The two majors in reorganisation are finding that the brute force of bankruptcy protection produces more results than a conciliatory approach.
Northwest Airlines, which went into Chaper 11 on 14 September, has won tentative concessions from two major unions after telling its bankruptcy judge that it would cut wages unilaterally if the work groups did not agree.
It then reached agreement with the Air Line Pilots Association (ALPA) and the Professional Flight Attendants Association to cut costs by a combined $332 million, after both unions said agreeing to cuts was preferable to a Draconian court-imposed pact. It also signed tentative agreements with small unions for meteorologists and technical support staff.
However, Northwest still needs an interim pact with the International Association of Machinists, and it has filed a motion with the Bankruptcy Court in New York to impose temporary wage and benefit reductions of $114 million. The threats of wage cuts from Northwest have been made credible by its strong stance against a rebellious mechanics union that went on strike in August, says a union attorney.
By contrast, Delta Air Lines, which filed for bankruptcy protection on the same day in September as Northwest, tried negotiating with its only union, its pilots, but made little progress. And by the time Delta was in court telling its bankruptcy judge that it too would unilaterally cut wages, its ALPA pilots union said it was preparing to strike.
As he launched a strike committee, ALPA chairman Lee Moak told fellow pilots: “It is clear they never had any intention of meaningfully engaging in a negotiation process they themselves had endorsed.” The company wants $325 million in new concessions from them, including a 19.5% pay cut. The union instead proposed $90.7 million in average annual concessions over four years, which would include a 9% pay cut effective from December to last for seven months, followed by 7% for six months, then 5% after that.
The cuts would be on top of $1 billion in annual concessions the pilots agreed to in a five-year deal, including a 32.5% pay cut, late in 2004. Delta’s net loss in the third quarter was $1.1 billion. Delta’s confrontation with its pilots, once the highest paid in the nation, is crucial, because they are the first large union to make a credible strike threat against a bankrupt airline. Expert opinion is divided as to legality of a strike against a bankrupt company, as US statute generally holds that bankruptcy outweighs other laws.
DAVID FIELD/WASHINGTON
Source: Airline Business
