Things just seem to be getting worse for Northwest Airlines.
The carrier exited Chapter 11 bankruptcy last month, and that's about where the good news ends. It announced a few weeks ago that it expected 2nd quarter mainline domestic revenue per available seat mile to go down by 2 to 3 percent. Last Tuesday, the J.D. Power and Associates annual customer satisfaction survey was released, and among airlines, Northwest came in last place (JetBlue finished first). "[Northwest's] largest drop in rank position over last year was in satisfaction with the flight crews," said Linda Himeise, of J.D. Power. "The flight crews weren't happy. Courtesy, friendliness and helpfulness represent 43 percent of flight crew satisfaction. According to the customers, it just wasn't there."
The airline's pilots union, the Air Line Pilots Association, also recently gave a vote of no confidence to Northwest's management. "We didn't give up 40 percent of our pay and commit to a severely degraded lifestyle to watch it be squandered by poor management," said Monty Montgomery, a 20-year Northwest pilot and spokesman for ALPA. Naturally, the Northwest board has spoken out against these claims, saying that Northwest is "a much stronger and now profitable airline". But it's going to be hard for Northwest CEO Doug Steenland to keep the unions happy, especially when employees have had to give up $1.4 billion in annual concessions (pilot labor costs alone had been cut by $608 annually). Steenland has also received an estimated $26.6 million in stock and options - something that has got the unions even angrier.
To make matters worse, Northwest has also canceled hundreds of flights within the past few days, supposedly due to weather problems. “The recent severe weather events have caused Northwest Airlines to experience some crew shortages. Northwest apologizes for any inconvenience incurred as the airline continues to recover from these recent weather events," said a company spokesman. But the pilots union has a different explanation. “It’s a staffing issue,” said Monty Montgomery, spokesman for the union. “Our pilots are operating at contractual limits. The summer flying season is in full swing and we are operating at our max... I think they [Northwest] didn't realize the severity of the problem.” A spokesperson at Detroit's Metro Airport, home to one of Northwest's largest hubs, said that he wasn't aware of any weather-related delays there.
But regardless of the reason, Northwest has reason to be worried about cancellations. It should be looking to avoid a repeat of United's infamous meltdown in the summer of 2000 in Chicago, when a combination of factors, including weather, meant that it had to cancel a large percentage of its flights. The incident stuck with United for a while and, for a few, still does to this day. If it is an issue of pilot staffing - which it probably is - Northwest needs to get that resolved ASAP.
Secondly, the time is not right for CEO Steenland to be taking over $26 million when rank-and-file employees have to be sacrificing so much. Whether or not he deserves that $26 million (the board says he does, the unions say he doesn't) shouldn't matter; if he wants to increase his popularity (and perhaps employee morale), perhaps he ought to take a page out of Gerald Grinstein's book. As CEO of Delta, Grinstein earns a relatively modest salary and has said that he won't accept cash or stock awards following Delta's exit from Chapter 11 bankruptcy - instead, he's giving to a fund that will help Delta employees in times of hardship. Steenland should also take a look at the history books while he's at it, too - past CEOs at Delta and American have been forced down in recent years by angry unions upset over executive compensation.