Northwest Airlines held off on imposing new labor terms, recognizing that a strike could lead to the end of the airline.
Northwest Airlines pilots could quickly kill the airline by going on strike. Management could kill the airline slowly by forcing the pilots to work under an imposed contract.
That stark reality is what's keeping the sides locked in marathon negotiations in New York even though the deadline for them to reach a consensual deal officially has passed.
In January, Northwest witnesses testified before U.S. Bankruptcy Judge Allan Gropper that the airline must quickly secure $358 million more in annual concessions from the pilots to position itself to leave bankruptcy. If management failed to get a deal at the bargaining table, the carrier said it wanted the judge to toss out the pilots' current contract.
On Wednesday night, Gropper had not ruled on Northwest's motion, and the second extension he'd granted to negotiators expired. At that moment, Northwest gained the option of imposing new pay rates and work rules on the pilots, a step no other bankrupt airline has taken.
But Northwest management has not acted, perhaps in recognition that an imposed solution isn't really a solution to the standoff with its most powerful union.
Late Thursday, Northwest spokesman Bill Mellon said, "The two sides have continued to meet, and we've made additional progress toward a new contract."
George Singer, a bankruptcy attorney with Lindquist & Vennum, Minneapolis, said he doesn't see how Northwest management could win by forcing pay cuts and new work rules on the pilots.
"I don't envision any circumstance under which Northwest will unilaterally impose revised contract terms on the pilots, absent Judge Gropper getting involved," he said.
Singer, who has carefully monitored the Northwest case, said it would be "poor business judgment" for Northwest to shove a new contract down the throats of pilots.
"They would push the pilots over the edge," he said, likely prompting them to go ahead with strike plans.
Even if Northwest blocked a strike by winning a court injunction, Singer said the airline's chances of successfully restructuring could be ruined if it appeared to have declared war on its pilots. Some investors would be wary of an airline with perpetual labor conflicts.
The "path of the unilateral imposition of contract terms" could lead to the destruction of the airline, Singer said.
Wade Blaufuss, a spokesman for the Northwest branch of the Air Line Pilots Association (ALPA), said the union's executive council met Thursday night to get an update on open issues in the negotiations.
A deal could be reached in a matter "of hours," Blaufuss said, but that would require Northwest to move toward pilot positions on key issues, such as giving pilots equity in the restructured company.
"We are inching toward an agreement, but it is very, very frustrating," Blaufuss said. "There is a lot of anxiety with our pilots and our families, because we want to know what the future holds for us.
"Are we going to be on strike and lose our jobs or are we going to get an agreement that we can live with?"
At 9 p.m. Thursday, the union told its members that negotiators are striving for a deal, but that they will not allow "management to unduly exploit the bankruptcy process by overreaching" in its contract demands.
The pilots agreed to 15 percent pay cuts in late 2004, and an additional interim cut of about 24 percent in November 2005.