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Airlines assess losses
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September 11, 1998: 2:25 p.m. ET
Northwest, Air Canada profits hit after strikes leave carriers crippled
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NEW YORK (CNNfn) - Northwest Airlines Corp. and Air Canada, both of which reached tentative deals with striking workers Thursday, said Friday the walkouts had taken their toll on earnings.
Northwest said it anticipates losses for the last two quarters of the year and for the full year ending Dec. 31, 1998.
The company attributed the losses to cancellations of flights due to the strike, as well as the lengthy recovery anticipated while the nation's fourth-largest carrier gets back on its feet.
Northwest also blamed weakened domestic performance in July and a deterioration of yields in August, when a "cooling off" period between the airline and strikers drove travelers to other carriers.
Shares of Northwest (NWAC) jumped 1-3/4 to 27-1/2 on the Nasdaq early Friday amid reports from the day before a tentative deal had been reached.
While neither Northwest nor the union would directly disclose terms of the agreements, reports indicate pilots will receive a 12 percent raise over the course of the contract.
The union had sought a 14 percent increase over three years. Northwest had originally offered 9 percent over four years.
The airline has canceled flights through at least Sunday.
The union is scheduled to review the proposed settlement Saturday, when it will decide whether to approve it.
The carrier has said it would take three or four days to restore partial service and eight to 10 days before full operations resume.
The company estimates the strike has cost Northwest $26 million a day.
Meanwhile the contracts of five other unions at Northwest, including those representing flight attendants and machinists, are up for renewal, meaning the airline could face another strike.
Machinists have asked the National Mediation Board to declare an impasse, which would jump-start a 30-day countdown toward a strike.
Strike costs Air Canada
As Air Canada pilots started voting on a tentative agreement to end a painful strike, analysts said the dispute had cost Canada's biggest airline about $132.1 million (C$200 million).
Air Canada and its 2,100 striking pilots reached an agreement in principle late on Thursday to end the nine-day strike. The strike was called primarily over salary issues. Details of the agreement to end the strike were not released.
HSBC Securities airlines analyst Jacques Kavafian predicted the work stoppage will severely cut the carrier's revenue for 1998. "The strike will have cost them an overall C$200 million, until the pilots return to work," he told Reuters.
"We are revising our earnings estimates to C$0.35 per share from C$1, but we keep intact our 1999 estimates of C$1.50. This is subject to revision when we have details of the agreement."
Air Canada said it will reveal the extent of the damage when it unveils its third-quarter financial results on Oct. 29.
While both sides expressed confidence that the proposed deal will be ratified by union members, they have agreed to keep details of the pact secret for the time being.
Pilots' union leaders refused to speculate about the chances of ratification but said they had urged members strongly to support the deal.
"We are not going to comment at this point. It is up to the pilots. We are conducting a series of meetings to get them informed but, obviously, we are recommending them to vote yes," said Peter Foster, a spokesman for Air Canada's pilots in Toronto.
Capt. Jean-Marc Belanger, chairman of Air Canada's pilots' Master Executive Council, said: "The word going out to the pilots is simple. It's a good deal. It's a fair deal. But perhaps even more important for the majority of our pilots, it's a deal that holds real improvements in our working conditions and the rules we live by."
Air Canada said it was optimistic about the outcome of the vote and said some flights would resume as soon as Monday afternoon if the agreement is approved by pilots.
"All flights are canceled until 1300 EDT/1700 GMT on Monday, and everything should be back to normal by Thursday, if the pilots vote for the agreement," said Air Canada spokeswoman Nicole Couture-Simard.
Pilots will vote by telephone to ratify the deal over the next three days. Details of the secret ballot will be released at noon EDT on Monday.
Air Canada's planes were grounded on Sept. 1 after contract talks failed over demands by the pilots for higher wages and better working conditions. The strike has disrupted travel for thousands of people and caused havoc with cargo and mail flows.
The two sides returned to the bargaining table Tuesday and hammered out the deal after a marathon session of negotiations at a Montreal hotel.
The airline had offered salary increases to pilots of 4 percent and 5 percent over two years. The pilots, who make an average of C$100,000 a year, argued they were paid less than their U.S. and European counterparts and sought a 12 percent increase over two years.
Analysts were not impressed.
"This is a dispute that should never have happened. This is an irrational one. These pilots are the best paid in the country," said Kavafian. "Air Canada had offered them a 4.5 percent salary increase per year in a context where inflation stands 1.5 percent lower."
In rejecting the initial demands of pilots, Air Canada said it did not want to set a precedent for other unions whose contracts will soon expire. Roughly 17,250 of Air Canada employees, or 75 percent, belong to unions.
The airline has laid off 9,500 support staff since Sept. 4 and Couture-Simard said Air Canada did not know yet when it would call them back.
She said once the deal is ratified, the airline will begin phasing in operations over 24 hours. Service would resume to most destinations within three to four days once aircraft are repositioned and crews flown in to operate flights.
"The planes are ready to restart the service. Technically we are ready. It takes between 24 and 48 hours to put the planes back into action," she said.
Air Canada shares were down C$0.30 at C$7.90 on the Toronto Stock Exchange in early afternoon trading on Friday. ($1$1.51 Canadian) 
-- from staff and wire reports
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