Northwest Airlines


and its mechanics are getting closer to a potential strike, as both sides refuse to blink in a showdown over wages and benefits.

The Airline Mechanics Fraternal Association said Tuesday that 92.4% of its Northwest members have voted in favor of allowing the union's national leader to call a strike.

The vote comes a day after Northwest rejected the National Mediation Board's offer for both sides to submit to binding arbitration. The airline's decision is likely to prompt the NMB to start a 30-day "cooling-off" period, after which mechanics can legally walk off the job and the airline can put replacements to work.

When asked Tuesday morning whether the NMB had declared a cooling-off period, a spokeswoman for the federal board said, "At this point, I have no comment."

The Railway Labor Act, which governs airline labor relations, prevents sudden strikes and lockouts. If the NMB agrees with one side's request that talks are at an impasse, it then offers binding arbitration. If either side declines, however, the board can then invoke the 30-day strike countdown.

On July 5, AMFA asked for talks to be declared at an impasse. The airline didn't object to that request, but disputed the union's claims about the viability of its proposals.

On Tuesday afternoon, Northwest shares were down 7 cents, or 1.5%, to $4.60, even as many other airline stocks were gaining ground.

Analysts have cautioned that news about strike developments will buffet the stock. But some say investors shouldn't worry about a strike crippling Northwest's operations.

"Northwest has contingency plans prepared for a strike," writes Helane Becker, airline analyst at the Benchmark Co., a New York-based brokerage that does no business with companies it covers. "In addition, we do not expect either pilots or flight attendants to honor a strike. As a result, we are reasonably confident that Northwest will be able to fly through a strike, if one were to occur."

In recent years, workers at other airlines have had to accept steep concessions, sometimes under the threat of bankruptcy, and sometimes after their airlines filed for Chapter 11. Employees, including some at Northwest, have complained they've been asked to make large sacrifices even as airline executives remain highly compensated.

Given industry trends, however, Northwest mechanics may think twice before actually going on strike, according to Becker. "As mechanic jobs within the industry have been declining for the past four years as more airlines have outsourced maintenance, we do not think the appetite for striking is likely to be that high at the airline," she writes.

Northwest has set an overall annual labor savings target of $1.1 billion, saying its labor costs are uncompetitive with other major airlines at a time of high fuel costs and tough industry fare competition. Having achieved only $300 million of that, Northwest says it still needs $800 million in concessions from groups including its mechanics.

Although Northwest has a substantial cash cushion, Wall Street analysts say it could face liquidity problems if it can't lower labor costs and persuade Congress to give network carriers more time to meet their traditional pension obligations.

Northwest says the mechanics' share of the labor-savings target amounts to $176 million, and AMFA says the airline has asked it for pay reductions of about 25% to achieve that goal.

The union has countered with an offer for 16.1% pay cuts, saying this would save the airline more than $140 million a year and be sufficient for Northwest to hit its $1.1 billion goal. Northwest disputes that assessment, and says AMFA's proposal would save only about $87 million annually.

In a letter to the NMB rejecting the offer of binding arbitration, Julie Hagen Showers, Northwest's vice president of labor relations, said the union must provide $176 million of savings. "Any process which may result in achieving less than the required savings leaves the airline at risk."

The executive added that the company "is committed" to reaching a consensual agreement with AMFA on a new contract. "We believe a deadline will facilitate the process and help the parties reach an agreement."

The union says Northwest's refusal to budge from its proposal leaves it "little choice" but to prepare for a strike.

Northwest plans to report second-quarter results next Tuesday, and analysts on average expect the carrier to lose $3.29 a share.

Other airlines report this week, with

American Airlines'





Continental Airlines

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scheduled for Wednesday.

They will be followed Thursday by

Alaska Air

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America West



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JetBlue Airways

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