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ARCHIVES: Northwest vs. AMFA: A Battle for American Labor

(This article by Brian Allemana was originally published in the Sept./Oct. 2005 issue of Newtopia Magazine)

On August 20th, machinist and custodial workers for Northwest Airlines, members of the Airline Mechanics Fraternal Association (AMFA), walked out on strike to protest proposed cuts in pay and benefits. On September 14th, Northwest submitted their bankruptcy filing after hiring cheaper, non-unionized replacement workers. According to Northwest Airlines, the cuts are necessary for the company to stay in business. But the strikers tell a different story, one that warns of safety problems, national security concerns, and major fallout against labor unions across the nation.

Since 9/11, the airline industry has been in free-fall. Just before Northwest’s bankruptcy filing, Delta Airlines submitted their own filing, a move that is expected to allow the company to cut labor and pension costs significantly. Last May, United Airlines was allowed to drop their pension obligations to their union workers, resulting in a default of $6.6 billion, a tab partially picked up by the federal Pension Benefit Guaranty Corp. (PBGC), which insures employee pensions up to about $44,000 a year. US Airways, which has filed for bankruptcy twice since 9/11, cut $2 billion in labor costs after their first filing in March 2003. After the second filing, the company defaulted on pilot pensions worth $2.5 billion, $600 million of which was picked up by the PBGC. In fact, four of the ten largest claims in the PBGC’s history are from airline companies.

In the case of Northwest, the company’s official position is that without a $1.4 billion cut in annual labor costs (recently risen from an original estimate of $1.1 billion), the company will not survive. $176 million of that amount would be cut through a layoff of 53% of their unionized mechanics, plus a 26% pay reduction for those that remain. They blame rising fuel costs, lower ticket sales, and low-fare competition as the reasons for the cuts. Not so, say the strikers, some of whom spoke with me on the picket line in Minneapolis.

“The company wants to bust the union, that’s their only aim,” said one representative of AMFA. “When you start negotiating in good faith with your contract workers, while simultaneously planning to replace them with 1800 scabs, what does that tell you?”

Indeed, Northwest has acknowledged at least $55 million spent in preparing for the strike, and Wall Street analysts have said the strike would cost Northwest $10 million a day. “That money could have been put towards making the airline a better company and giving us a decent contract,” said Frank, a mechanic on the line. Frank’s wife Susan, standing with him, added: “They don’t need replacements, they already have good mechanics.”

Adding insult to injury, members of Northwest’s board of directors dumped massive amounts of stock in anticipation of the strike. According to disclosures filed with the Securities and Exchange Commission, Chairman of the Board Gary Wilson sold 3.1 million shares of his stock in the company since word of the strike began. Other executives, like Northwest CEO Doug Steenland, Vice Presidents Tim Griffin and Phil Haan, and others, sold shares from April 23 to May 3 worth over $1.8 million.

Northwest has a history of compensating its top executives while demanding pay cuts from its workers. In 1993, IAM union workers (now members of AMFA) accepted a decrease in pay of 15%, with the promise that their pay would be restored once the company returned to profitability. By 1996, the company was back on its feet reporting record profits, but the workers did not see a commensurate pay increase, while CEO John Dasburg received a handsome compensation package. Over the two year period spanning 2000-2002, Northwest saw revenue losses of $1.2 billion and cut 17,000 jobs. But CEO Richard Anderson and President Doug Steenland (now the company’s CEO), received bonuses totaling $450,000 and stock compensation worth nearly $2 million.

In the first quarter of 2005, the company’s labor costs went up 1.9%, while fuel costs rose 40%, a rise that figures largely in Northwest’s arguments for labor cuts. But rather than find alternate ways to offset fuel costs, Northwest continues to place the burden of rising crude on its unionized labor. Other airlines, like Southwest, have avoided problems associated with oil prices by “hedging”, the practice of locking in fuel prices over a number of years. Northwest, on the other hand, has ostensibly believed it more likely that fuel costs would drop, despite years of steady climbing. They now blame their current financial situation on a commodity cost they say is out of their control, and their union laborers are asked to make the necessary sacrifice. But even though it was an executive decision not to hedge, the executives are not the ones feeling the heat.

