Flight attendants, union leaders and management from Northwest Airlines recently approved a new contract labor agreement.  Under the new deal, the airline’s flight attendants will receive a $182 million secured claim, which will be sold for cash and distributed now that the company has left bankruptcy protection. Northwest ended its 19-month bankruptcy on May 31 with $2.5 billion in annual cost savings and an equity value of about $7.8 billion. Its departure from Chapter 11 status marks the first time in five years that a major U.S. airline has not been in bankruptcy status.

The labor agreement between the flight attendants’ union and Northwest management also includes additional contract modifications designed to improve the flight attendants' work environment, causing speculation by some industry analysts that the move was brought on to dampen tempers from some worker groups. During the negotiations, many employees were publicly outraged by the airline's $1.4 billion in labor cost savings made to facilitate its restructuring. Flight attendants, in particular, publicly bashed Northwest's use of its court permission to void their contract and impose wage and benefit cuts. Labor tensions quickly worsened in May when the company revealed a management compensation plan that awards Chief Executive Doug Steenland stock and options potentially worth more than $20 million vested over four years. Northwest also disclosed that its top 400 managers now own about 5 percent of the company after bankruptcy.

A Contentious History
Northwest’s 8,100 flight attendants had voted down two earlier pay cut agreements negotiated by their unions. In fact, the current deal narrowly passed through the union vote. Of the flight attendants who voted, 51 percent voted for the deal and 49 percent voted against the contract, which would maintain wage cuts the airline imposed last year.

By the way, this is the third contract that Northwest’s 8,000 flight attendants have voted on in the last year and a half. In July, Northwest with approval from a bankruptcy judge, imposed $195 million in concessions on its flight attendants after they voted down two contract proposals. In contrast, employees will each benefit from an estimated $15,000 payout in their hands in exchange for their concessions. By approving the new contract, flight attendants will split up a $182 million claim in Northwest’s bankruptcy reorganization. The union concedes this opportunity would not be available after Northwest’s emergence from bankruptcy protection.

On the other hand, Northwest has now locked all its unions into lower pay and more company-friendly work rules through the end of 2011. This will undoubtedly provide the airline’s management some breathing room as they plan the carrier’s life after bankruptcy.

Northwest began seeking worker pay cuts in 2003, and the process continued after it filed for bankruptcy protection on Sept. 14, 2005. Bankruptcy laws allow companies to reject union contracts, giving managers a lot of leverage in negotiations. After flight attendants rejected a second negotiated agreement Northwest, with a judge’s permission, imposed pay cuts last July. Courts blocked flight attendants from striking. And flight attendants have been working under similar pay cuts since July, when Northwest imposed new terms with a bankruptcy judge’s permission. After the tentative agreement was reached April 26, the cuts capped top flight attendant pay at about $35,400 a year, down from $44,190 before Northwest filed for bankruptcy protection.

Now that the airline has emerged bankruptcy protection, its CEO looks forward to bringing the carrier to prosperity. Steenland said Northwest hopes to distribute a total of $1.6 billion in unsecured claims and profit sharing payments through 2010. For now, the airline continues to fly as evidenced by this week’s video feature courtesy of Airside TV