Last update: May 26, 2004 at 7:49 AM
Northwest pilots prefer pay cuts to job cuts
Liz Fedor, Star Tribune
May 26, 2004NWA0526
Pilots at Northwest Airlines want their $200 million in annual labor savings to come primarily through pay cuts rather than changes in scheduling, vacations or other work rules, a pilots union leader said Tuesday.
"Our philosophy is to make our cost reductions in W-2s rather than changing work rules," which could produce more job losses, said Curt Kruse, a spokesman for the Northwest branch of the Air Line Pilots Association (ALPA).
The union outlined its negotiating approach in a four-page memo recently mailed to pilots. Kruse, a Northwest A320 captain, elaborated on ALPA's strategy in a Tuesday interview.
Last month, Northwest's pilots union leaders voted unanimously to propose $200 million in annual labor cost savings in order to help the Eagan-based airline regain profitability. Northwest management has said it needs to cut pilot costs by $442 million a year.
Kruse said pilot negotiators would like to reach a tentative agreement with Northwest by September or October.
The cost reductions the pilots are proposing would run through 2006, as opposed to the 6½-year agreement sought by management.
"The $200 million was not a number we grabbed out of the air," Kruse said. "Our analysis shows that it would bring us down to a pilot unit cost which would be competitive with our main competitors, mainly United and American," he said.
It's unclear how much of the airline's total savings will come from pay rate cuts, because the union might accept some work rule changes that have no impact or limited effect on staffing levels. The pilots union also might be given credit for separate agreements that provide an economic benefit to the airline, such as one under discussion covering expansion of the cargo division.
The current contract includes a pay range of $35,000 to $240,000 a year. Northwest's compensation is the second-highest in the industry behind Delta Air Lines. Among the major carriers, Kruse said Northwest had been the second-lowest for several years.
But that all changed when US Airways and United Airlines filed for bankruptcy protection in 2002, and American Airlines averted bankruptcy in 2003. The trio substantially reduced pay rates for airline employees, and some pilot groups agreed to scheduling changes that reduced vacation accruals and required more flying each month.
ALPA cautioned against agreeing to such changes at Northwest.
"While it may be relatively painless on an individual basis to give up a few days of vacation per year or work a few extra hours per month, the cumulative effect on staffing can be significant," ALPA said in its memo to Northwest pilots.
Work rule changes could delay recalls and increase furloughs. Currently, 881 pilots are on furloughs out of a population of about 6,200 pilots.
For example, altering the vacation accrual rate could save Northwest $46 million a year and reduce the workforce by 223 pilots, the union said.
Though Northwest pilots support two years of labor savings, the union proposal does not demand that wages "snap back" to pre-concession levels.
"We expect pilot pay rates at our key competitors to remain at or below those at Northwest well beyond the end of the proposed [two-year] agreement," the ALPA memo said. A "snap back" clause could harm Northwest's ability to refinance its debt and increase the "risk of a Chapter 11 [bankruptcy] filing."
But the pilots are calling their proposal an "investment agreement," because it does include provisions for future financial rewards such as airline stock.
"Northwest has very serious financial challenges," Kruse said. "We've seen where the rest of the industry has gone. We believe that we can do better for Northwest as a corporation and for the pilots by working out a mutually agreeable deal without dragging Northwest through the same kind of process that American, United and US Air have gone through."
The pilots union is the first work group to show its receptiveness to labor cost cuts. "We still firmly believe that all Northwest unions will have to participate in making Northwest competitive," Kruse said.
To date, the other unions have publicly opposed Northwest's call for concessions.
Northwest received the pilots' proposal April 28, and Kruse expects executives to formally respond to it before union leaders convene for a June 8 meeting.
In addition to reviewing the pilots' proposal, Kruse said, Northwest management is updating its business plan to include assumptions for higher fuel costs and pension law changes. Management is attempting to cut its annual labor costs by $950 million.
Liz Fedor is at
lfedor@startribune.com.
