Seeking peace at Northwest

Just two weeks after Roy Bostock succeeded Gary Wilson as chairman of the Northwest Airlines board in June, pilots union leaders gave the airline's executives a vote of no confidence.

A few days after that action, Bostock, a 38-year advertising agency veteran, watched Northwest's operations and national reputation deteriorate as the carrier canceled hundreds of flights because of a pilot staffing shortage.

In early July, the flight attendants called on CEO Doug Steenland to resign, saying he had mismanaged the airline.

Bostock, a relative newcomer to the Northwest political scene, knows that the airline's contentious labor relations are its biggest liability. In a wide-ranging interview with the Star Tribune last week, Bostock cast himself in the role of a healer.

He thinks that it is "inane" for a company to have such poor labor relations, and he argues that Northwest management and labor must work as a well-functioning team if they want to have high-quality customer service.

He's been dissecting the airline's problems since he joined the board in 2005.

Now he's in a position to marshal significant change. He became the 12-member board's chairman after the airline exited bankruptcy on May 31.

"There simply is no reason in my mind for the kind of confrontational relationship that developed between Northwest and its unions," Bostock said. Better treatment for Northwest employees and customers is at the top of Bostock's priority list.

Bostock, quarterback of the state champion Edina High School football team in 1957, is a candid businessman who recognizes that a major culture change at Northwest will take more than rhetoric.

"There has been an adversarial relationship between management and unions, and even to some extent board versus management. That to me has got to go away," Bostock said. "We need to develop an attitude and behavior patterns to say, 'You know what? We are in this thing together.'"

Bostock, 66, and Wilson both earned undergraduate degrees from Duke University, both serve on the Yahoo Inc. board of directors and both have buildings that bear their names at Duke.

But Bostock is free of the political baggage that Wilson accumulated during his tenure at the airline. Many members of Northwest's veteran workforce have been critical of Wilson since he led a leveraged buyout of the airline in 1989 with California financier Al Checchi. In recent times, employees were angered after Wilson sold more than $21 million worth of Northwest stock in the months leading up to Northwest's 2005 bankruptcy filing.

Wilson declined to do media interviews and did not seek out Northwest employees to solicit their opinions about the company. Bostock is charting a much different course.

He plans to hold meetings with employees. "Doug [Steenland] is the leader of this company. I want to make that absolutely clear," said Bostock. But the chairman emphasized that it's also valuable for him to hear directly from Northwest employees.

"I want these folks to know that this board of directors cares about them and is hell-bent on changing this culture and changing the attitudes in this company to make it more productive for everyone," he said.

Bostock also believes that Northwest needs to improve its outreach to its customers.

"I come from the world of consumer-packaged goods and marketing and advertising," Bostock said, and he's always worked with companies that have "their own survey techniques and tools to measure how well they are doing with their customers."

At Northwest, he said, he thinks there's too much reliance on evaluating operations by looking at Department of Transportation statistics, which include industry comparisons on measures such as on-time flight performance and mishandled baggage.

"We are launching a new company," he said. "The name is the same, but a lot of things are going to be changed."

Northwest has hired a San Francisco-based company to survey customers and, later, help the airline brand its products in the marketplace.

"You've got to have a product before you can have a brand. So we are going to get this product right," Bostock said. "And then we are going to build it into a brand that people embrace and love."

Bostock knows that he cannot work miracles overnight. But "I would be disappointed if we were not a long way along the road in another 24 months," he said.

Bostock, who lives in Rye, N.Y., was in communication with Steenland on a daily basis after the carrier began canceling a hundred or more flights a day in late June.

"Those cancellations were a result of pilot scheduling that turned out to be too burdensome and onerous on some of the pilots," he said. "I think that is a management responsibility."

But he said that he is not blaming management for the conditions that led up to the operational meltdown. Instead, he pointed to the ensuing negotiations as a good example of what the carrier can do when the two parties work together. On Aug. 1, the two sides announced a deal that allowed pilots to reduce their flying hours and it also provided overtime pay for pilots who fly more than 80 hours a month.

When pilot absenteeism rose and the carrier lacked enough crews to fly the full schedule, "we really didn't know what was causing it," he said. Later it was determined that some of the new work rules were too harsh and management had not taken the "human factor" into account and had underestimated pilots' fatigue, he said.

Union leaders have been highly critical of stock awards that were granted to Steenland and other top executives.

Bostock was chairman of the board's compensation committee that allocated Steenland an estimated $26.6 million in restricted stock and options that vest over four years. He justified the stock awards as a means of ensuring the future of the company.

"There is no airline unless you have a very competent, capable management team," Bostock said. "Somebody used the term that 'Doug Steenland pocketed $26 million.'" Not true, Bostock said. What Steenland ultimately receives will depend on the future value of Northwest's stock and how long he remains with the company, he said.

The new chairman said that he favors "cost-neutral ways of improving the work experience for our flight attendants" and other Northwest employees.

But he added that the $1.4 billion in annual labor savings cannot be reduced because the current cost structure is necessary to sustain Northwest's profitability.

On multiple occasions during the interview, Bostock used complimentary terms to describe Steenland and other executives. "I and the entire board have enormous confidence in Doug and this management team," he said. "This is one of the best management teams that I've ever encountered."

Since former Northwest CEO Richard Anderson was chosen to lead Delta Air Lines, speculation about a Northwest-Delta merger has intensified.

"There have been no discussions with Delta about a merger in any way, shape or form since we had very brief conversations that took place in Chapter 11," Bostock said.

"From Northwest's point of view, this airline can sustain itself and build itself as an independent airline for the foreseeable future."

In the coming months, Bostock is focused on building bridges with employees and customers.

"When you reach out to human beings on any level," he said, "people generally respond if you are genuine in what you are doing."

Liz Fedor • 612-673-7709

Liz Fedor • lfedor@startribune.com