The problems of hiring replacement mechanics go beyond the losses that will be suffered by the unionized workers. AMFA members also point out broader issues such as national security. Because the replacement workers being hired are often times foreign-born, the ability to do thorough background checks is virtually impossible. The implication, therefore, is that a newly placed worker with access to sensitive technical data, as well as less fettered access to the internal workings of the Northwest fleet, could sabotage one or more jets. A custodial worker I spoke with made the point this way: “I’ve worked for Northwest for 15 years and they went through my background twice. But you don’t know if some of these replacement guys have a history with a group that sees this as an opportunity to look at our airplanes and maybe plan [an attack].”

There is also the issue of jet safety. Apart from intentional sabotage, there is a concern about replacement workers being less experienced than the mechanics who have been working on Northwest’s fleet for 30 plus years. According to Craig, another worker on the picket line: “The way Northwest is doing business, they jeopardize safety by farming out their quality control. One of the problems they have now is that many of the replacement workers don’t read or write the English language,” an FAA requirement for all aircraft mechanics.

Speaking further on safety, Frank told me: “Northwest management has been trying to do away with our maintenance program for years. We used to have airline after airline come through on tour to model their maintenance program after ours. But now our program is destroyed. As far as I’m concerned, the outsourcing of our maintenance is unethical, immoral, and un-American.”

When asked if they feel any support from state or federal governments, all of the strikers I spoke with were adamant in their response. They feel it’s clear the Federal Government will fully back the company before considering the workers’ situation. “If you go back in history to 9/11, a tragedy for the whole world,” said the AMFA rep, “the first thing the Federal Government said to the airline companies with the Airline Stabilization Act was not ‘build a better mousetrap, make your system work’, they said ‘bring down your labor costs’, and guess what? That’s what they’re doing.”

As for state government, Minnesota has so far denied the workers unemployment benefits. Moreover, Frank said: “I haven’t seen one of my state or federal legislators out here talking to us or supporting us. They’ve been nonexistent.”

The workers were also unanimous about their striking as a matter of principle, not money. Most said they wouldn’t return to work, even if a better deal was offered. “The money isn’t important,” said the AMFA rep, “I mean, no one wants to take a 25 percent cut in pay, but to help a company that was actually gonna continue as a viable company, we’d bite the bullet. But they made it so bitter, they never wanted to settle.” Craig echoed a similar comment, saying he couldn’t work for a company that was going out of business. A more personal comment from Frank: “Our union members that I’ve worked with for the past 25 years, I couldn’t vote yes on an agreement that would put them out on the street.”

Charles Carver, a George Washington University law professor and labor history expert, echoed a sentiment felt by all of the strikers I spoke with: “Right now organized labor is truly at a crossroads. [The Northwest strike] and the unions’ failure to organize companies like Wal-Mart and new economy workers could be the death knell for labor.”

The fear is that other companies will be more emboldened towards replacing their unionized workers with cheaper labor, now that Northwest has gotten away with it. As one AMFA rep said: “Every company in the United States will go down this same path. It’s the same as when they were able to shed their responsibility for pensions. United has dumped their huge pension obligation on the taxpayers. US Air did it, and GM’s talking about it, now Ford’s talking about it, so if it works for the airlines, why wouldn’t they all jump on board?” Frank, again speaking more direct: “If we fail, you’re going to see a major domino effect in big business all across America. They’re gonna treat their employees the way Northwest has treated us.”

Certainly the airline industry has seen turbulence from events outside its control, but these events have been used as an excuse for cutting labor, rather than a wake up call to “build a better mousetrap.” Despite a Congressional bailout of $15 billion, the beleaguered airline companies continue to cut out their unionized labor and eradicate employee benefits, while allowing their top executives to reap huge salaries and bonuses. The argument from Northwest is they need to keep executive compensation high in order to be competitive with other airlines. This is not a reasonable excuse since it implies that the average worker, which, by salary comparison, is worth less than a tenth of the company’s top executive, does not warrant fair compensation in hard times. Despite AMFA’s attempts at negotiating a deal, Northwest, like other airlines before it, has dumped its labor obligations with a shrug, clearly setting its union busting agenda in motion.

Moreover, there is nothing to stop other large companies from following the same scheme. Companies like General Motors, Borders Books and Music, and Wal-Mart have made their anti-union stance clear. What does this say about how we honor those who gave up life and liberty for the cause of giving all of us the chance at a fair living? Are we headed straight back to the days of expendable labor, contracted to anyone willing to risk everything and demand nothing? These indications are unfavorable towards a future of a robust American job market, and unless we are all willing to stand with those on the picket line, we are turning a blind eye to a trend that may consume millions who work for a living.

Article written by Brian Allemana



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