Northwest Airlines to cut 2,500 jobs due to high oil

Northwest Airlines to cut 2,500 jobs due to high oil

Posted: Monday, July 14, 2008 9:37 pm
By: AP

By JOSHUA FREED AP Business Writer MINNEAPOLIS (AP) — Northwest Airlines Corp. said on Wednesday it will cut 2,500 jobs because of high oil prices, and will soon begin charging $15 to check luggage and up to $100 to redeem a frequent-flier award ticket. The airline said it expects the new fees to add $250 million to $300 million a year in revenue. Northwest said the job cuts — which represent about 8.3 percent of its work force — will include front-line and management workers. It said it will start with voluntary departures and leaving open jobs unfilled before moving to furloughs to reach the 2,500 total. Northwest had said previously it would have fewer workers after it cuts 8.5 percent to 9.5 percent of mainline flying in the fourth quarter of this year. It has said overall capacity would shrink 3 percent to 4 percent because it is adding regional seats. As of the end of 2007, Northwest employed about 30,000 people. Northwest has a hub in Memphis, Tenn. President and Chief Executive Doug Steenland said Northwest’s fuel costs have more than doubled in the past year. “These reductions are the direct result of our extraordinary fuel costs and the necessary actions we must take to right-size our airline and eliminate unprofitable flying,” Steenland said in a written statement. Northwest also said it would begin charging $15 for the first checked bag, matching a fee announced earlier this year by US Airways, American Airlines, and United Airlines. Northwest’s new fee applies to tickets sold after Thursday for travel starting Aug. 28 in the U.S. or to Canada. Northwest also announced a fee for issuing frequent-flier tickets beginning Sept. 15. It said it will charge $25 for domestic tickets, $50 for trans-Atlantic tickets and $100 for trans-Pacific tickets. Steenland called the service fee temporary. “As fuel comes down, we will revisit this decision,” he said. Last month Delta Air Lines Inc. announced a $25 surcharge for redeeming frequent flier tickets for domestic travel and $50 for international. Delta, which is buying Northwest, has not added a fee for the first checked bag. American Airlines was the first major U.S. carrier to announce a fee on first checked bags. Spokesman Tim Smith said Northwest’s moves “clearly show they are facing the same extreme challenges all airlines are dealing with these days.” American also charges $50 to $100 to book a frequent-flier ticket within less than 21 days. Executives of American parent AMR Corp. said last week they expect to cut 8 percent of the work force, or about 6,800 jobs. Continental Airlines Inc. has announced 3,000 job cuts. Frequent flier programs have been around since the early 1980s. The idea has always been that airlines would reward customer loyalty “with a free, repeat, free ticket,” said Tim Winship, who runs mileage program tracking Web site frequentflier.com. “That to me is a pretty clear-cut promise. And the free part is at the center of that promise.” Randy Petersen, editor of FrequentFlyer magazine, said U.S. airlines have actually been later than their European and Asian counterparts in adding fees for frequent-flier awards. “If this is how the industry is gong to stay in business so our awards are available to use one or two years from now, we don’t like it, but we’re going to live with it,” he said. Northwest shares fell $1.17, or almost 16 percent, to close at $6.30. ——— AP Business Writers David Koenig in Dallas and Harry R. Weber in Atlanta contributed to this report. Published in The Messenger 7.14.08

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