Northwest Decides Not to Terminate Carrier's Contract to Operate Avro RJs

Mesaba Airlines pilots have ratified their new contract with the regional carrier by a 66 percent margin. Separately, Mesaba said Feb. 2 that Northwest Airlines [Nasdaq: NWAC] has decided to keep its four-engine Avros at Mesaba.

Pilots will see pay increases effective Jan. 31 that range from 5 percent to 27 percent (CRAN, Jan. 19). Entry-level pilots who had been paid only $17,000 will now make $21,600.

In addition, the pilots will get annual longevity increases and additional pay bumps that average 3 percent per year during the five-year contract, according to figures released by the Air Line Pilots Association (ALPA). Overall, wages will increase by 37 percent on average from previous levels through the end of the contract.

The contract also provides improvements in job security, wages, retirement, and work rules, which were the top issues for the pilot group, which was represented by ALPA.

Virtually every section of the contract was enhanced, according to union officials.

"Despite a tough environment in the airline industry, pilots have achieved a contract that secures their jobs and provides overdue increases to their compensation and retirement," said Capt. Tom Wychor, chairman of the Mesaba unit of ALPA.

"But the real credit for this contract goes to every Mesaba pilot for his and her professionalism and resolve throughout the arduous negotiating process."

The contract was agreed to following 930 days of negotiations, including a 25-hour non-stop bargaining session after pilots agreed to postpone their strike deadline of Jan. 9. Mesaba was forced to temporarily suspend flights during this period, but the pilots never actually went on strike.

The new contract also binds Mesaba's holding company, MAIR Holdings [Nasdaq: MAIR], to give all flying opportunities -- including all future growth at Mesaba or any other future MAIR subsidiary -- to Mesaba pilots. The job-security provisions also state that Big Sky Airlines, of Billings, Mont., will be restricted to flying its current-sized fleet of aircraft with 19 seats or less.

"Any new flying that Mesaba or MAIR Holdings gains, whether it comes from Northwest Airlines or another carrier, will be flown by Mesaba pilots," stated Mesaba pilot and union spokesman Kris Pierson. "Our pilots wore buttons with the slogan 'Our Profits, Our Jobs.' The new contract makes that vision a reality."

The retirement package included in the contract will make it possible for Mesaba pilots to remain with the carrier for their entire careers, without leaving to fly for a larger carrier, Wychor said.

"It was very important that we shore up pilots' retirement provisions and pay scales to make it feasible for them to retire from Mesaba Airlines at the federally mandated age 60, and I believe we've taken a positive step in that direction with this new contract," he said.

Meanwhile, Northwest has decided to keep the operation of 36 Avro RJ85 regional jets (RJs) with Mesaba. Northwest was considering removing the four-engine Avros from Mesaba's fleet and replacing them with more cost-efficient two-engine RJs. Mesaba stood to lose about 40 percent of its revenues and jobs if Northwest decided to terminate the Avro contract with the carrier (CRAN, Oct. 13, 2003).

ALPA officials contended that the threat was lodged in order to strengthen Mesaba's negotiating hand during its contract talks with its pilots, a claim the airline denied.

Northwest did not offer a detailed rationale for keeping the Avros at Mesaba. "We had the opportunity to conduct a detailed study, review our options and found economics that allow us to continue operating the aircraft," Northwest spokesman Kurt Ebenhoch said.

Mesaba had removed five Avros from its fleet over the past two months at Northwest's request. Two Avros will return to scheduled service in April, with the remaining three returning to service in June.

"We are pleased with Northwest's decision," Mesaba President John Spanjers said. "This is a favorable outcome for Mesaba, and we look forward to continuing our relationship with Northwest."

Northwest and Mesaba have a regional jet service agreement that runs through April 25, 2007. That contract had an early termination clause, which Northwest first considered exercising late last year. But the early termination provision now has been removed from the agreement, Mesaba said.

"If you look at the impact of what losing the Avro fleet would have had on our company, financially and psychologically, it would have had a very serious impact," Mesaba spokesman Dave Jackson said.

Mesaba and Air Wisconsin are the only U.S. regional carriers that fly the Avro RJ-85, manufactured by British Aerospace (BAE Systems [PNK: BAESY]). There were 51 total aircraft in service at the end of 2002, according to the Regional Airline Association, and Air Wisconsin had 16 in its fleet. Mesaba's Avros are configured with 69 seats, 53 in coach class and 16 in first class. Mesaba acquired the Avros between 1996 and 2000. They have a range of 1,250 miles.

>>Contact: Dave Jackson, Mesaba, 651-367-5135; Kris Pierson, ALPA, 612-839-0789; Laura Anders, MAIR Holdings, 612-337-0354.<<