Pilots at Northwest Airlines Corp. (NWAC), the No. 4 U.S. air carrier, have ratified a $265 million concession package that includes 15 percent pay cuts, the pilots union said on Friday.

The deal, which runs through Dec. 31, 2006, was approved by an 89.1 percent margin, according to the Air Line Pilots Association (search). Management and non-contract employees will contribute an additional $35 million in pay cuts and benefit changes, for a total of $300 million in annual savings for the airline.

The Eagan, Minn.-based carrier, like other major airlines, is struggling with soaring fuel prices and low fares and has said it needs $950 million a year in labor savings.

"We recognized that this agreement alone won't solve Northwest's problems, but it will let them overcome some near-term hurdles," said Hal Myers, a Northwest pilot and union spokesman.

The two-year deal becomes affective on the first day of the month following the airline's successful restructuring of its revolving credit facility, Myers said.

Northwest pilots will receive 3.5 million options for stock in the airline plus additional profit sharing in exchange for their concessions.

Last month, Northwest expanded a $10 each-way fuel surcharge to nearly all of its domestic fares. Airlines have attempted to offset fuel costs by adding surcharges, most of which have been unsuccessful.

"In light of current economic and competitive issues facing Northwest, the airline's overall labor cost reduction goal of $950 million in annual savings remains unchanged," Northwest said in a statement. "The long-term outlook for Northwest Airlines remains strong, assuming we are able to achieve competitive labor cost agreements."

Northwest is in talks with unions representing the carrier's machinists and aerospace workers, transport workers, mechanics, flight attendants, meteorologists and aircraft technical support staff.

Earlier this week, Northwest said it would recall 565 furloughed flight attendants.

Pilots at several other airlines have agreed to concessions to help their airlines survive a severe industry downturn. No. 2 carrier United Airlines, a unit of UAL Corp. (UAL), has told its unions it must terminate and replace their pensions as part of an effort to cut costs by an additional $2 billion a year.

Last week, Delta Air Lines Inc. (DAL) reached a tentative contract with it pilots, helping the troubled No. 3 carrier avoid filing for bankruptcy protection. Under the deal, Delta pilots would take a 32.5 percent pay cut with no contractual increase for five years.

"Given the nature of the industry I don't think it's going to be a magic bullet," said Ron Kuhlmann, vice president at Unisys R2A, of the Northwest pilots deal. "I wouldn't look for the stock to rocket up. I think that wages and work rules are vital to change, but they're not the only pieces of the puzzle to be addressed."

Shares of Northwest traded up 12 cents, or 1.2 percent, to $10.05 on the Nasdaq (search) on Friday afternoon.

In October, Northwest reported a third-quarter loss of $46 million.