Northwest Airlines Reevaluates Cost Cuts

    March 29, 2005

Northwest Airlines announced in January that it was reevaluating its annual labor cost-savings target of $950 million.

This was in light of record high fuel costs, revenue negative domestic fare restructuring initiatives undertaken by various airlines and labor cost reductions at its primary competitors including United Airlines.

After a careful review of these competitive issues, the airline has decided to adjust its annual labor cost-savings goal from $950 million to $1.1 billion.

In addition, the carrier will be asking its unions to agree to a freeze of the current defined benefit pension programs. Northwest has proposed a new defined contribution pension program to replace the current defined benefit plan.

The new $1.1 billion target includes $300 million in annual labor savings from Northwest pilots and salaried and management employees that went into effect in December 2004.

Airline officials are meeting with union representatives to discuss the new labor cost-savings and pension proposals with a goal of reaching agreements with all contract groups as soon as possible.

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