It Will Either Be Bad... Or VERY Bad

Nineteen days into 2006, Northwest Airlines is already predicting its financial future for the year... and essentially, the choices are 'bad,' or 'worse.'

The outcome hinges on $1.4 billion in annual labor concessions the airline is seeking from its pilots, flight attendants and other employees, a company official testified at the second day of hearings into doing away with Northwest's labor agreements.

"If we achieve the labor savings we are seeking, losses will be $400 million [in 2006]," David Davis, senior vice president of finance and controller at Northwest Airlines, told a New York bankruptcy court.

The airline will lose $1.1 billion for the year without the concessions, according to Davis. Northwest is shooting for savings this year of $2.5 billion in costs, including the employee concessions.

Those aren't encouraging numbers, any way you look at it... especially as Northwest posted losses of more than $4 billion from 2001 through Q3 of 2005, $1.5 billion of which was from last year.

Should those losses continue, said Davis, it will hobble the carrier -- especially as Northwest doesn't have the cash reserves needed to pay higher fuel prices or credit card fees associated with its filing of Chapter 11 bankruptcy last year, and Northwest has few assets remaining that it can afford to sell off.

Union representatives told the Seattle Times, meanwhile, they question some of Northwest's assertions.

"We believe there is still some question regarding the need for that particular level of savings and there are many questions about how Northwest values some of the concessions they are demanding from pilots," said Hal Myers, spokesman for Northwest's pilots union.

Karen Schultz, a spokeswoman for the flight attendants union, said the union has already agreed to $195 million in wage and benefits cuts, as well as extended work hours for members -- and she isn't sure what else Northwest can reasonably expect.

"Labor is not the problem. They have core cost problems," said Schultz, adding Northwest is forcing flight attendants to choose between massive job cuts, or a radical cut to their benefits and wages.

As the hearings continue, Myers and Schultz told the Times, so do negotiations between unions and management and Northwest. While at this point it's tough to tell in which direction events will swing, one thing appears certain.

The events of 2006 will likely determine the future of Northwest Airlines.

FMI: www.nwa.com, www.alpa.org