With strike on, Northwest eyes bottom line
The first walkout at a major airline since 1998 comes as Northwest nears the possibility of bankruptcy.
As passengers start checking their bags on Northwest flights Monday, they will part of the first real test of both the striking mechanics' power and management's resolve.
Monday is the first day the airline will be flying a full schedule since Northwest's mechanics and maintenance workers walked off the job early Saturday morning. The weekend saw only a handful of disruptions, in part because management had more than 1,300 replacement workers ready to step in, but also because the weekend schedule is lighter than weekdays.
Analysts say that Monday will give the first indication of whether the strike has the potential to disrupt flight operations enough to force Northwest's management to reconsider its final offer. It could also show whether the combination of replacement workers and excess capacity in independent maintenance operations will undermine the strike completely, allowing the airline to run pretty much as usual.
This is the first strike at a major airline since 1998, when Northwest's pilots walked off the job for 20 days. It comes at a time when the so-called legacy carriers are in the worst financial shape in commercial aviation's history of more than 80 years. The majors are coping with unprecedented losses: Both United and US Airways are in bankruptcy, and analysts expect Delta and Northwest may follow soon.
They're all dogged by the same dilemma: the need to cut costs significantly enough to compete with low-cost carriers like Southwest and JetBlue, at the same time that jet-fuel prices are soaring. Northwest says it needs another $1.1 billion in cost savings in order to avoid a bankruptcy filing, and management is determined to get that from its own workers or, if necessary, new ones.
"Northwest management believes that a replacement operation is actually more economically advantageous than the settlement they proposed," says aviation analyst Robert Mann of R.W. Mann & Co. of Port Washington, N.Y. "So if they're able to generate superior economics and run a reliable operation with replacement workers, there's literally no reason to bargain."
On the other hand, if the delays begin to pile up, flights are canceled, and passenger frustration becomes widespread, then Northwest will have to consider its other options. Mr. Mann believes that chief among them is bankruptcy, rather than giving in to the union's demands. Northwest has been "very consistent" about drawing the line on how much they're willing to spend on a maintenance operation.
This is why many analysts believe that Northwest's 4,400 mechanics and maintenance workers are between a rock and a hard place. Northwest is asking for cost savings of $176 million from the mechanics. The airline is proposing to reach that number by laying off half of them and cutting the salaries of those remaining by 25 percent.
The draconian nature of the cuts has inspired sympathy for the mechanics among many airline workers, who have watched their once-generous pay and benefits disappear as the industry undergoes a postderegulation transformation.
But that sympathy is also tempered by the aviation industry's new economic reality. Northwest's flight attendants, pilots, and other workers are crossing the picket line, and laid-off mechanics from other airlines are lining up to take their jobs.
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