Aloha Air makes plea for more concessions
The bankrupt carrier says it risks losing its loans and investors
Aloha Airlines, claiming it is getting squeezed from all sides, said in a motion in federal Bankruptcy Court over the weekend that it risks losing its loans and much-needed investment capital -- and ultimately faces liquidation -- if the airline doesn't further reduce its labor costs and improve productivity.
The carrier is asking Bankruptcy Judge Robert Faris for approval to restructure collective-bargaining agreements with its five union groups and to terminate the defined-benefit pension plans of the four groups that have them.
Aloha, entering its slowest travel period of the year, said it had a net loss of about $3 million in September and expects a net loss of $2 million this month. Aloha already has lost $16.5 million in the first eight months of this year.
"Given an industry shift to a (low-cost carrier) cost base and the constraints placed by investors and the company's (debtor-in-possession) lenders, Aloha will not be able to avoid illiquidity, much less compete profitably outside bankruptcy, unless it secures the relief it seeks," the motion said.
David Banmiller, president and chief executive of Aloha, said yesterday the airline has cut about as much as it could from other areas and that the pension plans and workplace rules need to be changed if the airline is to survive.
Banmiller said the price of fuel has gone from $1.29 to as high as $2.25, costing Aloha another $50 million a year. "That's not going away anytime soon," he said.
Banmiller also said new investors in Aloha cannot afford to continue paying for the company's defined-benefit pension plans.
But the Aloha Airlines unit of the Air Line Pilots Association accused management of flip-flopping on an earlier promise that the company would not to go to court to void their labor agreement.
"We have made every attempt to negotiate in good faith with this management team for a labor contract that benefits both the pilots and the company, and would create a seamless transition for the new investors," said David Bird, chairman of the master executive council for the Aloha pilots group. "Why they now would go back on their word, ask the court to reject our contract and risk having the new investors walk away from the table is beyond reason."
The pilots previously agreed to a 20 percent pay cut, productivity enhancements and a two-year freeze on their pension plan as part of nearly $12.5 million in concessions. In return, the pilots said, Aloha signed a letter of agreement agreeing not to seek rejection of the pilots' contract.
In last weekend's motion, Aloha said that $74 million in projected cost-cutting measures in fiscal 2005 have not materialized because of its pensions plans, inefficient labor practices and rising fuel prices, and that the company needs additional concessions to emulate low-cost carriers such as Southwest, Jet Blue and America West.
Banmiller said yesterday that any perception that the pilots and other unions would be left with greatly reduced retirement benefits is, in most cases, untrue because of the protection provided by the Pension Benefit Guaranty Corp., the federal agency that insures pensions.
"Probably about 90 percent (of union employees) will receive similar benefits to what they receive today," he said. "Other (unions) also have defined-contribution programs that are fairly substantial to assist them, particularly pilots and flight attendants."
Banmiller said the company contributes an additional 7 percent of the pilots' annual salary into each pilot's defined-contribution program, augmenting the pilots' defined-benefit plan.
Aloha contributes 10 percent of the flight attendants' annual pay into their defined-contribution program, Banmiller said.
"That's all 100 percent company money," he said. "It's not matching. We've been doing that for a long time."
A hearing on Aloha's motion is set for Oct. 28 and 31. Banmiller said hopes the two sides can avoid having to put the issue before the court and are continuing to negotiate.