Hawaiian trustee
to press givebacksJoshua Gotbaum says airline
unions must agree to concessions,
or he'll take the issue to court
Hawaiian Airlines trustee Joshua Gotbaum has told union employees that he will reluctantly go to court to alter the terms of their contract if they don't agree to $11.2 million in labor concessions that he is seeking by a March 15 deadline.
Less than a year ago, the unions relinquished more than $15 million in concessions.
In this latest round of proposed givebacks, Gotbaum is seeking $4.8 million from the Air Line Pilots Association, $3.8 million from the Association of Flight Attendants and $1.5 million from the International Association of Machinists. He also is seeking $1.2 million in concessions from noncontract employees.
The March 15 date coincides with the extended deadline for renegotiating the leases on three 767s and 11 717s with aircraft lessor Boeing Capital Corp. Gotbaum said he has told Hawaiian's creditors committee and the unions that he expects to have agreements in place by the end of the month and that the March 15 date for the employees would give union members time to ratify the agreements.
"The best way to negotiate changes at Hawaiian Airlines is to negotiate them, and that collective bargaining is far better than having to go to court," Gotbaum said last night. "But (I told the creditors committee and the unions) that if I had to go to court in order to implement changes that are necessary to get Hawaiian out of bankruptcy successfully, then I will."
Under the federal Bankruptcy Code, Gotbaum has the right to alter the terms of the union contracts and impose his own terms. But Gotbaum, who has projected the airline in 2004 to have net income of $16 million on $681 million in revenues, has yet to convince the unions that the cuts are necessary.
"I don't think he's shown any justification for it," said Jim Giddings, master executive council chairman for ALPA's Hawaiian Airlines unit. "He gave us his business plan presentation (last month in Los Angeles) and as of yet no backup information that really shows any of the concessions are necessary.
"He talks a lot about how the unions at Hawaiian have always given in the past. But our perspective is we've only made concessions when we've chosen to and only when we thought they were necessary. He hasn't provided the information yet that would indicate to us that it is necessary."
Gotbaum said, though, that yesterday afternoon he sent more than 100 pages to ALPA's financial advisers.
He said that he also intends to meet with the machinists directly next week -- since the union has no financial adviser -- and that he will provide financial data to the flight attendants' union after its financial adviser signs a nondisclosure agreement.
In spring 2003, under then-Chairman and Chief Executive Officer John Adams, the pilots conceded $8 million -- or 20 percent of the pilots' payroll -- in labor cost reductions with the machinists giving up $3.8 million and the flights attendants $3.5 million. The latest request, which accounts for roughly 14 percent of the pilots' current payroll, would bring the pilots' overall givebacks to $12.8 million, the flight attendants' sacrifices to $7.3 million and the machinists to $5.3 million.
Gotbaum said he's looked at many ways to increase revenues and reduce costs, such as buying fuel by the tanker full, booking passengers through the Web, changing the airline's route structure and renegotiating aircraft leases.
"Even with all of that," Gotbaum said, "the successful reorganization of Hawaiian includes the contribution of the employees."
Gotbaum said that because Hawaiian is based in the middle of the Pacific Ocean, its aircraft fly less per day than other airlines' planes and the company doesn't get as much use from its aircraft.
"That means that even with lower wages than at other airlines, our labor costs per dollar of revenue and our labor costs per seat miles are higher than other airlines," he said. "This is not obviously the employees' fault and not the management's fault, either. But since we are in a competitive world and are competing with American, United and ATA, we need to recognize that and have competitive costs. It's understandable why employees who know they've traditionally had lower wages than at other airlines, but who haven't been exposed to the fact their costs are higher, would need to be convinced."
In another development, sources say that San Francisco-based Vx Capital Partners, which invests in commercial aircraft and aviation assets, has indicated it could infuse $20 million to $40 million into Hawaiian Airlines if Vx Capital's potential reorganization plan is accepted. Vx Capital has had discussions with former Hawaiian CEO Paul Casey.
At least six plans may be filed, with the others coming from Gotbaum, parent company Hawaiian Holdings Inc., Hawaiian Airlines pilot Robert Konop, New York-based venture capital firm Resurgence Asset Management LLC, and a group affiliated with former Hawaiian CEO Bruce Nobles.
"It's a lot easier to talk about filing a plan than it is to actually file one," Gotbaum said.