Aloha Airlines
wants permanent
pension freeze

The company will seek today to force
concessions on one of its unions

Aloha Airlines, which is seeking court-imposed concessions on its mechanics and inspectors, disclosed in a bankruptcy filing yesterday that it needs to freeze the pensions of several of its unions permanently.

The company will ask Bankruptcy Judge Robert Faris today to enforce a 10 percent pay cut, permit the outsourcing of heavy-machinery operations and allow a permanent pension freeze on the airline's unit of the International Association of Machinists and Aerospace Workers District 142. The union's members last week rejected a "final" contract offer from Aloha after earlier voting down two tentative agreements.

Aloha initially had sought to freeze the mechanics' pension permanently, then changed its position to a two-year freeze to reach an agreement with the union. The airline said it is again seeking a permanent freeze because fuel prices continue to rise and investors are requiring it to freeze the pensions.

IAM District 142 represents about 250 workers at Aloha.

The airline said freezing the union's defined-benefit plan will save Aloha $1.5 million in contributions for 2005 and 2006. Aloha also said it will seek permanent freezes on the Air Line Pilots Association; the Transport Workers Union, which represents dispatchers; and the unit of the IAM that represents clerical workers. Aloha said it would propose a defined-contribution plan, such as a 401(k), to have in addition to the frozen pension plans. Aloha's flight attendants already have a defined-contribution plan.

MatlinPatterson Global Opportunities Partners II LP, which recently withdrew its $65 million financing package for the airline, considered two-year pension freezes to be inadequate and wanted a permanent pension freeze, Aloha's filing said.

In March, Faris allowed the company to impose a 10 percent pay cut on the mechanics and inspectors until today but rejected the airline's request to extend the pay cuts through July 31. Faris also temporarily turned down Aloha's outsourcing and pension plan requests.

The mechanics claim that Aloha has engaged in bad-faith bargaining, sought a disproportionate share of concessions from the IAM mechanics, and failed to establish that the changes to its contract are necessary.

Aloha said it cannot achieve the cost savings it has projected without the mechanics' concessions and that its financial targets need to be met as a condition of its financing package with Goldman Sachs Credit Partners LP and Ableco Finance LLC, which each are providing $32.5 million to Aloha.

The IAM said it wants to continue negotiating with the company and that the airline has changed its position on important issues. Aloha argued that it is not bound to its tentative agreements and that circumstances have changed.