NWA slashes 2,500 jobs, pumps up ticket, bag fees

  • Article by: LIZ FEDOR , Star Tribune
  • Updated: July 11, 2008 - 10:49 PM

Airline hopes most job cuts will be voluntary. A checked bag will cost $15, a ticket change $150 or more.

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A refueling agent pumped fuel into a tank through the wing of a Northwest jet Wednesday at Minneapolis-St. Paul International Airport.

Photo: Marlin Levison, Minneapolis Star Tribune

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Northwest Airlines, facing a major financial threat from skyrocketing oil prices, announced Wednesday that it will cut about 8 percent of its workforce and impose more fees on passengers.

The carrier intends to reduce 2,500 front-line and management positions -- including an undisclosed number in Minnesota -- and hopes to achieve most of those cuts through early retirement, voluntary leaves and attrition.

Northwest employs about 31,000 workers, including 11,500 in Minnesota.

As it cuts expenses, Northwest also introduced two passenger fees and raised a third with the goal of increasing revenue by $250 million to $300 million a year.

Northwest will begin charging many customers $15 for a first checked bag and up to $100 for redeeming frequent-flier miles. Charges to change some domestic tickets will jump to $150, up from $100. Some international change fees will rise even more.

Airlines have been scrambling to deal with record oil prices, which have doubled in the past year to around $140 a barrel. They've revealed plans to slash many domestic flights -- as well as some international routes -- cut their fleets and pare workforces as their costs jump and stock prices sink. Most of the cuts in flight schedules will occur after the summer travel season ends.

Northwest's cuts, while major, aren't out of line with other carriers. American Airlines, the world's largest carrier, last week announced that it would cut almost 7,000 jobs and Delta Air Lines has trimmed 4,100 workers.

Northwest is "just moving in lockstep with everybody else," said David Stempler, president of the Air Travelers Association. Other big carriers, attempting to raise revenue wherever they can, also have been raising fares and fees.

Northwest CEO Doug Steenland recently testified before Congress that more bankruptcies and liquidations will occur if oil prices don't fall.

Oil torpedoes business plans

Four of the nation's six large airlines restructured in bankruptcy during this decade, but they rebuilt their business plans based on assumptions of drastically lower oil prices.

This year, Steenland said U.S. airlines are expected to spend $61.2 billion on aviation fuel, a $20 billion annual increase in their fuel bills.

Last month, Steenland announced that Northwest would reduce its flight capacity in the fourth quarter by 8.5 to 9.5 percent -- the job cuts revealed Wednesday will occur in tandem with those flight reductions.

Stephen Gordon, a top official with the Northwest ground workers union, said Wednesday that about 400 jobs will be cut from the 12,500 employees he represents. The International Association of Machinists and Aerospace Workers is the largest union at Northwest, and its members include customer service agents and airport ramp workers.

People who volunteer for the early retirement program could get a maximum of 20 weeks of severance pay, but he's not sure if there will be enough volunteers because of the state of the national economy. "There's not a job to be found in Michigan," Gordon said, referring to the state where Northwest's Detroit hub is located.

But he added that the Minnesota economy is performing better, so some employees who are not enthralled with the proposed Delta/Northwest merger may opt to exit the airline.

In a Wednesday message to employees, Steenland said, "These reductions are the direct result of our extraordinary fuel costs and the necessary actions we must take to rightsize our airline and eliminate unprofitable flying."

Northwest said in June that it will remove 33 old DC9s from its fleet this year, and it also is taking 14 Boeing 757s and small Airbuses out of its fleet.

However, the Northwest pilots union informed its members Tuesday that it had negotiated an agreement that "prevents furloughs" when the 2008 fall schedule is reduced.

Northwest pilots are being offered an early retirement program, special leave incentive program and partial-month leaves to reduce pilot hours in the flying schedule.

Northwest flight attendants have until July 13 to make bids for a special leave program. They can request leaves of up to nine months from the carrier, and attendants would receive travel benefits on Northwest and company-paid medical, dental and life insurance coverage during their leaves.

Bill Hochmuth, a senior research analyst for Thrivent Investment Management, Minneapolis, warned that more job and capacity cuts could lie in Northwest's future because oil prices may climb even higher.

New York-based aviation consultant Julius Maldutis said Northwest's move mirrors "what other major carriers are doing as part of a survival game." He doesn't expect it to have any negative impact on the merger.

Pilots are negotiating

Delta wants to acquire Northwest by the end of this year. The carriers' two pilot groups started meeting this week in Chicago to negotiate a combined seniority list.

Ben Hirst, Northwest's general counsel, said the airlines want to move quickly on merging the pilot groups and fleets, because it will provide substantial financial benefits to the merged carrier.

"The reasons for the merger are even more compelling in the current fuel environment," Hirst said. He explained that the cost savings and revenue growth expected from the merger will offer "an additional financial margin" for dealing with high fuel costs.

The chief executives of 12 large airlines, including Northwest and Delta, are asking their customers to contact members of Congress to seek a clampdown on oil speculators.

Northwest's $15 bag fee will apply to Northwest ticket sales beginning today and for travel starting Aug. 28 throughout the United States and between the United and Canada. Frequent-flier elite passengers and full-fare coach passengers will be exempt from the fee.

The WorldPerks redemption fees begin for award tickets issued in North America on or after Sept. 15. Northwest will charge $25 for domestic tickets, $50 for transatlantic trips and $100 for trips to Asia.

Liz Fedor • 612-673-7709

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