updated 7/5/2005 8:46:22 PM ET 2005-07-06T00:46:22

Mechanics at Northwest Airlines Corp. sought release from contract negotiations on Tuesday after the nation’s fourth-largest carrier rejected their pay-cut offer. Release from the talks would commence a 30-day period toward a strike.

Northwest has said it wants $176 million in concessions from mechanics, who say they have offered $143.5 million in cuts. But the company contends that the union’s actual offer amounts to only $87 million because mechanics count money that was saved from earlier layoffs.

“They just continue to refuse to move off the $176 million number,” said Jeff Mathews, contract coordinator for the Aircraft Mechanics Fraternal Association. “We’re being asked to share too much of that burden. And they refuse to give us any credit whatsoever for our already-laid off members.”

Talks between mechanics and the airline ended after less than two hours Tuesday, Mathews said. He said he wasn’t sure if talks scheduled for the rest of the week would take place.

A strike authorization vote by mechanics will end on July 19. The airline has vowed to keep flying if mechanics strike.

Before the mechanics made their offer, the mediator had denied Northwest’s request to be released from talks. But now both sides are asking.

“Northwest remains willing to negotiate with AMFA on a consensual agreement,” the airline said Tuesday after the mechanics asked to be released from talks.

The company is seeking $1.1 billion in annual labor cost savings. It has gotten a total of $300 million from pilots and managers, and is seeking $148 million from flight attendants, according to their union.

“If we are unsuccessful in realizing labor cost restructuring, we are going to have to consider the Chapter 11 bankruptcy option,” CEO Doug Steenland told Minneapolis business leaders in a speech on Tuesday. In response to a follow-up question, Steenland declined to say whether that meant Northwest would file for bankruptcy after the end of the year.

In a Securities and Exchange Commission filing on Friday, Northwest said its “financial viability primarily depends on” labor cost cuts and a change in pension laws that would allow it to spread out payments to its underfunded pension. Northwest said current pension law would require it to pay $800 million in 2006 and $1.7 billion in 2007 to its pension.

“Failure to obtain pension funding relief will also cause the company to consider Chapter 11,” it said in the filing.

But Prudential analyst Bob McAdoo said in a note to investors Tuesday that strike talk is common in the airline industry, and that he believes Northwest will get labor cuts. “We would be surprised if there is any resolution to the labor issues in the very near future,” he wrote before the mechanics asked to be released from talks.

“It is unlikely Northwest will seek bankruptcy protection anytime in the near future,” he wrote. “Its labor negotiations, whether successful or not, will likely to drag on well into 2006. Its troublesome catch-up pension payments do not occur until 2006.” And even if it fails on both pension reform and labor costs, cheaper oil would probably be enough to keep Northwest out of Chapter 11, he wrote.

Oil prices are near $60 a barrel. Steenland said Northwest’s costs increase by $50 million a year for every dollar increase in a barrel of oil.

Northwest is looking for other ways to boost income, Steenland said, including a new luggage service for a fee. He offered no details on such a service.

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