Bankruptcy judge blocks Mesaba Airlines from canceling union contracts

by Jeff Horwich, Minnesota Public Radio
May 18, 2006


Mesaba pilots union chairman Tom Wychor reacts Thursday to a bankruptcy court ruling denying the company's request to cut the wages and benefits of its union employees. (MPR Photo/Jeff Horwich)

The judge in the bankruptcy case of Mesaba Airlines did something Thursday that does not happen often in U.S. bankruptcy courts. He ruled in favor of the airline's unions, denying Mesaba the right to impose pay and benefit cuts on its workers. Union leaders called it a victory. Mesaba says the judge's ruling hinges on a technicality. Both sides say they must keep talking if the company is to have a future.

St. Paul, Minn. — The ruling by U.S. Bankruptcy Court Judge Gregory Kishel runs 98 pages, but the effect of it boils down to essentially two words: "Keep talking." Eagan-based Mesaba had hoped Kishel would give it the ability to cut wages and benefits for pilots, flight attendants and mechanics, reducing labor costs by 19 percent.

The Northwest Airlink carrier declared bankruptcy last fall shortly after Northwest Airlines, and says drastic labor cost cuts are essential for the company's survival.

But Kishel denied the request, encouraging the two sides to work out their differences to save the company. Kishel acknowledged in his ruling that Mesaba's imposition of new employment terms might have brought on a strike by the unions, but he did not seem to give that scenario much weight in his opinion. His expansive and often indirect lines of reasoning left the airline and the unions free to draw their own conclusions about what it meant.

To Mesaba pilots union chairman Tom Wychor, the labor victory was a clear indication that Mesaba had overreached in asking for nearly 20 percent wage cuts and steep increases in employee costs for health care.

"Our costs are already in line with all the other carriers in the industry, and I think that's a huge thing," said Wychor. "What this company was seeking to do was drive us 10 percent below any other carrier in the industry. They were simply asking for too much that they didn't need."

They were simply asking for too much that they didn't need.
- Mesaba pilots union chairman Tom Wychor

Flight attendants union president Tim Evenson believes the judge knew workers would have very little to lose if Mesaba were allowed to impose its contract terms.

"It would qualify a lot of our flight attendants for food stamps and welfare. A new hire flight attendant, after paying for the health care that the company has proposed would take approximately $9,000 home a year," Evenson said.

Mesaba, in a statement, sees the judge's ruling quite differently. According to airline officials, the judge found Mesaba's proposed cuts "reasonable and necessary," and ruled against the airline largely on a technicality. Spokeswoman Elizabeth Costello says the company plans to address the issues, which she described as "limited."

"Mesaba will continue to meet with its unions to address their concerns about the bankruptcy and continue to seek consensual agreements. While we're disappointed in the delay, Judge Kishel states that if the unions do not recognize the dire financial condition of the company, Mesaba can refile the motion and it will be heard promptly," Costello said.

Judge Kishel did conclude his ruling by saying Mesaba can refile its request to impose labor cuts if its unions fail to recognize the depth of the concessions that are required. If this leads to a strike that destroys the company, Kishel essentially says, so be it.

While travelers and employees have gained some temporary stability, Mesaba's underlying situation has not changed. Its role as a feeder carrier for Northwest, its only customer, is subject to Northwest's own bankruptcy restructuring. Northwest is stripping Mesaba of all but its small turbo-prop aircraft, leaving it an extremely limited fleet with which to build a viable business plan. University of Minnesota labor relations expert John Budd says if this ruling is a victory for the unions, it is a small one.

"This does give labor a little bit of bargaining leverage, but the financial realities of the industry are out there for all to see," said Budd. "So this doesn't give labor a lot of additional leverage."

Mesaba's unions say they recognize the need for labor cuts, though officials maintain they cannot be as deep as the company has proposed. They say they look forward to working with Mesaba management to find not only an acceptable level of concessions, but a business plan that gives Mesaba some sort of future.