Hawaiian acts
to force labor deal

The airline, seeking to exit
bankruptcy, says contract
negotiations with its pilots
union are at an impasse

Hawaiian Airlines declared yesterday it has reached an impasse with its pilots union and asked federal Bankruptcy Court to modify the pilots' contract.

Also yesterday, the company said its operating profit in December fell nearly 54 percent to $6.2 million from $13.4 million a year ago.

The filing of the motion, which was expected, follows several months of negotiations between the two sides. Another meeting is scheduled for Tuesday in Los Angeles.

Hawaiian Airlines trustee Joshua Gotbaum said he felt he had no other choice than to proceed with the action after having reached agreements with the company's other five union groups. In a conference call between the main parties last Friday, the airline said it might file the motion this week.

"We would much rather negotiate an agreement -- as we've done with every other union -- than have the court impose one," Gotbaum said yesterday.

Jim Giddings, negotiating committee chairman for the Air Line Pilots Association's Hawaiian Airlines unit, said filing the motion could strain negotiations.

"We're disappointed that the company has filed this motion and we think that this would tend to make it more difficult to reach a negotiated resolution," Giddings said. "But nonetheless, we continue to be willing to sit down and meet with them to see if we can come to a consensual agreement."

Gotbaum said he didn't think it was fair to keep the other union groups in limbo while negotiations between the company and pilots dragged on.

"We filed the motion to create a deadline so that one way or another we can complete our labor negotiations and get Hawaiian out of bankruptcy," Gotbaum said.

The three-year contract that Hawaiian proposed in its motion offers 2 percent-a-year wage increases followed by an arbitration provision to adjust wages up or down depending on what the rest of the industry does. It offers profit sharing and includes a retirement plan that will keep the existing pension for pilots 55 and over. That plan guarantees pilots two-thirds of their final pay for life.

Pilots under 55 would have their current pension frozen but kept in place, and in the future would receive from the company 17 percent of their pay without having to make any contributions. The pilots would be responsible for deciding what funds to put the investments in as opposed to the current pension, where the company takes on the risk. Thus, under the company's proposed defined contribution plan, an under-55 pilot making $150,000 a year would receive $25,500 a year from the company.

However, the proposal also changes medical and other benefits that the company said brings deductible co-payments more in line with other airlines. It also includes contract changes that would establish productivity efficiencies the company said is similar to other airlines.

Gotbaum said the proposed contract preserves "the 40-plus percent wage increases the pilots have enjoyed" during the past four years. The company noted in its motion that captains flying trans-Pacific routes make $163 an hour.

"Unlike every other airline, we've proposed no wage cuts and no cost cuts," he said. "From the onset of negotiations, we have sought to keep costs from rising more, by moving to industry standard productivity and benefits. We think that's what Hawaiian needs to do at a time when every one of our competitors is cutting costs and lowering fares."

Giddings said the key issues involve retirement, disability, health care and compensation but declined to elaborate.

"I don't think that the differences are insurmountable but there seem to be some pretty strong philosophical differences that need to be addressed," he said.

Unless the pilots and the company come to an agreement, hearings on the motion will be heard Feb. 14 and 15 in Bankruptcy Court. The stalemate has resulted in the confirmation hearing of a trustee-backed reorganization plan being pushed back from Tuesday to Feb. 8. If no agreement is reached with the pilots before Feb. 8, then the hearing to confirm the plan would need to be delayed until after the Feb. 14-15 hearings.

"If we don't have an agreement on Feb. 14, the bankruptcy court will decide what the labor contracts are at Hawaiian Airlines," Gotbaum said.

Hawaiian, which has been in bankruptcy since March 21, 2003, cannot exit until it has agreements in place with all its unions. The company previously reached tentative agreements with its flight attendants, clerical workers, mechanics, dispatchers and network engineers. The dispatchers and network engineers already have ratified new contracts while the mechanics and clerical workers were voting yesterday. The flight attendants' vote is scheduled for next week. All the agreements are contingent upon contracts being reached with all union groups -- with or without the court's help.

Airline’s profit
nosedives 54 percent

Hawaiian Airlines ended a string of three consecutive monthly operating losses with an operating gain of $6.2 million in December but still saw its earnings plunge nearly 54 percent from a year ago.

Despite what is historically a strong month, Hawaiian said its operating results suffered due to higher costs and lower fares.

The airline had an operating gain of $13.4 million in December 2003.

Revenue fell 3.1 percent to $66.5 million from $68.6 million a year ago.

The company, which is required to file monthly operating reports with federal Bankruptcy Court, cautioned that the numbers are preliminary and unaudited and could be changed by year-end adjustments that will be available in March.

For the year, Hawaiian's operating profit declined 9.6 percent to $70 million from $77.5 million in 2003. Revenue rose 8.2 percent to $764.3 million from $706.1 million.

Operating expenses in 2004 rose 10.4 percent to $694.3 million from $628.7 million as fuel costs soared 40.9 percent to $136.8 million from $97.1 million.

"Hawaiian is usually profitable in December because of the holidays, but this year the combination of higher costs and more intense fare competition has taken its toll," Hawaiian Airlines trustee Joshua Gotbaum said.

The airline saw its unrestricted cash drop to $100.4 million last month from $118.9 million at the start of December. The airline had $87.7 million at the beginning of 2004.

Hawaiian filled 84.1 percent of its seats last month to equal its load factor of a year ago.