Northwest Airlines' bankruptcy filing means workers will face another huge round of job, wage and benefit cuts, union officials say.

"This is not going to be good," said Bobby DePace, president of Machinists Air Transport District 143, which represents about 14,500 baggage handlers, ticket agents, reservations clerks and other workers at Northwest. "Basically, bankruptcy court is to take care of the company, not the employees."

"It's definitely bad," said Will Holman, spokesman for the Air Line Pilots Association?s Master Executive Council at Northwest. "The pilots have been working very hard to avoid it for the last 2-1/2 years, and we have made significant sacrifices trying to avoid it for a reason: You lose control."

The bankruptcy filing opens the door to portions of union contracts being gutted or suspended. It also increases the likelihood that Northwest will get away with not having to pay back what it still owes workers from concessions they granted in the 1990s.

Bankruptcy judge can void contracts
Although workers are likely to bear the brunt of Northwest's bankruptcy reorganization, "Labor did not cause Northwest's financial problems," Holman said. "It was not the problem.

"High fuel costs, over capacity, pension rules ? those are reasons we are where we are," Holman said. "Unfortunately, a few years ago, management decided not hedge fuel costs, as Southwest did. Unfortunately management decided not to pass higher fuel costs along to customers. If their business plan included hedging fuel costs, we wouldn't be in this situation."

The primary purpose of a Chapter 11 bankruptcy is to give a company like Northwest time to reorganize its finances and business plan without the risk of creditors seeking to liquidate its assets. Northwest filed bankruptcy in New York on Sept. 14, after losing $3 billion in the last four years.

Bankruptcy laws make it easier for companies to cuts costs by making it possible for a judge to impose "short-term relief" from union contracts if such relief is "essential" to the survival of the company, Holman said.

Similarly, the bankruptcy judge can order concessionary negotiations, with the judge determining the framework for negotiations, he said.

"It's not open-ended negotiations," DePace points out. "The company's going to come to us and say 'We need this.' If we don't give it to them, they'll just go to the bankruptcy judge to get it."

Pension plan in jeopardy
The pilots and other unions also fear that Northwest could use the tactic United Airlines used in bankruptcy: Throwing out its pension plan in order to save money. Northwest executives say publicly they don't want to abandon the pension plan. Instead, they want Congress to pass legislation that allows them to freeze pension payments at current levels and give the airline more time ? as long 20 years ? to make required payments to the plan, which is underfunded by an estimated $3.8 billion.

DePace and Holman say they're willing to support that approach, which is being pushed in Washington by Sen. Mark Dayton and others. "Freezing the pension plan, that's better than termination," DePace said.

But issues of fairness and comparative compensation have little influence in bankruptcy proceedings, DePace said. Because the Machinists' contract at Northwest has been under negotiation for three years, Machinists members have not had general pay and pension increases since August 2002. Their wages and pensions are lower than comparable workers at United ? even after United has slashed its labor costs as part of its bankruptcy reorganization plan.

That matters little to the bankruptcy judge, DePace said. "We want to argue our relative position," he said, "but the judge is just going to do what he has to do to protect Northwest.

"The people who have the real control are the creditors," he said. "The creditors can say, 'Screw them.' The creditors can say 'That's baloney. Before you give them money, give us money.'"

Stock payments long overdue
Northwest still owes Machinists, mechanics and flight attendants hundreds of millions of dollars in stock payments from concessions the workers granted in 1993. Some workers stand to collect as much as $40,000.

With interest payments figured in, Northwest owes the workers about $56 a share, DePace said. In contrast, Northwest stock now is trading for less than $1 a share.

Northwest was supposed to pay off the stock no later than August 2003, but didn't. It claims that under Delaware law, where the company is incorporated, it isn't allowed to make the cash payments because of its financial difficulties.

A New York Supreme Court judge rejected the airline's argument in March, but Northwest has appealed that ruling.

Now, with the airline in bankruptcy court, it's unclear whether workers will ever see that money, DePace said.

Adapted from The Union Advocate, the official newspaper of the St. Paul Trades and Labor Assembly. E-mail The Advocate at: advocate@stpaulunions.org