility for their part in the incident. When the DOT report came out and they STILL refused to apologize to the employees, we went public...

I don't know much about NW employees, but US has some of the finest people in this industry. It is to the credit of the employees that loyal customers like myself and my fellow FFOCUS members stayed during the past 4 years and allowed US to live to see another day.

My best to ALL of you on here who work for US!!!

Alex T
10-17-2005, 06:58 PM
First of all, it is just posturing in public to try toget the judge to okay cancellation of the contracts. I seriously doubt that an airline the size of NW would be allowed to just shut down.

T

they said the same about TWA, Eastern, PAN AM, they were all much bigger then NWA. they all also shut down (of course TWA was bought).

Alex

Clipper
10-18-2005, 12:47 AM
SO if Northwest did go out of buisness their gigantic fleet would be sold or scattered?
But if they did have to sell their planes they could give Jetblue the A330's, American/FedEx back some DC-10's and American could get thier A-buses , anything oter than that could go to Independence.

The last time I looked, they don't "own" anything worth while and other airline would want. I think it was a bunch DC-9, a few 747-200 and some engine less 727's sitting in the desert.

All their A330's are financed, RBS and Airbus will take those back if they do shut the doors. FedEx have a few more DC-10's left in the desert from their old AA deal yet to be converted, I don't think they would want some high time DC10-40 with Pratt engines, especially at today's fuel prices. Indi is not in a position to take any additional aircraft unless they can get additional funding to operate beyond the current cash on hand. The remaining fleet are mostly 100% leveraged by current creditors so they no longer own anything thats worth looking at.

Can NWA shutdown? I am sure that is a possibility, but their current cash flow can keep them going until sometime in the 1st Qtr of 06'. I feel bad for all those people loosing their jobs, some their career. I have been in the same position with PAA. I think the union did a bad job representing them during this go-a-round, they should have concede earlier without a strike and re-negotiate when the economy are doing better.

Consolidation may be good for the industry right now but will be bad for the flying public in the near future.

Art at ISP
10-18-2005, 02:27 PM
[quote="Art at ISP":9835b]First of all, it is just posturing in public to try toget the judge to okay cancellation of the contracts. I seriously doubt that an airline the size of NW would be allowed to just shut down.

T

they said the same about TWA, Eastern, PAN AM, they were all much bigger then NWA. they all also shut down (of course TWA was bought).

Alex[/quote:9835b]

Times are very different now. While it would probably be good for the industry, I just don't see it happening. They might merge with DL or something before they would close the doors.

My best to you all.....

classicjetz
10-19-2005, 12:36 AM
Back in the year 2000, a professor I had said in the future there would be only about 3 or 4 major airlines in the USA. I disliked that thought from an enthusiast's point of view.

That was before the economic downturn and 9/11. Well here we are past that now and 3 of the biggest airlines are flying under chapter 11 and two others merged to survive.

USairways was bankrupt also right? If so, how does that change by merging with America West?

T-Bird76
10-19-2005, 08:23 AM
US did not merge with America West, America West bought out US. The term merge is a nice way of saying buyout. Effectively the U.S Airways Inc that existed no longer exists and will file a Chap 7 Liquidation plan. America West Holdings Inc. parent company of America West Airlines bought out for the most part all of U.S Airway’s assets including the name which they have taken as their own.

This is a similar situation when AA took over TWA. AA purchased almost all of TWA's assets including the name but instead of changing their name to TWA, the TWA name was dropped and the two airlines were run under the American name.

For over a year AA did run TWA as its own airline even though the birds were flying in AA colors. The airline was called TWA LLC Dba (Doing Business As) American Airlines.

This is exactly what is going on right now with U.S Airways and America West. Both operate under two different FAA flight certificates and have many different operating standards. Over the next two years these differences will go away and the airline will function as one and any subsidiary airline that might have been established to separate the two during this time will go away.

So basically in business terms U.S Airways is gone bought out by America West which will continue to carve out its own history now under the U.S Airways name. I hope that made sense and helped you out.

protonv5
10-19-2005, 12:23 PM
Thanks for working for us for 20 years waiting for you pension you old coot. Now hit the road! Sweet.

mirrodie
10-20-2005, 08:00 PM
Damn, Tommy, you know your ****.

Anyway, I just hope they stick around. Got to admit, what a diverse fleet they have!

Alex T
10-20-2005, 08:40 PM
Makes you wonder if AA changed it to TWA would it be more popular? Sadly of course AA will NEVER match up to TWA standards, but maybe it may have helped? Of course higly unlikely, but one must wonder.

Alex

classicjetz
10-21-2005, 05:15 PM
I haven't had time to get online lately but Tommy I appreciate that explanation, you even threw in there the TWA example for comparison, interesting stuff!

I don't know why but I've never liked how the USAirways name sounds. Even though it might be a more coveted trade name than "America West", I preferred how the latter sounded. USAirways sounds like the name of a virtual airline or something to me :D

Clipper
10-25-2005, 03:48 PM
Here is the latest news from SpeedNews:

"NORTHWEST AIRLINES received US Bankruptcy Court approval to reject/abandon 115 aircraft: three 747-400s, nine 747-200s, 28 757-200s, eight DC-10-30s, four DC-9-30s, 22 A320s, six A319s, and 35 MESABA Avro RJ85s."

Look like there will be alot of busy bankers ferrying planes around in the next few weeks.

Art at ISP
10-25-2005, 04:51 PM
Although NW got permission to terminate a large number of leases, the actual probability that they will return ALL those aircraft is low.

Permission to reject current leases is leverage to negotiate new lease rates with the lessors. It is most likely they will get better rates on the majority of the equipment.

The AVRO's, however, are most likely gone.