Mesaba pleas for sacrifice

President John Spanjers wrote to employees that, unless savings from labor cuts are realized, the bankrupt airline could face liquidation.

Liz Fedor, Star Tribune
September 8, 2006

John Spanjers: "A strike would be as fatal as an orderly shutdown."
Glen Stube
StarTribune

Bankrupt Mesaba Airlines, losing money at the rate of $1 million per week, made a direct appeal to its employees Thursday to accept labor concessions or face possible liquidation of the company.

The carrier, seeking labor cost savings since December, is running out of time, the company said.

Mesaba President John Spanjers told employees in a special newsletter that failure to secure negotiated deals leaves the company with two unattractive alternatives: imposing pay cuts and risking a strike, or halting flight operations.

"A strike would be as fatal as an orderly shutdown," Spanjers wrote in the flier to 3,300 Mesaba employees.

And the airline is not assured of getting $10 million a year from Northwest Airlines for taking over ground work at 17 cities, he said. In mid-August, a Northwest spokesman told the Star Tribune that the airline planned to contract with Mesaba, but also other companies.

Those contracts would be for services in several cities where Northwest is shifting work to outside vendors.

However, Spanjers told Mesaba employees Thursday: "Due to the current uncertainty of our future, Northwest now has backed away from Mesaba and is rebidding these stations to other ground-handling vendors."

The seven-page newsletter was to "update employees on the severity of the company's situation," Mesaba spokeswoman Elizabeth Costello said.

In mid-July, U.S. Bankruptcy Judge Gregory Kishel ruled that, after a 10-day notice, Mesaba could nullify its existing labor contracts with pilots, flight attendants and mechanics.

"The company recognizes that consensual agreements are in the best interest of all employees, our passengers and Northwest," Costello said. "That is why we have held off on issuing this 10-day notice."

Mesaba and its pilots have not bargained for a month, talks have not been held with the flight attendants for three months, and no bargaining has occurred with the mechanics union since mid-July.

"Each of our unions has large packages on the table, on average meeting 75 percent of the company's [concessionary] goal over a three-year term," said Tom Wychor, chairman of the Mesaba pilots union.

Costello said Mesaba must reach negotiated deals soon, because its cash balance is dwindling and it cannot get access to $24 million in debt financing until its labor savings are achieved. As of late July, the carrier had about $20 million in cash.

When Mesaba began the negotiating process, it said it needed six-year contracts slashing labor costs by 19.4 percent. Wychor said the three unions will insist on market-rate contracts.

Costello said the company is offering profit sharing to employees, which could offset some of the pay cuts.

Liz Fedor • 612-673-7709 • lfedor@startribune.com