Northwest's New Subsidiary: Compass Airlines

In June, Northwest Airlines (which, by the way, lost almost $500 million in February) wants to start its new way to screw pilots over- whoops, start a new subsidiary airline called Compass Airlines. Compass will fly from Northwest's three hubs in Minneapolis, Detroit and Memphis. The first flight, in June, will be the Minneapolis-Washington Dulles route.

Compass is part of what I see as Northwest's big plan to a) cut costs, b) retire those Flying Fossils that are the DC-9s, and c) rely less on the 'express airlines' like Mesaba and Pinnacle. The pay scale for Pinnacle will be lower than Northwest's, so the airline saves money there because the pilots get paid less. Northwest is eager to get rid of those DC-9s, which average 30 years or older. And the airline has had a rocky relationship with some of its express airlines that fly under the Northwest Airlink name recently.

Although Compass will share corporate headquarters space with its parent in Eagan, Minnesota, the AP reports that flight operations will be headed out of Dulles. Not coincidently, that's where defunct Independence Air has its hub. On March 10 I wrote that Northwest bough Indy Air's certificate, which they put to good use here. At the beginning Compass will fly a single fifty-seater Bombardier CRJ-200, the type Indy Air used to fly. And Compass will hire a bunch of ex-Indy Air employees, like the director of safety, operations, and maintenance. (The CEO of Compass will be Northwest's current CFO.) Of course, all this is still up to the Department of Transportation to allow, and that takes time. But with Compass basically taking bits and pieces out of the carcass of Independence Air, they'll be able to shave off some time and get those planes in the air.

Speaking of planes, Northwest hasn't decided what type Compass will operate in the future. Northwest had to wrangle with the unions over the number of seats on planes that Compass could fly. Originally NWA wanted Compass to fly 100-seaters, but the union didn't buy that, so they dropped it down to 76-seaters and the union gave the green light. Understandably, some junior pilots over at Northwest were concerned that Compass would replace their jobs. Laid-off Northwest pilots and flight attendants get first priority for jobs at Compass. How benevolent.

But the airline has said it will fly either Bombardier's CRJ-900 model or the Embraer 175. Compass plans to have 36 planes by the end of 2010. The brass over at NWA are hoping that their new airline-within-an-airline will pay off. With Northwest losing what it called a 'staggering' $2.6 billion dollars in 2005, they're hoping that Compass will point the airline in the right direction.