Northwest, flight attendants reach pact

July 18, 2006|By BLOOMBERG NEWS

NEW YORK -- Northwest Airlines Corp. and its flight attendants agreed yesterday on how to reduce wages and benefits by $195 million a year, averting a showdown in which the bankrupt carrier would have imposed its own cuts and risked a strike.

Specifics of the proposed contract weren't immediately released.

The tentative pact must be approved by union leaders, the airline's 9,300 attendants and U.S. Bankruptcy Judge Allan Gropper. Northwest expects attendants to finish voting on July 31, the carrier said.

Northwest and the Association of Flight Attendants-CWA negotiated the contract in talks that extended through the weekend and into yesterday. The airline had a bankruptcy judge's permission to impose new labor terms yesterday if an agreement weren't reached.

Northwest, the fifth-largest U.S. carrier, said it needs $1.4 billion in labor savings to emerge from Chapter 11. Reaching an agreement instead of imposing a new contract will increase Northwest's appeal to investors considering financing its exit from bankruptcy.

"Financiers will tell you straight away they want committed partners," said Robert Mann, head of R.W. Mann & Co., a Port Washington, N.Y., consultant for airlines and unions. "They don't want the prospect of disruption. This is a very important development not only for the flight attendants, but also for Northwest's restructuring."

Northwest filed for bankruptcy protection Sept. 14. The airline has said it might emerge from court supervision as early as next year.

The attendants are Northwest's only labor group that hasn't accepted concessions. Wage and benefit cuts approved by pilots and baggage handlers don't take effect until the attendants accept the new agreement or until Northwest implements its own terms.

"This tentative agreement is huge for the airline and its employees," said John Budd, a labor professor at the University of Minnesota's Carlson School of Management. "It's not just getting concessions from the flight attendants, but it's locking in the concessions with the pilots, Machinists and smaller groups."

"With the airline in bankruptcy, this deal was always going to be about survival," said Mollie Reiley, interim president of the union at Northwest. " ... This is not a day that we celebrate."

Without the agreement, Northwest would have become the first U.S. airline to impose contract changes since the 1984 overhaul of U.S. bankruptcy laws.

The union had threatened to conduct random, no-notice strikes against certain Northwest flights or cities if the airline implemented changes in its contract.

The latest round of talks began a week ago, after Northwest's attendants rejected an earlier proposal, ousted the union that negotiated it and voted in the Association of Flight Attendants.

The earlier agreement rejected by attendants would have cut pay 21 percent, halved vacation time and reduced medical benefits.

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