Manufacturing Industry

Northwest Airlines outlines cost savings and files motion to reject labour agreements

Airline Industry Information, Oct 13, 2005

Northwest Airlines (OTC: NWACQ) has said that as part of its restructuring the airline is seeking USD2.5bn in overall savings.

According to the airline the savings are needed in order for it to return to profitability on a sustained basis. To achieve these savings Northwest is committed to realising competitive labour and non-labour costs, restructuring its balance sheet, achieving market rates for its aircraft and optimising business practices.

For the labour costs, Northwest also said that it has filed a Section 1113(c) motion with the US Bankruptcy Court for the Southern District of New York that outlines the company's financial condition, competitive environment, and proposed labour cost reductions, requesting that the court reject the existing labour agreements if the company is unsuccessful in reaching new terms with its labour groups through collective bargaining.

The court motion reportedly outlined Northwest's new targets for its labour groups, targets that have also been communicated to union leaders. Northwest said that the total labour cost savings requirement includes the USD285m in annual savings the airline realised from its pilots and salaried and management employees starting in December 2004, as well as the approximate USD200m in annual savings achieved from restructuring Northwest's maintenance organisation after the strike by Aircraft Mechanics Fraternal Association-represented employees in August.

Salaried and management employees are also expected to take a second round of pay and benefits reductions in the near future.

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