Will Unions & Management Team Up to Preserve Northwest Airlines?

Northwest Airlines, along with the rest of the airline industry, and its employees are facing a particularly difficult economic climate. The impact of a slow economy on the company is being compounded by high fuel costs and a public that, due to terrorist attacks and the Iraq war, is jittery about air travel.

The time has come for the management of Northwest and the unions that represent its employees to work together. If they cannot, the largest carrier at Detroit Metropolitan Airport faces drastic reductions in flights and staff, and may even be forced into bankruptcy.

Surprisingly, compared to other carriers, Northwest is in relatively good shape. Northwest reports that its planes flew at 74 percent of passenger capacity, the best among major domestic airlines. Nonetheless, in the final quarter of 2002 Northwest Airlines lost $178 million. No company in any industry can afford to lose money at that rate for long. Already, two of Northwest’s competitors, United and USAir, have entered bankruptcy. Neither workers nor unions benefit when employers fail.

In bankruptcy, workers and management are both likely to lose as the company is restructured for the benefit of its creditors. For workers, this process can and does include restructuring collective bargaining agreements. Pilots at USAir have already had their pension plan restructured as part of the airline’s bankruptcy plan, and even more drastic actions are possible if other airlines file for bankruptcy.

Unions have even more at stake. Union membership overall dropped by 280,000 in 2002; it dropped by over 60,000 in Michigan alone. Most of this membership loss can be attributed to lower employment in unionized firms and industries.

Whether earned or not, unions have a reputation for making businesses less competitive. A recent report released by financial services company Morgan Stanley advised investors to avoid “businesses with high fixed costs, pension funding issues and spiraling post-retirement health-care obligations...found prominently in industries with outsized union representation.” The prospect that unionization may put employers out of business weighs heavily when non-unionized workers vote on union representation.

Unions representing Northwest’s workers have an opportunity to improve the their public image by making a positive contribution to the health of the company. This does not necessarily mean rolling over to the demands of management, but it does mean presenting constructive alternatives that will reduce costs. In particular, the unions should consider revising or abolishing wasteful work rules to save expenses, in lieu of wage or benefit reductions.

And while union officials should avoid “us versus them” rhetoric, they should not hesitate to point out unnecessary expenses created by management. Northwest management, for its part, should be prepared to consider union proposals with an open mind. Both parties must recognize that in this economy they sink or swim together.

This is not a good time for either unions or management to pick fights with each other. But that does not mean that the union does not have a responsibility to protect the interests of its members who are forced to pay dues. What is needed most is creativity; union officials can assure that workers’ ideas are heard: ideas on increasing efficiency, reducing unnecessary costs, and assuring the survival of the airline.

If Northwest can ride out the current storm and avoid bankruptcy, the airline and its employees can position themselves to prosper. And in the process, unions could demonstrate the ability to protect workers in both good times and bad.

Paul Kersey is labor research associate for the Mackinac Center for Public Policy, a Midland-based research and educational institute.