Citing Airline Slump, Northwest Airlines Moves to Evict NWA FCU for Refusing to Pay Royalty Fees

MINNEAPOLIS – In what’s being described as a cost-cutting move to weather the airline industry’s economic slump – and a “bad public relations campaign” by critics – Northwest Airlines recently said it would be forced to evict NWA Federal Credit Union from all of its properties if the credit union did not pay for the use of the airline’s name and logo. In a March 19th letter to the credit union, Northwest Airline Controller Thomas Kennedy said the credit union has “enjoyed exclusive access to the Northwest employee base and the use of the company’s imagery in marketing to our employees.” “In our current financial situation, Northwest Airlines can no longer subsidize the credit union while it makes $15 million to $20 million per year in profit,” according to the letter, which has appeared in several published reports. “We are seeking fair and reasonable sharing from all stakeholders in this difficult time and do not believe these initiatives will impact either the services or costs to credit union members.” NWA FCU President/CEO Paul Parish countered in an April 28th statement in which he explained that Northwest proposed that the credit union pay a royalty/user fee “equal to more than half our net income.” “We have reviewed Northwest’s proposals and have concluded that implementing Northwest’s recent requests would cost you, our members, at least $6 million annually,” Parish wrote. “It is in all of our best interests for Northwest Airlines to thrive and prosper and the credit union will do everything we possibly can to help. There are limits, however, to what we can do.” NWA FCU pays Northwest rent for seven offices, including four in Minneapolis and 23 ATMs at Northwest facilities across the nation. The credit union’s lease for its Detroit office and seven ATMs expires in July and its lease for the six remaining offices and 16 remaining ATMs expires March 21, 2004. Parish pointed out that federal regulators have informed him that paying the royalty/user fee is “not permissible.” In addition, the airlines has “launched a formal challenge” to NWA FCU’s “trademarked” name. A credit union spokesman would not provide further information beyond Parish’s official statement but did say this has become a “bad public relations campaign” on Northwest’s part. Northwest has laid off nearly 17,000 employees in the past two years and has cut annual expenses by $1.3 billion. The airline is also seeking an additional $950 million in pay cuts from union and salaried employees. As the largest credit union in the state with 115,000 members and $1.3 billion in assets, NWA FCU has had a 65-year relationship with Northwest with nearly 90% of the airline’s active employees belonging to the credit union, Parish said. Kevin Chandler, president of the Minnesota Credit Union Network said Northwest’s latest move will seriously “hurt employee morale” considering the large number of members that work for the airline. “Credit unions don’t answer to shareholders,” Chandler said. “Northwest is used to dealing with high-rolling banks and here’s an opportunity where they see a highly-successful credit union. You can’t run a successful credit union with a $6 million levy on net income.” Chandler pointed out that while NWA has more than a $1 billion in assets, it doesn’t compare to a bank such as U.S. Bancorp, which has $178 billion in assets. Meanwhile, Parish has assured members of continued access to its 12,000 ATMs through a surcharge-free network, direct deposit services, online and telephone banking as the credit union explores opening additional offices. -