Strike Threat in the Air at Northwest

Mechanics ask a government mediation board for leave to end labor talks.
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Updated from 11:23 a.m. EDT

Now it's the mechanics' turn to get frustrated.

The Aircraft Mechanics Fraternal Association, which represents mechanics and plane cleaners at

Northwest Airlines

(NWAC)

, says it asked the National Mediation Board to release it from talks with the airline. If NMB honors the request, it could set in motion a process leading to a strike.

In a news release, the union says it's "frustrated by the airline's refusal to take contracts talks seriously." AMFA says Northwest won't budge from its original proposal, which the union says aims to save $176 million a year through extensive layoffs, plus pay reductions of 25% to 26%.

The AMFA request comes seven weeks after the airline asked the NMB to release both sides from mediation. The NMB rejected the request after the union disputed the airline's claim that talks had hit an impasse.

Now, however, AMFA says the airline is stonewalling by dismissing a recent union proposal that included a 16.1% pay cut.

"The truth is that Northwest's biggest problems today are the high cost of fuel and underfunded pensions, not labor," said O.V. Delle-Femine, national director of AMFA. "Management is trying to exploit this economic situation to bust our union."

In a statement, Northwest said it wants to work with AMFA on an agreement that provides wage and benefit levels that are fair to employees and will allow the airline to be competitive.

But a failure to achieve $176 million in savings from the union will leave Northwest "at risk," the statement said. The union's latest offer saves only $87 million on a temporary basis and allows wage rates to "snap back" to 2005 levels in 2007, regardless of market conditions, according to Northwest.

The airline has been seeking an additional $800 million in annual concessions from employees, saying its labor costs are uncompetitive with those of other major airlines. Although Northwest has a substantial cash cushion, Wall Street analysts say it could face liquidity problems if it can't lower labor costs.

Another big challenge for the airline comes from its underfunded pension plans. Northwest has warned that it may seek bankruptcy protection if Congress doesn't pass pension reform legislation giving airlines more time to meet pension shortfalls.

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, a 30-day "cooling-off" period begins, at the end of which workers can strike and management can hire replacements.

Last week, AMFA's national leadership authorized a strike vote. The union's members at Northwest have until July 19 to cast ballots. Approval would allow the national leaders to call a strike any time after the end of the cooling-off period.

Northwest shares were trading down 18 cents, or 4.3%, at $4.01. Earlier in Wednesday's session, they set a new 52-week low of $3.77.