Northwest Airlines, Long-Time Employee CU Sever Ties After

Register now

Perhaps indicative of the financial strains airlines are under, Northwest Airlines startled its long-time credit union by announcing it would sever relations with NWA FCU, after the credit union refused to pay a multi-million-dollar fee the airline said it deserved to receive.

NWA FCU immediately moved to respond to the statements the airline made to employees in Northwest's employee newsletter. In a letter to members posted on its website, NWA FCU explained that the airline will not renew the combined lease and services agreement covering the CU's use of offices and ATMs on Northwest property as well as the CU employees' status as Northwest employees.

"The airline informed the credit union that they see great value in the access they provide to your financial services," read the letter from CEO Paul Parish. "The airline desires to realize some benefit from that value. The airline 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. 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."

According to NWA FCU, NCUA has determined that any such fee as proposed by Northwest is not permissible. Nevertheless, the airline has decided not to renew the combined lease and services agreement and has launched a formal challenge to the CU's trademarked name.

"Northwest Airlines and the credit union have a 65-year relationship that has served all of our employees very well," the airline's statement reads. "However, in our current financial situation, Northwest Airlines can no longer subsidize the credit union while it makes $15 to $20 million per year in profit. 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 declined to comment on whether it would seek to diversify its field of membership. Currently, 90% of Northwest Airlines employees are members of the credit union. As the CU's leases at various Northwest locations come up, NWA FCU will vacate those premises, but the credit union does have a number of locations off of Northwest property, members will still have access to some 12,000 surcharge-free ATM locations, and direct deposit will continue to be offered.

For reprint and licensing requests for this article, click here.