( NWACQ) has formally asked the court overseeing its Chapter 11 bankruptcy to terminate its union contracts.
The nation's No. 4 carrier, which sought bankruptcy protection on Sept. 14, reiterated its insistence on reducing its labor costs, which are at or near the top of the industry. Northwest is seeking to end the contracts if the unions don't agree to the airline's proposals aimed at saving $1.4 billion a year.
"Time has run now run out," the airline said in a motion filed Wednesday in U.S. Bankruptcy Court in Manhattan. "Northwest must achieve competitive labor costs quickly, or it too faces the prospect of failure."
Northwest's move was expected. The airline already had informed the International Association of Machinists and Aerospace Workers, which represents its ground workers, that it would seek to terminate IAM's contract if the union didn't agree to concessions.
Northwest is making its motion under a section of the Bankruptcy Code that rivals such as
have already used to extract big labor savings.
If the court agrees to Northwest's request, the airline would be able to impose new terms on its unions.
Northwest also wants to freeze its defined-benefit pension plans, preserving benefits workers have already earned but stopping their accrual in the future. Northwest would move workers into 401(k)-type plans. The airline estimates that its defined-benefit plans are underfunded by $3.8 billion.
In Wednesday's motion, Northwest said it hoped that pension reform legislation being debated in Congress would provide sufficient time for it to meet its existing pension obligations.
But if legislation provides insufficient relief, or Northwest suffers other adverse "economic circumstances" elsewhere, it may ask the court to terminate its defined benefit pensions plans.
That would shift billions of dollars in obligations to the federal government's pension insurer, which already has taken over multibillion-dollar pension plans from U.S. Airways and United Airlines and currently operates with a deficit of more than $23 billion.
Northwest shares finished Wednesday up 2 cents at 62 cents.