Flight Attendants, Mechanics and Other Workers All Could Be Affected

With a Jan. 10 strike deadline looming, pilots with Mesaba Airlines, a subsidiary of MAIR Holdings [Nasdaq: MAIR], made little progress last week in last-minute negotiations with company management on a new contract. The 600 daily flights that Mesaba flies under a code-sharing contract with Northwest Airlines [Nasdaq: NWAC] were threatened at press time.

Also threatened were the jobs of Mesaba's non-pilot workforce. Mesaba told about 1,700 of its non-pilot workers, including mechanics, flight attendants, office workers, dispatchers and customer-service agents, that they could be laid off if the pilots strike. About 1,000 of those workers are in the Twin Cities area of Minnesota, at Mesaba's headquarters in nearby Eagan, Minn.

An estimated 750 other Mesaba workers would remain on the job if the company is grounded by a strike. Many would help fulfill the carrier's contractual obligation to provide baggage-handling services for Pinnacle Airlines, a Memphis, Tenn.-based regional carrier that, like Mesaba, operates Northwest Airlink feeder flights.

A Mesaba pilots' strike would be a significant disruption to Northwest Airlink, the network carrier's regional operation. Last year, Mesaba ferried about 5.7 million passengers between Minneapolis/St. Paul, Northwest's other hub airports and about 110 U.S. and Canadian cities. Mesaba serves small communities, such as International Falls and Hibbing, Minn., as well as large cities such as Philadelphia and Pittsburgh.

While Mesaba pilots have said they would prefer a new contract, they were prepared to go on strike at midnight EST Jan. 9. The deadline was set by a federally mandated 30-day cooling-off period. Mesaba officials also have said they wish to avoid a strike.

A strike could reduce air service to about 90 cities and completely shut down regular flights to 20 more, including Eau Claire, Wis., and six Minnesota towns. Mesaba is the sole carrier to those 20 cities.

But Northwest Airlines said that if the strike takes place, it would accommodate passengers holding tickets for travel on Mesaba. Part of that policy involves re-booking customers on Pinnacle flights, but during a rally at a hotel in Bloomington, Minn., last week, pilots from Pinnacle indicated they would support Mesaba pilots in their strike, and might not fly the routes.

Capt. Wakefield Gordon, chairman of Pinnacle's unit of the Air Line Pilots Association (ALPA), said Pinnacle pilots passed a resolution outlining how they would honor the Mesaba pilot picket lines and "demonstrate a peaceful, lawful show of solidarity" for the strike by "refusing to perform struck work while maintaining normal preexisting Pinnacle operations."

"We know that we could be a linchpin in this conflict if [Northwest] Airlink management tries to cover their losses during a strike by expanding Pinnacle operations in Mesaba territory," Gordon said to hundreds at the rally. "The pilots in the Northwest system are family, and we look out for our own."

Pilots from about two dozen other regional air carriers, including many from Comair who survived a bitter 89-day strike in 2001, pledged their support for the Mesaba pilots. The rally also was telecast to simultaneous rallies in Detroit, Memphis and Cincinnati for the Mesaba pilots.

One of the main sticking points is wages. Starting pay for a Mesaba pilot is $17,352 per year. "That is unacceptable," said Capt. Tom Wychor, chairman of ALPA's Mesaba unit. "A four-day tour away from your family and you bring home nine hours of credit -- that is unacceptable."

About half of Mesaba's 844 pilots earn less than $35,000 a year for full-time work, according to ALPA (CRAN, Jan. 5). Pilots at Mesaba, Northwest and Pinnacle have said they won't fly new flights or larger planes added to make up for lost Mesaba capacity, as is their right under the Railway Labor Act, which governs airline unions.

It also appears unlikely that a strike at Mesaba would influence the federal government to intervene to halt it. Mesaba may not be big enough to coax such federal intervention.

President Bush, if prompted by the National Mediation Board, can appoint an "emergency board" and effectively halt any airline strike for 60 days. The emergency board, usually comprised of three neutral labor experts, then would propose a settlement. In 2001, Bush implemented such a board to settle a dispute between Northwest and the union that represents about 9,400 of its workers, mostly mechanics.

