Pilots Union Agrees to Put Northwest Contract to Vote
By SUSAN CAREY, Wall Street Jornal
March 4, 2006 9:54 p.m.

The Air Line Pilots Association leadership at Northwest Airlines late Saturday unanimously agreed to put a tentative contract agreement its negotiators reached Friday with the company out to a vote by Northwest's 5,000 pilots, the union said.

Terms of the tentative accord weren't immediately disclosed. Northwest on Friday said the potential deal delivers the added $358 million in annual savings it was seeking from ALPA. The airline said then that it was pleased by the proposed deal, agreement on which lessens the odds the pilots will strike. (See article1.)

The union more than a year ago voluntarily agreed to pare $265 million from the pilots' annual expenses, in a bid to keep Northwest solvent. The nation's fourth-largest airline by traffic ultimately filed for bankruptcy-court protection last September, and quickly raised the amount of overall labor cuts it was seeking from its 32,500 employees to $1.4 billion from $1.1 billion.

ALPA, in a message to its members late today, didn't say how long the voting will take. Normally such balloting takes about a month. The leadership council also hasn't agreed whether to endorse the deal, be neutral on it or recommend that members reject it. That decision is expected mid-month after a regularly scheduled meeting of the union's leadership council, ALPA said in a message to members.

Having a tentative deal puts off, for now, the possibility the pilots would strike if the bankruptcy-judge overseeing Northwest's bankruptcy reorganization would rule for the company and throw out the pilots' current contract. U.S. Bankruptcy Court Judge Allan Gropper was expected to rule on that issue last Wednesday. But because bargaining was continuing, the judge -- who earlier told both sides that a consensual decision was the better option -- declined to issue an order.

In the ensuing two days, both sides negotiated intensively, with Doug Steenland, Northwest's chief executive officer, playing an active role in the talks. Among the last disputed issues were sick leave payments, retirement benefits and pilot equity in the reorganized Northwest. An earlier sticking point, which Mr. Steenland has said was surmounted, involved the introduction of larger regional jets into Northwest's route network.

ALPA had resisted Northwest's initial plans that all regional jets of 70 to 100 seats be flown by a new subsidiary that would employ pilots who aren't on the airline's seniority list. Later, Northwest backed down on that idea and agreed that all planes of fewer than 76 seats would be flown by others, but that Northwest pilots would have the ability to fly jets of 77 seats or more. That was a concern because Northwest has about 150 elderly DC-9 aircraft that seat about 100 passengers. Those planes are going to be replaced eventually and ALPA wanted to keep that work.

Northwest reached an agreement2 last Wednesday, hours before Judge Gropper's expected ruling, with its flight attendants, obviating the need for the judge to rule on the company's request that the current contract of the 9,000 attendants be abrogated. Terms haven't been spelled out to the union members, pending a ratification vote that could take several weeks. But Northwest said the accord meets its needs to $195 million in annual savings.

A third group, the International Association of Machinists union, currently is voting on Northwest's latest offer. Results should be known in about a week. The accord would cut the annual expenses of those 14,000 ramp, reservations and customer-service workers by $190 million a year.

Northwest, Eagan, Minn., posted a 2005 loss of $2.6 billion, compared with a prior-year loss of $891 million. Excluding reorganization and other unusual items in the latest year, the loss would have been $1.4 billion. For the month of January, the carrier had an operating loss of $65 million, suggesting it is losing $2.1 million a day on an operating basis.

If all three contracts are ratified and the three big unions don't strike, Northwest would be free to work on other aspects of its restructuring, which include cutting its non-labor costs, revamping the contracts of its regional-airline affiliates and renegotiating its aircraft leases.

Cost-cutting by airlines that have emerged from bankruptcy, including UAL Corp.'s United Airlines and US Airways Group Inc., and those that have restructured without resorting to Chapter 11, such as AMR Corp.'s American Airlines, have effectively set the bar for Northwest. Delta Air Lines, another big hub-and-spoke airline, remains in court protection, having declared insolvency the same day as Northwest. All face continued competition from growing low-fare airlines that have lower costs, a gap made all the more painful by currently high fuel prices.

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