Northwest cuts 2,500 jobs

NWA jets
Northwest airliners sit on the tarmac at Minneapolis-St. Paul International airport.
MPR Photo/Tom Weber

The job cuts will take out about 8 percent of the airline's nearly 31,000 employees. Northwest says the cuts will be split between management and front-line jobs.

But the airline isn't providing much detail beyond that. It won't say how the cuts will distributed among pilots, flight attendants and other work groups. Nor will Northwest say where the cuts will come geographically.

Northwest spokeswoman Tammy Lee says the workforce reduction reflects the airline's previously announced plan to cut its flight schedule by roughly 9 percent later this year.

Northwest CEO Doug Steenland
Doug Steenland, president and CEO of Northwest Airlines, says the airline's decision to lay off 2,500 employees is directly related to the high cost of fuel.
Chris Hondros/Getty Images

"As a result of flying a smaller network with fewer flights, we need fewer employees," Lee said.

One industry analyst estimates the job cuts could save Northwest about $100 million a year, excluding upfront costs such as severance pay and buyout programs.

Northwest blames its flight and workforce reductions on rising oil prices. Lee says the airline's fuel costs have more than doubled in the past year.

"This is all driven by fuel," Lee said. "Every airline in the business is making these difficult cuts to both employees and capacity. So, we're not alone in this."

Northwest says it will try to jettison as many jobs as possible by using buyout programs, voluntary leaves, work rule modifications and attrition. The airline says it'll resort to layoffs only if it can't reach its job cut target through voluntary means.

Kevin Griffin, head of the flight attendants union, says his members haven't been told much about how the job cuts will affect them.

"This is all driven by fuel. Every airline in the business is making these difficult cuts to both employees and capacity."

"A leave program is being offered right now, which gives the employees a voluntary furlough with benefits and accrued seniority, for up to nine months. But we really don't have any details as far as the number, the locations and wherever they will be reducing the workforce, as far as flight attendants go," said Griffin.

The job cuts come as Northwest officials prepare to combine the airline with Delta Air Lines. Mergers often lead to large scale job cuts. But the two airlines had promised no frontline employees would lose their jobs as a result of the merger.

Griffin says high oil prices may provide cover for a merger-related staff cut.

"I think they're changing the blame from the merger to oil," said Griffin.

Northwest officials insist the cuts are the result of fuel costs which have more than doubled in the past year.

If history is a guide, flight attendants and ground employees, such as baggage handlers and ticketing agents, will bear the brunt of job cuts. That's the view of airline analyst William Swelbar of MIT.

But Sewlbar says it's anyone's guess if the cuts will be enough to allow Northwest to fly at a profit, with oil recently topping $140 a barrel.

So far, he says Northwest and its peers have been trying to cut service and staff judiciously, trying to avoid a truly radical shrinking of their businesses. Swelbar says it's a matter of dumping unprofitable flying.

"This just says very clearly that Northwest and other carriers in the industry recognize that --at these high prices of oil-- there is somewhere between 8 and 12 percent of their respective operations that are not profitable, nor do they offer any hope of being profitable," said Swelbar.

Swelbar says that's critical to keeping an airline from burning through its cash these days.

"You're talking about substantial payroll savings. But the real savings are going to come in not paying for fuel, the ability to put aircraft down," said Swelbar. "There are many things at work here. But more than that, it's just simply the preservation of cash in the short term. That's precious."

Northwest also said it would begin charging $15 for the first checked bag, matching a fee announced earlier this year by US Airways, American Airlines, and United Airlines.

Northwest's new fee applies to tickets sold after Thursday for travel starting Aug. 28 in the U.S. or to Canada.

Northwest also announced a fee for issuing frequent-flier tickets beginning Sept. 15. It said it will charge $25 for domestic tickets, $50 for trans-Atlantic tickets and $100 for trans-Pacific tickets.

The company says it may review the frequent flyer ticket fees if fuel costs drop.

The airline expects those moves could earn it up to $300 million a year.

At Delta Air Lines Inc., which is buying Northwest, a spokeswoman said record high fuel costs are causing the Atlanta-based carrier to look at everything.

"However, we have made no changes to the service we offer to customers for a complimentary first checked bag," spokeswoman Betsy Talton said.

Last month Delta announced a surcharge for redeeming frequent flier tickets $25 for tickets in the U.S. and Canada and $50 for international.

American Airlines was the first major U.S. carrier to announce a fee on first checked bags. Spokesman Tim Smith said Northwest's moves "clearly show they are facing the same extreme challenges all airlines are dealing with these days."

Executives of American parent AMR Corp. said last week they expect to cut 8 percent of the work force, or about 6,800 jobs.

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