Eye of the Perfect Storm

Categories: Business

Reading Tea Leaves on Northwest's Bankruptcy Reorganization

Labor Kremlinology at the Minneapolis-St Paul International Airport has long suggested that Northwest Airlines intends to emerge from the sheltering arms of bankruptcy court a very, very different company. Meaner, leaner, and possibly able to compete in the global marketplace, sure, but also the employer of far fewer Minnesotans--and, excluding a handful of lavishly compensated execs, possibly no one who can afford to buy a plane ticket ever again.

This week spokesfolk for both the company and its unions testified in New York before U.S. Bankruptcy Judge Allan Gropper on the subject of what terms the judge ought to impose on Northwest's workers. The company line: Without some $1.4 billion a year in concessions from workers, the carrier can't turn a profit. Labor's counter-argument: The concessions are exorbitant, especially given that it appears increasingly likely that post Chapter 11, the carrier won't employ most of them.

Indeed the scenario long kicked around by anxious employees is looking increasingly realistic: Northwest wants to created a stand-alone regional carrier, dubbed NewCo. for now, which will use 70- 100-seat jets to serve mid-sized markets. Remnants of the old legacy carrier, Northwest itself, will concentrate on international routes. And that, if this week's court hearings are any indication, is justification enough in the company's eyes for accelerating the use of foreign-based, nonunion employees. Displaced locals will be eligible for jobs with NewCo, but those will pay a fraction of similar posts at Northwest.

If the above-linked Strib story leaves you wanting more than a sketch of yesterday's testimony, it's well worth checking out is Associated Press writer Joshua Freed's outline of the proposal, which includes some interesting analysis of how poorly the same concept has served other bankrupt airlines.


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