Judge implores Aloha Air and pilots to reach a deal
FEDERAL Bankruptcy Judge Robert Faris, calling the failed talks between Aloha Airlines and its pilots "terrible news," urged the two sides yesterday to reach an agreement before he issues a written ruling on whether the company can terminate the union's contract.
On a day in which he congratulated the airline and its flight attendants for reaching a tentative contract agreement, Faris wrapped up a six-day hearing by imploring the Air Line Pilots Association and Aloha to strike a deal. Aloha wants court approval to terminate the pilots' -- and previously the flight attendants' -- contract through a so-called 1113 motion.
Faris said he wouldn't immediately decide on the fate of the pilots' contract, and noted that by law he is allowed 30 days to rule unless the period is extended by mutual agreement. The 30-day period ends Nov. 28, the same day of a scheduled hearing to approve an reorganization plan for Aloha by two Los Angeles-based investment groups. That day also is the deadline for flight attendants to vote on ratifying their tentative contract, which would run through April 30, 2009.
"This is an important decision for pilots and their families," Faris said. "I want to do everything in my power to get it correct."
Faris said he would alert the attorneys from both sides before he's ready to rule in case they were at or near an agreement.
"There's a lot of moving parts," he said. "Let's let the process play out for awhile."
During the hearing, ALPA attorney Daniel Katz said the pilots were willing to continue negotiations even though Aloha had violated a bankruptcy principle by repudiating a letter it signed during the bankruptcy that it wouldn't seek to terminate the pilots' contract.
Aloha attorney Charles Dyke said terminating the pilots' contract was necessary to avoid liquidating the airline. He repeatedly said there was only one investor in Aloha and that the combined entity of Yucaipa Cos. LLC and Aloha Aviation Investment Group would walk away if the pilots' defined-benefit pension plan wasn't terminated.
Katz said lead investor Yucaipa didn't show up at the hearing and thus it wasn't known if the company would be willing to accept an alternative arrangement.
But Dyke said the reorganization plan clearly called for the termination of a defined-benefit plan and Yucaipa wasn't needed at the hearing.
Afterward, Aloha spokes-woman Stephanie Ackerman said the two sides will continue talking so "we can come to a consensual agreement."
Steve Schreiber, attorney for the federal Pension Benefit Guaranty Corp., told Faris that the airline could afford all of the unions' pension plans.
Schreiber said Faris' ruling could have a monumental effect on the PBGC if the judge throws out the pilots' contract. The PBGC, a federal agency that guarantees pension plans, reported yesterday that its deficit for the fiscal year ended Sept. 30 was $22.8 billion.
"The PBGC is at a crossroads," Schreiber said. "Just to make your day, you may be deciding not only the fate of Aloha but the fate of the agency," he said.
Katz said the investment return of the pilots' pension plan has been exceeding its target rate, and that over the next six years the airline would see little difference in liability whether it keeps or terminates the plan. With the pilots' proposal to retroactively freeze the plan to Jan. 1, 2005, Katz said the airline would be liable for $18 million during the next six years. Under the airline's proposal, it would pay $16.8 million through supplemental payments to the pilots' defined-contribution plan.
Dyke said, though, that Aloha was most concerned about the future risk of the pension plan since a defined-benefit plan places all the risk on the employer.
Meanwhile, Karen Nakaoka, vice president of Aloha's flight attendants union, said the flight attendants won one of their main demands -- a 12-hour rest instead of the 8 1/2 hours that the airline had been seeking.
However, she said that future retirees now will have to pay their own medical costs instead of having them paid entirely by the company.
"It remains our position that the company didn't have the right to file this 1113, but even though it's the third round of concessions in less than three years, we recognize the need for further concessions to help the company survive," Nakaoka said.