Unions Threaten To Strike If Carrier Cuts Pay Package 19.4%

Bankrupt Mesaba Aviation [MAIR] wants the court to nullify its labor agreements with the three unions who have not agreed to 19.4 percent salary concessions.

The Minnesota bankruptcy court is scheduled to take up Mesaba's motion on Feb. 24. The unions are not taking the issue lightly. By the time the court begins its proceeding, one or more of the unions could be armed with authorization to call a strike.

The carrier's future is clouded. Mesaba's bid for a new regional jet pact with the bankrupt Northwest is apparently too high. It is now planning its future as an operator of 49 Saab 340s. The trouble is those Saabs belong to Northwest and the network carrier is expecting Mesaba to fly them for less than the current operating contract.

Last week the Mesaba Labor Coalition - composed of the Air Line Pilots Association (ALPA), the Association of Flight Attendants (AFA) and the Aircraft Mechanics Fraternal Association (AMFA) - issued a petition signed by their membership calling for the leadership of both Mesaba and MAIR Holdings, the parent company, to resign.

The Mesaba ALPA unit is now circulating a strike ballot. AFA will begin its balloting process next week. The membership of AMFA has a strike authorization on the table as a result of a breakdown in contracts talks last year. The mechanics may seek a new strike authorization due to changing conditions, said Kevin Wildermuth, the union's negotiating chairman.

"The support is unanimous here. What the company is doing is immoral and wrong. It is a bad business plan. It is not sustainable. If they continue down this path, I will probably not be working here this summer because there probably won't be a Mesaba Aviation to work at," Mesaba ALPA chairman Tom Wychor told Regional Aviation News.

Pointing to his own situation, Wychor said the real pay cut would be 42 percent. A 16-year veteran, Wychor would move from the Avro RJ85 to the Saab, taking a significant cut in pay grades. "It makes it very, very palatable to look for other options - like Home Depot. I have no desire to spend the rest of my career flying around while I make the same salary as I did in college in 1985 as a bar manager."

ALPA last week advised it membership to update their resumes and to give serious consideration to looking for jobs elsewhere.

In its petition to the court, Mesaba said that it has had a number of negotiating sessions with each union since its Oct. 13 Chapter 11 filings. According to the court filings and the unions, the company never budged from the 19.4 percent labor savings goal. The carrier offered some adjustments to the work rule demands.

Both the pilots and flight attendants offered "interim" agreements that provided the company with greater work rule flexibility. The flight attendants offered a small wage cut, said Carla Rogat, the Mesaba AFA acting chairwoman. The ALPA proposal was in the "ballpark" of what the company is seeking from the pilots, Wychor noted.

Mesaba told the court that the unions did not provide credible alternatives from which they could negotiate.

"Obviously it is a very, very difficult environment for just about everybody in the airline industry. We are extremely hopeful that Mesaba's management will reach a consensual agreement with all its unions," said MAIR CEO Paul Foley in an analyst call last week as the holding company announced a $4.5 million quarterly net loss.

Northwest Bid

Mesaba was one of eight regional carriers to submit a bid to Northwest to fly 126 RJs - both part of Northwest's current inventory of 50-seat Bombardier [BBD] CRJ 200s as well as larger, yet-to-be obtained 76-seat planes. The bulk of these planes - 124 CRJ 200s -are now flown by Pinnacle Airlines [PNCL].

According to Mesaba's filing, the carrier submitted its bid based on a wage rate that reflects the desired 19.4 percent labor savings. However, Mesaba has learned from Northwest that its proposal is not the lowest. In fact, Northwest told Mesaba that its proposal fell within a pack "less aggressive bidders."

Without the RJ contract, Mesaba's fleet would consist of the 49 Saabs. As Mesaba continues to fly under an existing agreement, Mesaba said that Northwest will be asking for a bid to continue the Saab flying. Mesaba, according to its filing, now doubts that even a 5 percent rate cut, that would be possible with the labor savings, would be significant enough to win a new Northwest contract. Northwest might seek other operators for the Saabs if Mesaba's terms are not low enough, it said.

As a Saab-only fleet, Mesaba estimates that it will generate $207 million in annual revenue this year - with a 5 percent rate cut - and employ only 2,200 workers.

Prior to the Northwest bankruptcy filing last fall, Mesaba anticipated $470 million in revenues this year flying 100 planes and employing 3,800. A Saab-only airline would be more expensive than its current operations because the company's most senior pilots and flight attendants would staff the planes.

Mesaba's business plan is based on obtaining an 8 percent operating margin. The 8 percent margin is needed so that it can attract exit financing. The new funds may be necessary, it said, to purchase its own aircraft in order to fly for Northwest or any other carrier.

MAIR's role

Reacting to the unions' motions, the judge ruled that MAIR cannot be brought into Mesaba's effort to void the contracts. The unions want to tap the $120 million cash balance on MAIR's books to help restructure Mesaba. ALPA's Wychor suggested that the sum could be used in a "pay-for-play" situation similar to last year's deal that saw Air Wisconsin invest $125 million into the then-bankruptcy US Airways so that it could fly 70 CRJ 200s in the US Airways Express network. Or the cash could be used to buy a fleet for Mesaba.

Mesaba's creditor's committee also objected to the unions attempt to link the two units. However, the creditors - with the court's blessing - are proceeding with their own probe of the relationship between Mesaba and MAIR. The creditors have hired their own consultants - at Mesaba's expense - to handle the investigation. The creditors are also eying MAIR's cash to pay the unsecured creditors claims.

CEO Foley is to be deposed by the creditors on Feb. 21. The information the creditors obtain from MAIR cannot be shared with the unions.

>>Case 05-39258, U.S. Bankruptcy Court, Minnesota. Contacts: Kevin Wildermuth, AMFA, Tom Wychor, ALPA, (612) 396-7795; (404) 808-8120; Carla Rogat, AFA, (612) 801- 4141.<<