Mesaba lays out deadline for deals

With the airlines facing a cash crisis, the unions got an ultimatum: Come to terms in a week, or it's back to court.
Liz Fedor, Star Tribune
September 22, 2006

Mesaba Airlines management and its labor unions took another step toward the precipice Thursday.

Management warned the unions that they must agree to new labor deals within one week or the airline will return to court for the fourth time in an attempt to void their contracts.

U.S. Bankruptcy Judge Gregory Kishel gave Mesaba approval in mid-July to nullify its labor pacts. However, management never acted on Kishel's decision, and last week U.S. District Judge Michael Davis took away that hammer, ruling on appeal that Kishel had erred.

Now Mesaba, having spent more than $10 million on lawyers and advisers so far in its bankruptcy, has little to show from the nine-month negotiating process but a dwindling cash position, an increasingly acrimonious relationship with its workers and no court authority to act unilaterally.

The company operates regional flights for Northwest Airlines.

Mesaba recently warned that it could face liquidation in October if there is no resolution to its standoff with labor.

Mesaba's unions gave no sign Thursday that they are ready to deal unless management is willing to bend. Tom Wychor, chairman of the airline's pilots union, said management has badly mishandled labor negotiations.

"The one thing they have achieved is a total loss of credibility among employees," Wychor said Thursday. "They have galvanized virtually every employee on the property against this management team."

He said it's time that executives show "some leadership and compromise off of their positions." He added that the pilots have offered to take cuts of 15 percent over three years. "The opportunity to kill the company is there if they choose to force the issue."

Mesaba spokeswoman Elizabeth Costello said union foot-dragging is forcing the company to consider renewing the court fight. She said Mesaba had planned to negotiate Thursday with the Association of Flight Attendants (AFA), but company representatives were left to cool their heels.

"Our negotiating team sat in the room waiting for them, and no one showed up," Costello said. "If we're dealing with union representatives who refuse to bargain, we must review all other legal options to ensure the survival of the company."

Tim Evenson, president of the Mesaba AFA, has a different perspective. He said the union will negotiate, but not if the airline continues to insist that a federal mediator participate. "The only reason Mesaba wants the National Mediation Board involved is to prevent a possible strike," Evenson said.

The carrier and its flight attendants union have not bargained since June 5.

Nathan Winch, a mechanic and negotiator for the Aircraft Mechanics Fraternal Association (AMFA), said his union and Mesaba will return to bargaining Tuesday.

Can they get a deal in two days' time? It hinges on whether "the company shows some movement," Winch said.

In a letter Thursday to the unions, Mesaba President John Spanjers said the company's eroding cash position is forcing the airline to quickly cut labor costs. If deals are not forged at the bargaining table, Spanjers said, Mesaba wants the legal option to impose new pay rates and work rules Oct. 15.

Since December, Mesaba has been pressing for 19.4 percent labor cuts locked in for six years. The carrier has pulled back slightly from that benchmark in recent weeks.

"All along, our efforts have been focused on getting consensual agreements," Costello said. The carrier is seeking roughly $5 million a year in savings from the pilots, about $2 million from mechanics and more than $1 million from its flight attendants. Currently, the average pay for a Mesaba captain is about $45,000 a year, mechanics earn $45,260 annually on average and a six-year flight attendant makes $21,276, according to union figures.

The labor conflict has come at a price to both sides.

According to U.S. Bankruptcy Court filings, attorneys so far have billed Mesaba $4.9 million, and consultants and advisers have submitted bills totaling $5.7 million.

"What we're spending on restructuring is a fraction of what other airlines have spent, yet we're still dealing with the same complex issues including the same labor unions," Costello said. Those numbers include $4.1 million to Mercer Management Consulting for working on financial models and restructuring company costs and $2.7 million to the Hawaii-based Marr, Hipp law firm that has served as labor counsel.

Wychor and Winch said Mesaba's decision to use the same lawyers as negotiators and litigators has made it difficult to reach deals.

Costello denied that allegation, adding that it was more cost-effective to use the same law firm in both roles.

The unions also have employed their own army of attorneys. Wychor said the Air Line Pilots Association alone has allocated as much as $4 million for legal fees and other activities in the labor battle.

"You can make a compelling case that a lot of money has been wasted," said John Budd, a human-resources professor at the University of Minnesota.

"If they had spent more time negotiating and less time litigating, they very well might have reached a deal that everybody can live with much earlier in the process."

But George Singer, a bankruptcy attorney from Minneapolis, said the high costs are common when an airline is forced to reorganize.

"Airline bankruptcies are expensive, particularly where there are [labor] fights that are protracted," he said.

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