remedy
Feb 12, 03, 5:53 am
from the WSJ today (no one is immune but it looks like NW is positioned better than most):
Northwest Air Tells Workers
It Must Overhaul Union Pacts
By SUSAN CAREY
Staff Reporter of THE WALL STREET JOURNAL
Northwest Airlines, which like other big carriers is
suffering after two years of heavy losses in a
changing marketplace, told its employees it has
exhausted nonlabor cost cutting and now must open
up union contracts to wring more savings from its
operations.
In a special edition of an in-house newspaper mailed
late last week to all 44,000 employees, the nation's
fourth-largest airline said it intends to start meeting
with labor leaders to discuss a restructuring of
employee costs.
Richard Anderson, the chief executive, noted in the
newspaper that UAL Corp.'s United Airlines and
US Airways Group Inc., through the bankruptcy
process, are "dramatically and permanently" cutting
workers' pay and benefits and will modify union
work rules. "In turn, this will require the rest of the
airline industry to address costs," he said.
Northwest is the third big carrier not operating in
bankruptcy-court protection to take aim at its labor
expenses. AMR Corp.'s American Airlines recently
asked its employees for $1.8 billion in annual
savings. And Delta Air Lines broached the idea that
its pilots' contract is too expensive.
At Northwest, wages and benefits were $3.85 billion
last year, 38% of the carrier's operating expenses
and the largest single item. While labor costs were
flat last year compared with 2001's level, Northwest's overall operating costs declined 4% last year in
response to rigorous cost savings in other areas.
The St. Paul, Minn., company disclosed at a Goldman Sachs airline conference last week that its target is
to cut its unit cost, or the cost to fly a seat a mile, by one cent to 1.5 cents. That would push unit cost
down to eight cents to 8.5 cents, and would put Northwest on top as the most efficient of the six biggest
carriers. The savings, which would come from labor and nonlabor reductions, would equal $1 billion to
$1.5 billion a year, the company said.
Northwest began slimming down in early 2001 when the economy slowed, well ahead of the terrorist
attacks that September. It figures it has wrung $1.2 billion in cost savings from its operations since then,
through layoffs, closure of a maintenance base and reservations centers, and hundreds of other initiatives.
Nevertheless, the carrier reported losses of more than $1.2 billion during the past two years, a period in
which industry revenue plummeted and low-cost carriers expanded.
The Air Line Pilots Association agreed to a series of meetings with Northwest management. The
International Brotherhood of Teamsters, which represents the flight attendants, said it is ready to talk
about protecting jobs and helping guarantee the long-term survival of Northwest.
"We will not, however, be willing to discuss any proposition that takes more money out of our members'
pockets or that will further jeopardize their benefits," union leaders said in a letter to members.
Northwest Air Tells Workers
It Must Overhaul Union Pacts
By SUSAN CAREY
Staff Reporter of THE WALL STREET JOURNAL
Northwest Airlines, which like other big carriers is
suffering after two years of heavy losses in a
changing marketplace, told its employees it has
exhausted nonlabor cost cutting and now must open
up union contracts to wring more savings from its
operations.
In a special edition of an in-house newspaper mailed
late last week to all 44,000 employees, the nation's
fourth-largest airline said it intends to start meeting
with labor leaders to discuss a restructuring of
employee costs.
Richard Anderson, the chief executive, noted in the
newspaper that UAL Corp.'s United Airlines and
US Airways Group Inc., through the bankruptcy
process, are "dramatically and permanently" cutting
workers' pay and benefits and will modify union
work rules. "In turn, this will require the rest of the
airline industry to address costs," he said.
Northwest is the third big carrier not operating in
bankruptcy-court protection to take aim at its labor
expenses. AMR Corp.'s American Airlines recently
asked its employees for $1.8 billion in annual
savings. And Delta Air Lines broached the idea that
its pilots' contract is too expensive.
At Northwest, wages and benefits were $3.85 billion
last year, 38% of the carrier's operating expenses
and the largest single item. While labor costs were
flat last year compared with 2001's level, Northwest's overall operating costs declined 4% last year in
response to rigorous cost savings in other areas.
The St. Paul, Minn., company disclosed at a Goldman Sachs airline conference last week that its target is
to cut its unit cost, or the cost to fly a seat a mile, by one cent to 1.5 cents. That would push unit cost
down to eight cents to 8.5 cents, and would put Northwest on top as the most efficient of the six biggest
carriers. The savings, which would come from labor and nonlabor reductions, would equal $1 billion to
$1.5 billion a year, the company said.
Northwest began slimming down in early 2001 when the economy slowed, well ahead of the terrorist
attacks that September. It figures it has wrung $1.2 billion in cost savings from its operations since then,
through layoffs, closure of a maintenance base and reservations centers, and hundreds of other initiatives.
Nevertheless, the carrier reported losses of more than $1.2 billion during the past two years, a period in
which industry revenue plummeted and low-cost carriers expanded.
The Air Line Pilots Association agreed to a series of meetings with Northwest management. The
International Brotherhood of Teamsters, which represents the flight attendants, said it is ready to talk
about protecting jobs and helping guarantee the long-term survival of Northwest.
"We will not, however, be willing to discuss any proposition that takes more money out of our members'
pockets or that will further jeopardize their benefits," union leaders said in a letter to members.