$265 million concession package ratified, includes 15 percent pay cut

The NorthWest airlines chapter of the Air Line Pilots Association has ratified an agreement granting the airline a $265 million concession package that includes 15 percent pay cuts. The agreement will expire on December 31, 2006, and received 89.1 percent of the votes from the rank and file. The management and other non-contract employees of the airline will also contribute $35 million, consisting of pay cuts and changes to benefit packages. In total, the airline will see some $300 million in annual savings.

The airline was asking for $950 million in labor savings, but so far only $300 million has been agreed to. As with most other major airlines, NorthWest has been hit hard by soaring fuel costs and low-fare competition. "We recognized that this agreement alone won't solve Northwest's problems, but it will let them overcome some near-term hurdles," said Hal Myers, a Northwest pilot and union spokesman to Reuters.

The deal does not become effective immediately, but rather on the first day of the month following the airline's successful restructuring of its revolving credit facility, said Myers. In return, the pilots will receive 3.5 million options for stock plus additional profit sharing participation.

The airline has been fighting a losing battle against fuel costs. The strategy of adding surcharges to ticket prices to offset rising fuel prices has apparently not worked. In a statement, the company said that "In light of current economic and competitive issues facing Northwest, the airline's overall labor cost reduction goal of $950 million in annual savings remains unchanged. The long-term outlook for Northwest Airlines remains strong, assuming we are able to achieve competitive labor cost agreements."

Still on the table are talks with the airline's machinists and aerospace workers unions, as well as transport workers, mechanics, flight attendants, meterologists and other union employees. In October, Northwest reported losses of $46 million in the third quarter.

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