- The Washington Times - Friday, April 25, 2003

MINNEAPOLIS (AP) In a sign that the labor unrest at American Airlines is spreading, Northwest Airlines is confronting growing employee opposition as executives use the threat of bankruptcy to persuade them to accept $1 billion in annual cuts.
Northwest is in better financial shape than some competitors, and unions are questioning the duration of the proposed concessions.
Northwest flight attendants plan to demonstrate today in New York, where the company is holding its annual shareholder meeting. Some employees have expressed anger that while they face layoffs and steep cuts, the airline's executives have been given bonuses one of the themes brewing at American.
Until recently, Northwest executives hadn't even whispered the word "bankruptcy" while handing out pink slips, presenting their cost-cutting plan and reporting a $396 million first-quarter loss. But Chief Executive Richard Anderson this week raised the possibility of a Chapter 11 filing.
"As we have seen at United and US Airways, an airline in bankruptcy loses substantial control over its business," Mr. Anderson said in the company's monthly newsletter to employees. "The bankruptcy judge … can force severe cuts in employee compensation, revoke union and vendor contracts and terminate pension plans."
Northwest's rank and file already were angry about how long Northwest's cuts would last and because they don't allow for any givebacks if the industry outlook brightens.
"They want to completely gut our contract for a period of 6 years with no guarantee of things being returned to normal after that time," Lacy Christensen, a flight attendant based in San Francisco, said in an e-mail sent to the Professional Flight Attendants Association, a union seeking to oust the Teamsters as representative of flight attendants at Northwest.
Analysts believe all major carriers need to lower their labor costs, but they also said talk of bankruptcy at Northwest was premature.
Ray Neidl, an analyst with Blaylock & Partners in New York, said Northwest had $2.3 billion in cash, most of it unrestricted, at the end of March enough to last through the end of the year.
Still, major carriers face immense challenges ahead and industrywide profitability is at least another year away, analysts said.
The weak economy, the lingering effects of September 11 and the war in Iraq have all taken their toll on passenger demand. To lure business and leisure travelers and stay competitive with low-cost carriers, major airlines have had to offer extremely low fares, further crimping their revenue base.
Last month's outbreak of severe acute respiratory syndrome in Hong Kong and southern China has caused traffic to the Pacific region to plummet, and Northwest, one of the top U.S. carriers serving Asia, has suffered as a result.
Industrywide, Pacific traffic was down nearly 26 percent in the first week of April compared with last year. Trans-Atlantic traffic, meanwhile, was off more than 25 percent, and domestic traffic was down 15 percent.
In attempt to reverse its fortunes, Northwest has presented separate proposals to each of its unions with cuts that would run through 2009 and save the carrier nearly $6.18 billion. Salaries, wages and benefits accounted for 38 percent of Northwest's total expenses last year.
Under the proposals, base pay for pilots would drop 17.5 percent, while wages for mechanics would drop 16.7 percent, flight attendants 9.8 percent and ground workers 2 percent.

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