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Posted on: Saturday, November 6, 2004

Northwest pilots approve 2-year 15% pay cut

Associated Press

MINNEAPOLIS — Northwest Airlines pilots overwhelmingly approved a new contract yesterday that gives them a 15 percent annual pay cut for the next two years and allows the company's regional affiliates to carry more passengers.

Northwest Airlines' deal with its pilots allows more seats on planes flown on regional routes. Shown is Northwest's A330-300 twin-engine jet, which began service last year. Pilots also will take pay cuts.

Associated Press library photo

The agreement would let Northwest Airlines Corp. increase revenue by adding new regional jets and increase the number of seats in existing small jets.

Of the 4,129 pilots who voted, 89 percent favored the agreement and 11 percent were opposed, the pilots' union announced.

The concessions are part of an agreement between Northwest and the Air Line Pilots Association to generate $265 million in savings as the struggling company attempts to slash its labor costs by $950 million a year amid higher fuel costs and tougher competition.

The airline has lost $2.1 billion on operations since the beginning of 2001.

Officials at other unions at Northwest said they still plan to resist concessions, despite the pilots' agreement.

Northwest said it was pleased that pilots ratified the deal. "The long-term outlook for Northwest Airlines remains strong, assuming we are able to achieve competitive labor cost agreements," it said.

The pilots' new contract won't take effect until after Northwest renegotiates a $975 million credit agreement that expires in October 2005. Failure to refinance the debt could have consequences for other credit agreements and for the company's continued financial viability.

"None of us are under the illusion that this agreement will permanently solve all of NWA's financial problems; it will not," Mark McClain, the chairman of the union's Northwest Master Executive Council, wrote in a letter to pilots. "However, it can help reduce the immediate and significant threats to NWA pilots' jobs and retirements."

Besides the 15-percent pay cut, pilots would have to pay a 20 percent premium share for medical and dental insurance, a first for Northwest pilots.

As part of the agreement, Northwest executives would accept the same 15 percent salary cuts as pilots. New Northwest CEO Doug Steenland's base salary of $675,000 would be reduced to $573,750 a year, and his annual performance pay would take a hit as well.

The agreement includes the right for Northwest to convert the 44-seat regional jets flown by Northwest Airlink partner Pinnacle Airlines to 50-seat planes and the right to add additional 50-seat jets.

In other airline news, Delta Air Lines Inc. released new details yesterday on the thousands of jobs it plans to eliminate starting Jan. 1.

The airline will cut between 1,500 to 1,800 administrative employees; 1,600 to 2,000 technical operations employees and 2,900 to 3,100 customer service employees, according to spokesman Anthony Black.

The cuts will begin Jan. 1 and will be carried out over an 18-month period. Employees in Dallas and Atlanta will be the most affected by the cuts, Black said.

The details were announced internally to employees earlier this week. The airline is asking employees to voluntarily retire or accept severance packages. Other employees may lose their jobs, Black said.

The airline union's 7,000 pilots are voting whether to accept a proposed agreement, reached by union leaders last week, that will cut their salaries by a third in a $1 billion wage concession effort to keep Delta out of bankruptcy. The voting will end at noon Thursday.

In Chicago, meanwhile, United Airlines said yesterday it is moving to obtain another $725 million in labor concessions and eliminate employees' traditional pensions as it seeks the financing to come out of bankruptcy.

The nation's second-largest airline has been threatening to terminate its pensions since August, and last month it said it would need to cut costs significantly more than anticipated because of the industry's deteriorating financial outlook.