Markets & Finance

Adding Insult to Injury at Northwest


Northwest Airlines just won a cut in take-home pay of as much as 40% from the last of its labor groups as the carrier restructures through bankruptcy proceedings. Management has followed up by advising these newly strapped employees on how to make ends meet. Among the company's tips: dumpster-diving.

In a memo titled "Preparing for a Financial Setback," Northwest (NWACQ) offered 101 ways to save money. No. 46 reads: "Don't be shy about pulling something you like out of the trash." Other budget-stretchers include taking in boarders, air-drying clothes, asking for hand-me-downs from family and friends, changing your car's oil yourself, using old newspapers for cat litter, and donating time instead of money to religious groups or charities.

Of all of Northwest's unionized workers, its 9,200 flight attendants may be in the tightest spot. On July 31, their annual pay dropped to a range of $16,000 for starting workers to $43,000 for the most senior, when a bankruptcy judge ordered them to accept the airline's contract terms. Camilla Wolkerstorfer, interim president of the Northwest Council of the Association of Flight Attendants, calls the memo "insulting and outrageous." She says flight attendants are so squeezed that some are taking second jobs and working seven days a week to pay their bills. "I just don't get that mentality," she says of the airline's management.

INTERNET CIRCULATION. Northwest says the tip sheet came from a vendor and was part of a 165-page book Coping with Job Loss sent to a small group of ground-operations employees without management review. As soon as employees began complaining, the pages were removed from the packet, the airline says, though not before employees began forwarding copies over the Internet.

The vendor, NEAS, an employee-assistance provider based in Waukesha, Wis., says that it, in turn, got the material from another outfit called Balance, a personal-finance adviser in San Francisco. NEAS had previously distributed the full list to other corporate clients without a squawk, says Carrie Reuter, manager of business development for NEAS. Nonetheless, NEAS joined Northwest in apologizing for suggestions that were inappropriate and maybe "offensive."

The trash-picking tempest comes at a particularly sensitive time for the money-losing airline and its flight attendants (see BusinessWeek.com 6/19/06, "Satisfaction Not Guaranteed"). Northwest, which filed Chapter 11 last October, has forced employees to swallow deep pay cuts and mass layoffs to chop $1.4 billion from its annual personnel budget. But while other unionized groups begrudgingly agreed to giveback contracts, the flight attendants twice rejected the company's new deal.

Now, they may strike. On Aug. 17, a judge refused to issue a temporary injunction that would have blocked flight attendants from walking off the job. While the airline says it will appeal the ruling, the union says employees could stage targeted strikes as soon as Aug. 25.


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