This is a partial transcript from "Your World with Neil Cavuto," May 19, 2005, that was edited for clarity.

NEIL CAVUTO, HOST: Help! My next guest needs about $3.8 billion. He heads Northwest Airlines (NWAC), which is one of the latest airline carriers to face pressure over its under-funded pensions (search). How does the company plan to fix that? Let us ask Doug Steenland, he is the president and CEO of Northwest Airlines. He joins us from Eagan, Minnesota.

Sir, good to have you.

DOUG STEENLAND, PRES. & CEO, NORTHWEST AIRLINES: Good afternoon, Neil.

CAVUTO: Your problem with under-funded pensions certainly isn't unique to you. It's certainly the case at Delta (search), and AMR, and Continental. It was the case at United before they shifted that over to the government. Are you tempted to do what United did?

STEENLAND: No, Neil. You know, the truth is that the pension funding laws are broken, and in the aftermath of what happened at United with their pension plans being terminated and the PBGC taxpayer assuming the liability and the employees bearing that brunt, we need to get those laws fixed. We have a plan to do that. And we're hoping that the Congress will enact the plan that we've put forward.

CAVUTO: I bet in the meantime, United has a distinct advantage over you, Doug. I mean, is it tempting for you to say, all right, they shifted theirs to the PBGC, why not us?

STEENLAND: Well, that's obviously, you know, one answer, but it's an answer that we don't want to pursue, Neil. We think the right answer is for us to honor our obligations, for our employees to get the full benefit of the pension earnings that they bargained for and that they've put their years in here. And we just need a change in the law in order for us to be able to do this.

CAVUTO: I just get a sense, Doug, in the meantime, that regardless of the carrier, regardless of the group, whether it's pilots or flight attendants or machinists, there's a lot of ill will between the worker bees and the folks who oversee them. Is that the case?

STEENLAND: Well, you can understand a couple of problems here, Neil. One is we're a business that's going through a transformation. And the reality is our business has changed and some business practices that we've historically engaged in, we're going to have to change. You know, we've aggressively attacked our non-labor costs. We've taken over almost $2 billion out on an annual basis, and unfortunately, given the competition that exists today, and given the emergence of the low-cost carriers that have come on the scene, we also need to get our labor costs down. And it's not something that anybody wants to do, but it's frankly a reality. And we're involved in negotiations with all of our unions to realize that. We got an initial $300 million last fall from our pilots and from management participating.

CAVUTO: But you need a lot more, right? You need upwards of a billion all things considered, right?

STEENLAND: Well, we've identified an additional $800 million that we're trying looking to realize this year.

CAVUTO: Do you think you'll see it?

STEENLAND: We're hopeful that we will be able to.

CAVUTO: In the meantime, some of your competitors are thinking maybe the better part of valor is to link up with someone else and share those costs. The talk is right now America West (AWA) and USAir (UAIR), are you similarly tempted?

STEENLAND: Well, there have been a lot of rumors surrounding the USAir-America West transaction. We'll have to see what actually is proposed, if and when something is announced. You know, if something is announced, one of the things we're going to look for is whether airplanes are going to be pulled out of the system and capacity comes down. I think at some point in time, some forms of consolidation in this business is likely.

CAVUTO: All right. Doug Steenland, thank you very much. I know times are tough, we wish you well.

STEENLAND: Thank you, Neil

CAVUTO: The Northwest airlines president and CEO, from Eagan Minnesota, Doug Steenland.

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