Pilot union leaders want company to turn over nearly 20% of outstanding shares

The leaders of the Northwest Airlines' pilot's labor union have rejected the latest company stock offer as "grossly inadequate." They are also accusing the airline's management of delaying tactics to stall negotiations for a new contract.

"Management has been saying that they want to have negotiations completed by this fall. However, they are not acting like that at the negotiating table," said union spokesperson Curt Kruse. "They are not displaying any sense of urgency."

The disagreement stems from a proposal by the pilots in April to cut their own salaries by $200 million per year to help the airline get itself back on track to profitability. In return, the pilots want 20.7 million shares of Northwest stock, which represents 19.4 percent of the company's outstanding shares. Two months later, the airline countered with a proposal to cut $300 million in labor costs, more than 25 percent less than their original proposal for $442 million in cuts.

In return, the company is offering the pilots 1 million stock options. "We don't consider their current offer a serious one." In fact, Mark McClain, chairman of the Northwest branch of ALPA, responded in the pilot newsletter, stating that "NWA's top five senior executives were granted 625,000 options in 2004 alone. Management is now proposing that over 5,000 pilots share 1 million options."

Kruse said. Northwest management did not comment on the response by the pilot's unions, but spokesperson Bill Mellon said that in regards to alleged delaying tactics in the negotiations, "We are working to reach an agreement by this fall." Several key members of the airline management team did in fact receive options, but they are restricted options given to key personnel that do not vest for years and require them to stay with the airline in order to be able to exercise them -- a common practice in and out of the airline industry.

What ALPA is trying to do is negotiate a two year bridge contract that would put the pilots in the position to reassess their situation and that of the airline in two years, and open the field for negotiations with the other labor unions at the airline. The stock portion of the agreement is more than likely going to be the biggest obstacle to an agreement with the pilots.

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