Aloha Air to seek
10% pay cuts,
sources say

The bankrupt carrier also
has started laying off
more workers

Aloha Airlines is seeking 10 percent pay cuts from its union employees for the second time in two years and has begun laying off union workers in its effort to realize about $60 million in cost cuts, according to people familiar with the situation.

The carrier, which filed for bankruptcy reorganization on Dec. 30, began sending layoff notices to pilots this week. Aloha also wants to reduce the number of flight attendants on its trans-Pacific flights from four to three to cut costs, and would lay off flight attendants in conjunction with a new contract that has yet to be ratified, the sources said.

In addition, Aloha Chief Financial Officer James Clarke testified at a creditors' bankruptcy meeting yesterday that Aloha didn't expect to get any lease payment reductions on the 13 Boeing 737-700s it uses for mainland flights. However, he said he expected to renegotiate lower prices on the 14 Boeing 737-200s Aloha uses for interisland flights.

"We lease aircraft (the 737-700) that is one of the three most popular aircraft types," Clarke said. "The lessors would just as soon take the aircraft back so I don't think we'll see changes in the leases, but we're working with the aircraft lessors for (payment) deferrals."

He added that Aloha is paying two to three times the market rate for the 737-200s and that he expects to renegotiate those rates to market levels.

Clarke said new contracts the company hopes to get from its five union groups will result in about $37 million in cost savings toward the $60 million target. He did not elaborate on any specific aspects of the negotiations.

Aloha, which has 3,325 union employees, has a ratified agreement with just one of its five union groups -- the clerical workers unit of the International Association of Machinists and Aerospace Workers. The airline and pilots also have agreed to a contract, but the pilots' Master Executive Council hasn't ratified the contract yet because the language still is being worked out. Unlike the other unions, the MEC, not the individual members of the Air Line Pilots Association, ratify the contract.

Airline spokesman Stu Glauberman said the layoff notices that just went out to pilots are a "direct result" of the elimination in mid-January of Aloha's Marshall Islands and American Samoa flights. Those layoffs come on top of the 10 other recently hired pilots who were laid off last month. The previous layoffs occurred partly because of the loss of the Marshall Islands and American Samoa flights, but also because the airline determined the pilots weren't needed in 2005 for possible expansion or to fill anticipated retirement slots, Glauberman said.

A source said more pilot layoffs are expected by the time the airline begins its new route schedule in April. The company is repositioning its planes by dropping Burbank, Calif., and Vancouver, Canada, service and adding two more daily flights to Orange County, Calif., and one extra daily flight to San Diego.

Aloha's clerical workers and mechanics also could face layoffs, but that could depend on what happens with the 737-700 negotiations, another source said.

Glauberman declined to confirm the 10 percent pay cuts and the reduction in trans-Pacific flight attendant staffing levels.

"We don't comment on speculative questions," he said. "We won't comment on any discussions with our employees."

In yesterday's 40-minute creditors' meeting, a handful of creditors individually addressed questions about their claims against Aloha to Clarke. Most of their claims were for work performed before the bankruptcy, so they would have to file a claim to get a full or partial recovery. Clarke said the airline is current on all its bills since filing for bankruptcy.

U.S. Trustee attorney Curtis Ching continued the meeting until March 31 so that creditors would have time to study Aloha's financial statement and creditor listings, which are to be filed by March 15.