Employee Pay Cuts and Executive Perks: Most at NWA Caught in Between

These days, morale is the word of choice for many employees at Northwest Airlines. But they’re not talking about it in positive terms.

The Eagan-based carrier emerged last week from Chapter 11 bankruptcy after almost two tumultuous years. Employees say that hardly meant anything for their bottom line.

On May 29 the union that represents flight attendants narrowly approved additional concessions that will save Northwest about $195 million annually over the next five years. Days later, the company awarded $300 million in stocks and other options to its top 400 executives, touching a nerve among frustrated employees.

“It’s a travesty,” said William Wilcox, vice president of Local Council 95, a union group that’s part of the Association of Flight Attendants (AFA). “It’s a clear example of how NWA executives have abused the bankruptcy ruling.”

In a statement, the company said executive compensation, while conservative compared to rivals, is necessary to retain talented management.

“Retention of [our] top 400 leaders is critical to … achieve [our] business plan over the next five years and compete with other large corporations for top-tier talent,” the statement read. 

But Wade Blaufuss, communications director for the Northwest chapter of Air Line Pilots Association (ALPA), asks, “How talented are the executives who put their company in bankruptcy?”

He added: “Employees are the real talent that glues NWA together. If you pay them 60 percent of what they used to get paid, you can’t expect them to perform 100 percent.”

Reeling from the effects of Sept. 11 and rising fuel prices, a number of major U.S. carriers retreated to bankruptcy protection. With more than 31,000 employees worldwide, Northwest Airlines scrambled to find ways to cut costs.

It turned to its employees for a series of cost-cutting measures, including pay cuts and pension freezes. Blaufuss says the carrier also demoted some pilots in rank, further slashing their pay.

That forced veteran pilots and flight attendants to seek jobs overseas or to retool for different careers, Blaufuss and others said.

“Such brain-drain has a direct impact in the safety and the customer service operations of NWA,” said Blaufuss, himself a pilot.

Other employees echoed a concern over what they described as a safety-sensitive industry. Pilots and flight attendants who are losing homes and cars as a result of steep pay cuts don’t have the morale to do their jobs well, said Wilcox, the AFA official.

“The underlying issue here is morale,” he said. “And it’s severely undermined.”

Even after new contract terms were signed 10 days ago, dispute over work-and-pay issues seem to linger. AFA filed two grievances against Northwest just in the last week, and at least one more grievance is likely, according to Wilcox.

One of the complaints is about a provision in the contract regarding minimum flight hours per month. AFA says it is 70, but Northwest contends it’s 75. More flight hours would mean more days away from home—something flight attendants don’t like.

Depending on who you talk to, Northwest’s future is either risky or rewarding.