orthwest
Airlines said yesterday that it was increasing the amount
it wanted in labor concessions to $1.1 billion a year and that it
would seek to freeze employee pension plans.
The moves were the latest sign of the toll that record fuel
prices are taking on the airline industry.
Northwest, which began pushing its unions for wage and benefit
cuts more than two years ago, had sought $950 million in cuts, but
the chief financial officer hinted last week that the airline would
have to increase that amount. Northwest and other airlines are being
hurt by fuel prices that have reached $1.62 a gallon, up 25 cents
since mid-February. That is a third higher than they paid at this
time last year, according to the Energy Department.
The increase has prompted furious cost reductions at several
airlines, including Northwest. This month, Northwest said it would
take 30 planes out of its fleet, including two dozen of its aging
McDonnell-Douglas DC-9's, which would eliminate 130 jobs. The
airline also said it expected its available seats this year to be
flat with 2004, instead of growing 2 percent to 3 percent.
Despite the moves, Northwest has been unable to persuade union
members to agree to wage and benefit cuts. Only Northwest's pilots,
who approved a two-year contract with $265 million in cuts last
fall, and its salaried employees, who contributed $35 million in
cuts, have gone along with the company's request.
The airline has not been able to reach agreements with unions
representing its flight attendants, mechanics, ground workers and
other employees. A federal mediator is taking part in talks between
the airline and several unions.
A Northwest spokesman, Kurt Ebenhoch, said the airline would
focus first on winning wage and benefit cuts from those unions.
Once that is complete, Mr. Ebenhoch said, the airline planned to
resume negotiations with its pilots on another round of concessions.
Northwest did not specify how much it would seek from each union.
The airline did not set a deadline for obtaining the cuts, but
said it hoped to complete negotiations as soon as possible.
Northwest is well behind its rivals in its quest for wage and
benefit cuts. Workers at the two major airlines in bankruptcy
protection, United and US Airways, have agreed to multiple cuts
since 2002, while unions at American, Delta and Continental have
granted wage and benefit concessions in the last two years.
In addition to gaining cuts, Northwest wants to freeze
its three employee pension plans, covering pilots, other union
members and salaried employees, and replace them with
defined-contribution plans like a 401(k) program, the airline said.
Northwest's three pension plans have an unfunded liability of $3.8
billion.
Freezing a plan means that it will not accept new members, and
that the company will not make any more contributions. Workers
covered by the frozen plans would receive benefits on retirement.
Northwest's pilots' union told its members last month that it
would discuss the idea with the airline.
Pilots at
Delta Air Lines, which are that
company's only unionized employee group, agreed to freeze their
pension plan last year, when they granted concessions of $1 billion
a year.
In an employee newsletter distributed this month, the chief
executive of Northwest, Douglas M. Steenland, said fixing the
pension problem was critical to efforts to restore its
profitability.
If it cannot do that, Mr. Steenland said, Northwest could be the
latest airline to seek bankruptcy protection. Northwest has lost
$2.5 billion in the last four years, but it has maintained a strong
cash position, which industry analysts say has been its best
protection against a Chapter 11 bankruptcy filing.
Mr. Steenland warned that a bankruptcy filing could damage the
airline. "It could, in fact, be the beginning of the end for
Northwest," he said, "as it has for other airlines that originally
saw bankruptcy as a way out of crisis."