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Flight attendants, union leaders
and management from Northwest Airlines recently
approved a new contract labor agreement.
Under the new deal, the airline's
flight attendants will receive a $182 million
secured claim, which will be sold for cash
and distributed now that the company has
left bankruptcy protection. Northwest ended
its 19-month bankruptcy on May 31 with $2.5
billion in annual cost savings and an equity
value of about $7.8 billion. Its departure
from Chapter 11 status marks the first time
in five years that a major U.S. airline
has not been in bankruptcy status.
The labor agreement between the flight
attendants union and Northwest management
also includes additional contract modifications
designed to improve the flight attendants'
work environment, causing speculation by
some industry analysts that the move was
brought on to dampen tempers from some worker
groups. During the negotiations, many employees
were publicly outraged by the airline's
$1.4 billion in labor cost savings made
to facilitate its restructuring. Flight
attendants, in particular, publicly bashed
Northwest's use of its court permission
to void their contract and impose wage and
benefit cuts. Labor tensions quickly worsened
in May when the company revealed a management
compensation plan that awards Chief Executive
Doug Steenland stock and options potentially
worth more than $20 million vested over
four years. Northwest also disclosed that
its top 400 managers now own about 5 percent
of the company after bankruptcy.
A Contentious
History
Northwest's 8,100 flight attendants had
voted down two earlier pay cut agreements
negotiated by their unions. In fact, the
current deal narrowly passed through the
union vote. Of the flight attendants who
voted, 51 percent voted for the deal and
49 percent voted against the contract, which
would maintain wage cuts the airline imposed
last year.
By the way, this is the third contract
that Northwest's 8,000 flight attendants
have voted on in the last year and a half.
In July, Northwest with approval from a
bankruptcy judge, imposed $195 million in
concessions on its flight attendants after
they voted down two contract proposals.
In contrast, employees will each benefit
from an estimated $15,000 payout in their
hands in exchange for their concessions.
By approving the new contract, flight attendants
will split up a $182 million claim in Northwest's
bankruptcy reorganization. The union concedes
this opportunity would not be available
after Northwest's emergence from bankruptcy
protection.
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On the other hand, Northwest has now
locked all its unions into lower pay and
more company-friendly work rules through
the end of 2011. This will undoubtedly provide
the airline's management some breathing
room as they plan the carrier's life after
bankruptcy.
Northwest began seeking worker pay cuts
in 2003, and the process continued after
it filed for bankruptcy protection on Sept.
14, 2005. Bankruptcy laws allow companies
to reject union contracts, giving managers
a lot of leverage in negotiations. After
flight attendants rejected a second negotiated
agreement Northwest, with a judge's permission,
imposed pay cuts last July. Courts blocked
flight attendants from striking. And flight
attendants have been working under similar
pay cuts since July, when Northwest imposed
new terms with a bankruptcy judge's permission.
After the tentative agreement was reached
April 26, the cuts capped top flight attendant
pay at about $35,400 a year, down from $44,190
before Northwest filed for bankruptcy protection.
Now that the airline has emerged bankruptcy
protection, its CEO looks forward to bringing
the carrier to prosperity. Steenland said
Northwest hopes to distribute a total of
$1.6 billion in unsecured claims and profit
sharing payments through 2010. For now,
the airline continues to fly as evidenced
by this week's feature courtesy of
Avjobs
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