Judge Gives Northwest, Unions More Time to Reach Deal
STEVE INSKEEP, host:
The judge overseeing the bankruptcy of Northwest Airlines has delayed a major decision.
It's a decision on whether the company may throw out its contracts with pilots and flight attendants. If the contracts are voided, the unions have threatened to strike, and that move would mortally wound the airline.
For Minnesota Public Radio, Jeff Horwich reports.
Mr. JEFF HORWICH reporting:
U.S. Bankruptcy Court Judge Allan Gropper is giving the airline and its unions one more week to negotiate new contract terms. In October, Northwest asked the judge to let it discard its labor contracts and impose terms of its own choosing. It's a standard bankruptcy move, and usually the threat alone is enough to prompt a deal.
Gropper has urged the sides repeatedly to work things out, and even recessed the trial at one point to allow them to focus on negotiations.
While the judge praised both sides for continuing to engage in good faith talks, Northwest remains locked in a bitter dispute with its powerful pilots union led by Captain Mark McClain. The union has struck before, in 1998, and McClain says, this time the stakes are even higher.
Captain MARK MCCLAIN (Chairman of Northwest Airline's Pilot's Union): Our goal is to reach an agreement with Northwest's management, and we hope to do that. But they're going to have to become more reasonable in their demands and recognize that Northwest's pilots and all Northwest employees, that there has to be some hope of a future, something in it for them.
Mr. HORWICH: Northwest is asking for pay cuts of nearly fifty percent for many pilots, and the union has so far rejected a plan to outsource flying on 70-seat jets, either to a new subsidiary or an outside vendor. McClain says these outside flights could cut twenty percent of current jobs.
Captain MCCLAIN: Northwest's managements' desire to outsource those jobs, it's just an overreach. It's trying to take advantage in a situation through the bankruptcy courts.
Mr. HORWICH: Northwest officials rejected repeated requests for an interview for this story. In a short statement after the judge issued his one-week extension, the airline says it appreciates the extra time to work out differences with the unions.
Northwest is losing more than four million dollars a day and has argued deep structural change is necessary for the bankruptcy process to be anything more than a Band-Aid. Its mechanics union has been out on strike since last August, and the company is already outsourcing most of the work of its members.
Finance Professor Arkesh Argovall(ph) of the University of Minnesota says Northwest is aiming for more radical restructuring than in other recent airline bankruptcies.
Professor ARKESH ARGOVALL (Economics, University of Minnesota): Northwest is operating in an environment where, with fuel prices where they are, it's going to be very hard for Northwest, without very, very deep cuts in their labor cost structure, to be able to be profitable and be able to successfully emerge as a viable long-run carrier.
Mr. HORWICH: Frequent Northwest travelers are growing nervous about the confrontation with pilots. Ralph Vergara(ph), returning this week from a business trip to Orlando, flies nearly every week from Northwest's hub in the Twin Cities.
Mr. RALPH VERGARA (Businessman, Minnesota): The word on the street is that if the pilots strike, you know, how much longer is Northwest going to be around, you know? Can they live through an event like that and still have a viable airline?
Mr. HORWICH: Many experts say Northwest as a company would last a few days at most without planes in the air. Industry consultant John Ashe says it would be irrational for pilots to give up everything rather than compromise.
Mr. JOHN ASHE (Consultant): It's easy to say that if the jobs aren't worth that much, you know, we'll shut it down. But the fact is, a job is a job. And a job is better than no job.
Mr. HORWICH: The earliest pilots could strike is February 28th, when the membership completes a strike vote. Flight attendants, facing wage cuts and a plan to outsource work on overseas flights, complete their vote in early March. Any call for a strike is certain to set off another court battle, this one over the legality of a walk-out during bankruptcy.
For NPR News, I'm Jeff Horwich in St. Paul.