Still, presidential intervention historically has not been used to settle airline strikes, particularly at regional carriers.

For example, Comair, the Cincinnati-based subsidiary of Delta Air Lines [NYSE: DAL], had 815 daily flights when it went through a pilots' strike in 2001. After 89 days -- the longest airline strike since 1989 -- there was no presidential intervention and the 1,350 Comair pilots eventually accepted a new contract.

The Comair strike sets a precedent for possible federal intervention if the Mesaba pilots strike. Mesaba is even smaller than Comair was in 2001, with fewer pilots and fewer flights. To merit federal intervention, federal rules state that an airline strike must "threaten substantially to interrupt interstate commerce to a degree such as to deprive any section of the country of essential transportation service."

While several small cities stand to lose regularly scheduled air service for a time, and each city likely would suffer some economic damage as a result, a strike at a smaller airline such as Mesaba poses a smaller economic threat than a walkout at a major network carrier. Because of the smaller economic impact, a Mesaba strike likely would not be a major political issue either.

The economic impact of a work stoppage at a domestic airline on a regional economy is difficult to quantify, the General Accounting Office (GAO) concluded in a report last year (CRAN, July 28, 2003). But in that study, GAO said the Comair strike cost that carrier an estimated $300 million in revenue when it halted its 815 daily flights. The work stoppage caused an estimated 25,000 passengers per day to curtail their travel or to make arrangements on other airlines.

At the same time, Comair's 1,350 striking pilots lost an estimated $14 million in salaries, and the airline reported laying off an additional 1,600 non-striking employees in the greater Cincinnati area. Its concourse at the Cincinnati/Northern Kentucky International Airport closed, and 16 stores and restaurants located there lost a reported $3 million in sales, and laid off 152 of 193 workers. The airport also lost $1.2 million in landing fees from Comair.

To date, political leaders in the Midwest have not been vocal about calling for federal intervention to avert a strike at Mesaba. That may change if a strike occurs. But the politicians also will have to confront labor union pressure to not get involved. The unions typically oppose government intervention because it deprives them of their ultimate weapon -- the right to strike.

If the Mesaba pilots strike, Mesaba would continue to pay rent on space at International Falls Airport but would not pay landing fees. Mesaba is the only commercial airliner at that airport. The passenger facility charges, at $4.50 a head, also would end. The carrier keeps 8 cents of this fee while the airport keeps the rest.

Meanwhile, Mesaba pilots filed a lawsuit early this month alleging that the carrier withheld money from their paychecks that was earmarked for their 401(k) plans. The lawsuit alleges the airline kept the money rather than depositing it into the retirement accounts and failed to identify and promptly fix the irregularities, which constitutes a breach of its fiduciary duties.

"Mesaba has been deducting money from our paychecks that was supposed to go into our 401(k) accounts, but instead they've kept the money in the company's coffers," said Kris Pierson, a Mesaba pilot and ALPA spokesman.

In papers filed in U.S. District court in Minneapolis, the pilots also allege Mesaba failed to make all of the matching contributions required under the plan, while making other contributions outside of the legal time limits, and failed to promptly rectify the errors dating back to at least 1996.

The money missing from the retirement accounts amounts to "hundreds of thousands of dollars," Pierson said. Mesaba has not disclosed the exact amount of the money that was withheld, Pierson added.

The retirement money in question was not from the pilots' regular payroll checks, but was money that was deducted when manual checks were cut for extra work not included in the regular payroll checks, he said.

ALPA said it learned of the funding shortfalls in late September. The union said it initially believed the problem could be resolved without litigation.

But Mesaba management has refused to disclose even the basic government filings related to the disputed funds, Pierson said. And without any supporting data, the pilots cannot be assured that the carrier would provide a full remedy, he added.

Mesaba apparently had promised to pay at least some of the money owed by Nov. 30, 2003, but missed the deadline. The funding shortfalls affect most of the pilots, as well as other Mesaba employees, he said.

>>Contact: Dave Jackson, Mesaba, 612-713-6409; Kris Pierson ALPA, (612) 839-0789.<<