Northwest pilots say airline seeks 37 percent cuts
Friday February 28, 11:13 am ET
CHICAGO, Feb 28 (Reuters) - Northwest Airlines Corp. (NasdaqNM:NWAC - News) has proposed cutting pilot costs by 37 percent annually through lower wages and benefits, changes in work rules, and 343 furloughs, a pilots union spokesman said on Friday.
Northwest, the No. 4 U.S. air carrier, told the pilots that the proposed cost cuts would total more than $2.7 billion over a 6-1/2 year contract starting in July -- about $441.8 million a year, said Capt. Curt Kruse, a spokesman for the Northwest unit of the Air Line Pilots Association (News - Websites).
The contract would run from July 1 through Dec. 31, 2009, according to a union summary of the proposal distributed to pilots late Thursday.
A spokesman for Northwest declined comment.
The proposed furloughs and 60 layoffs previously announced would cut Northwest's roster of more than 5,600 active pilots.
Northwest, based in Eagan, Minnesota, told union leaders in January that it wanted to discuss long-term labor cost reductions as part of its effort to compete with low-fare airlines and with bankrupt rivals that are reducing labor costs as they reorganize.
The airline reported a net loss of $798 million in 2002.
Several large U.S. airlines have sought labor concessions in response to billions of dollars of losses the industry suffered in the historic travel downturn following the Sept. 11, 2001, attacks.
US Airways Group Inc. (OTC BB:UAWGQ.OB - News) and United Airlines parent UAL Corp. (NYSE:UAL - News) have sought labor cost cuts as part of bankruptcy restructurings.
American Airlines parent AMR Corp. (NYSE:AMR - News) has asked workers for annual cost cuts totaling $1.8 billion, and Delta Air Lines (NYSEAL - News) has asked pilots for cost concessions.
Union leaders are expected to discuss Northwest's proposal at a meeting in March, and possibly again in April, before making a formal response.
"Northwest isn't setting any deadlines," Kruse said. "This is more of a long-term restructuring in their view. We will determine what is in the long-term best interest of Northwest pilots."
Northwest has said it sees the proposed cost cuts as separate from regular contract talks with the pilots set for July.
However, pilots union leaders said they view the proposal, which they received on Tuesday, as an early opener for the upcoming talks on the agreement that becomes amendable in September. The changes would have little impact on Northwest's short-term liquidity, the union said.
"They are proposing, instead, to completely redefine the value of NWA pilots over the long term to compete in what they view as the future airline marketplace," the newsletter said.
The proposal would reduce pay rates 17.4 percent from current levels and eliminate a 5.5 percent pay increase set for September. It also calls for annual 2 percent pay increases starting in July 2006.
The rest of the proposed savings would come from changes to benefits, as well as changes to work rules which would be more difficult to quantify, the union said. Some of the changes include permission to use more and larger regional jets. It also would reduce some vacation and require pilots to work two to three more days each month.
Northwest has exchanged opening proposals with the International Association of Machinists for contract talks that cover reservations agents, gate agents, ramp workers and others. Those proposals are separate from wage concessions proposals that may be presented later in March.