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STAR-BULLETIN FILE Aloha Airlines was down to $3 million in cash when it filed for Chapter 11 protection from creditors late last year, a judge said. That was only enough for to cover two to three days of operations.

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Aloha’s machinists
face losing contract,
judge warns

If the airline's mechanics reject
the company's proposal, the court
can throw out their entire contract

A federal Bankruptcy Court judge, acknowledging that it's "a real possibility" Aloha Airlines could go out of business, implored the company and its machinists union to reach a new contract.

Judge Robert Faris yesterday delayed for 16 days a hearing that would allow Aloha to impose a contract on the airline's mechanics.

Sharon Levine, a New Jersey-based attorney for the International Association of Machinists and Aerospace Workers District 142, requested the delay after telling Faris that some of the 250 union members did not know they could lose their contract if they reject the company's proposal.

"They were under the impression that there could be the imposition of certain modifications, not the loss of their agreement in its entirety," Levine said.

Under bankruptcy law, Faris' only two options are to keep the contract intact or eliminate it entirely. If the contract is thrown out, Aloha can impose whatever working conditions it wants on the machinists union.

"The worst deal you can make is probably better than the best deal I impose on you," Faris said.

Faris took the opportunity to stress the airline's precarious financial condition to the courtroom packed with mechanics. He said the airline had just $3 million in cash for day-to-day expenses when it filed for Chapter 11 bankruptcy -- about two to three days' worth of operations, according to Faris' rough calculations. He said Aloha was able to boost that amount to $10 million at the end of January because it didn't have to pay its aircraft lessors during the month.

"I know from the Hawaiian Airlines case, when they're below $75 million, they start sweating," Faris noted.

Aloha, which has reached contracts with the company's four other union groups, is seeking to impose a contract on the mechanics and inspectors that includes a 10 percent pay cut, outsourcing heavy-machinery work, and freezing the group's pension plan. Aloha's mechanics and inspectors have said that the airline has engaged in bad-faith bargaining, sought a disproportionate share of concessions from the union, and failed to establish that the changes to its contract are necessary.

"In outsourcing, a bunch of people will lose their jobs," Faris said. "But there is a real possibility that this company could fail and everybody loses their jobs. I hope the union members and management keep this in mind when they make their decision."

Aloha attorney Sheldon Kline said afterward that the mechanics will be given one final chance to ratify a contract after they previously rejected two tentative agreements and the company's "final" offer.

"The court made it clear that this is the mechanics' last and final chance to reach agreement on a contract," Kline said. "If we don't have an agreement by April 19, we will move to have the court reject the IAM 142 collective bargaining agreement in its entirety."

Aloha said it is seeking about $6 million in annual cost savings from the mechanics' unit as part of the company's total targeted labor savings of $37 million.

Kline contended in court that the machinists had been told they could lose their contract if they rejected the airline's proposal. He said later that Aloha hopes to reach consensual agreements on pension freezes with the Air Line Pilots Association; the Transport Workers Union, which covers dispatchers; and IAM District 141, which represents clerical workers. The company has said it wants to establish defined-contribution plans for those groups. The Association of Flight Attendants already has a defined-contribution plan.

Joseph Tiberi, communications representative for the IAM Transportation Department, said the motion Aloha filed seeking to impose a contract on the mechanics was unclear because the airline requested court approval for "modifications" in the contract.

"If the judge terminates the contract, Aloha could impose any contract it wants and the members lose any protections they have under their existing contract," Tiberi said. "There's no middle ground."

In January, a bankruptcy judge terminated the contract of US Airways' mechanics but held off implementing the order until the mechanics voted on the company's final offer with the understanding that they would lose their contract. The mechanics accepted it.