The tentative agreement on pay cuts clears Northwest's last big labor challenge in emerging from bankruptcy as a slimmer, healthier airline.
Northwest Airlines pilots reached a deal Friday to save their jobs, and ultimately the airline.
The tentative pact between the pilots union and the airline gives Northwest executives all of the $358 million in annual savings that they were seeking. But it also preserves pilot jobs at an airline that both sides expect will return to profitability.
If the rank and file agrees to the deal, the pilots will have removed the most serious obstacle that the bankrupt Northwest has faced to emerging from its financial straits. While the airline could remain under court protection for some time, having labor pacts with all its unions should allow it to obtain financing and, like United and US Airways, survive bankruptcy intact.
Mark McClain, chairman of the Northwest pilots union, stressed that long-term benefit in announcing the settlement. While calling the concessions "painful," he added that they were "necessary" for a restructuring.
The pilots, McClain added, are approaching a period in which "all of us can distance ourselves from these recent labor struggles and focus on ensuring the future success of Northwest."
For Northwest customers, the news brings the hope that Minnesota's dominant carrier will still be flying this month and in the future.
Trippler said he doesn't think Northwest will suffer any serious loss of traffic from the recent uncertainty, citing the experience of the mechanics strike last August.
"The next day the sun rose on the red tails, and Northwest kept flying," he said.
The pilots were the last, and most powerful, of Northwest's unions to reach a deal with management. Their pact, as well as contracts for flight attendants and ground workers, remains to be ratified. Northwest already has cut the pay of management employees, imposed new pay rates for mechanics and secured cost-cutting deals with three small unions. If the three big unions ratify their deals, Northwest will reach its goal of cutting the airline's labor costs by $1.4 billion a year. That would allow Northwest to return to profitability and compete with lower-cost carriers.
The deal reached Friday was three years in the making. Northwest first asked the pilots for concessions in February 2003. Northwest management and leaders of the Air Line Pilots Association (ALPA) met hundreds of times over the three-year period to debate what changes were needed.
Neither Northwest nor the pilots union released details of the agreement Friday. The union's executive council met Friday night in New York to review the terms and will vote on whether to send the offer to the membership for a vote.
The pilots, who are paid $60,000 to $160,000 a year, had the ability to shut down the airline with a strike, an event that both sides agreed could be fatal to Northwest.
Pilots' past sacrifices
The pilots had made substantial sacrifices going into the talks. In late 2004, the pilots took 15 percent pay cuts, which have saved the airline $250 million a year. In mid-November, pilots accepted an additional temporary pay cut of about 24 percent. Many pilots, who were flying smaller aircraft after Northwest's downsizing, have lost 50 percent or more of their pay, with some forced to sell their houses. The pilots also agreed several weeks ago to the freezing of their defined-benefit pension plan.
At two critical points in the past 10 days, Northwest management sent public signals that it wanted a deal.
Northwest CEO Doug Steenland, who had stayed out of the public eye, said Feb. 22 that management had backed away from its proposal to outsource some flying to a new subsidiary. He also said the pilots would fly new airplanes that will replace aging DC-9s.
That amounted to a public acknowledgement that the company would accede to a union position on a top priority.
On Wednesday, the pilots and management failed to meet a deadline for a deal set by U.S. Bankruptcy Judge Allan Gropper. In January, Northwest asked Gropper to nullify the pilots' contract if the two parties could not forge a deal.
When the two sides didn't meet Gropper's deadline, Northwest had the legal right to impose a new contract. Instead, it kept its negotiators at the bargaining table.
At that stage, Trippler said, each side was holding a "nuclear card." Northwest could have used the bankruptcy law to force the pilots to work under a contract they found unacceptable. And the pilots could have responded with a strike, which could have led to an ugly court battle over the legality of that move.
Neither side played the nuclear card.
James Sprayregen, who was the lead counsel in the United Airlines bankruptcy case, said Friday that Northwest management made an "intelligent" choice by not trying to force terms on the pilots.
"Without labor and management working together in the airline, at the end of the day you don't have an airline," Sprayregen said.
Steenland, who became CEO in late 2004, was in New York for the final days of negotiations, though he was not at the bargaining table when the pilots reached a deal Friday or when the Professional Flight Attendants Association (PFAA) negotiated its agreement Wednesday.
"As CEO, he knew the importance of the two agreements as Northwest continues its restructuring and he made the tough decisions that resulted in two tentative agreements over the past three days," Northwest spokesman Bill Mellon said.
Members of the International Association of Machinists and Aerospace Workers are voting on a contract that reduces ground worker costs by $190 million a year.
PFAA leaders said Friday that they are working on the final language for their contract. That, too, is subject to a vote. The offer cuts flight attendant costs by $195 million a year.