Ahead of a key court
decision, pilots’ union
talks of a strike

A judge must decide whether it is
necessary to force a labor contract
on Hawaiian Air pilots

A federal bankruptcy judge said he was "thunderstruck" when Hawaiian Airlines pilots previously rejected a tentative labor agreement with the company and urged the two sides yesterday to reach a deal before he forces one upon them.

"Getting an agreement in this case is like a shotgun marriage as opposed to a regular marriage," Bankruptcy Judge Robert Faris said yesterday during the wrap-up of a four-day hearing. "If you want a shotgun marriage, I'll give it to you. But it's usually not good for either side."

Faris said he had a lot to think about and read before determining whether to grant the company's motion to impose contract terms on its pilots. He said there was a human dimension to his decision and he wanted "to get it right."

"I'll get done as rapidly as I can and then I will decide," he said.

Faris said the company's contract proposal had met the test of being fair and equitable but that the toughest question was whether it was necessary.

"Necessary (under the Bankruptcy Code) doesn't mean absolutely essential," he said, but "I think necessary also means something more than desirable."

Air Line Pilots Association attorney Richard Seltzer said union members would consider striking if a contract was imposed on them.

Bruce Bennett, attorney for Hawaiian Airlines trustee Joshua Gotbaum, said the company would take action against strikers.

Seltzer also reiterated that the company is economically viable and said pilots would be eligible for contract rejection damages equal to the 100 percent recovery that the airline's unsecured creditors will receive. Bennett disputed that claim.

Faris expressed his displeasure that a year's worth of negotiations failed to produce a ratified contract. The pilots last month voted down a tentative agreement, 144-122, that had been recommended by their union representatives.

"When I first heard of the tentative agreement, I was struck at how far toward ALPA's proposal the company had come," Faris said. "When ALPA rejected it, not only was I struck, I was thunderstruck."

Both sides indicated a willingness after yesterday's hearing to resume talking.

"This process is obviously painful for everybody, but I think it also will help Hawaiian Airlines get out of bankruptcy with new labor contracts one way or another," Gotbaum said.

Kirk McBride, master executive council chairman for the Hawaiian ALPA unit, said the strike threat is more than a bluff.

"That question will be answered by the pilots and, depending on the circumstances at the time, it's certainly something that's a possibility," he said.

Jim Giddings, the Hawaiian ALPA unit's negotiating committee chairman, agreed the company and union need to get back to the negotiating table.

"That's really what we should be doing now," he said. "The company is really misusing the bankruptcy process here to force an agreement on the pilots."

Faris said the union was right when it said it would be unprecedented to grant financial relief to an airline like Hawaiian that was coming off of two straight years of profits and is projecting another profitable year.

"But there's a first time for everything," Faris said.

Faris said he was concerned about the effect on revenues that the company would incur from increased competition. He also noted that the airline needed to remain competitive and that there was "overwhelming pressure" in the airline industry to do away with defined-benefit retirement plans. Changing the retirement plan is a key point of disagreement between the company and pilots.

The three-year contract being proposed by Hawaiian in its court motion calls for 2 percent annual wage increases but immediately converts the defined-benefit plan for pilots under age 55 to a defined-contribution plan with annual company contributions of 17 percent of a pilot's wages. The traditional pension plan would remain for pilots 55 and over. The proposal also gives the company more flexibility in work rules than in the tentative agreement.

In a defined-benefit plan, a company contributes all the money and absorbs the risk that could be incurred from declining investments. In a defined-contribution plan, such as a 401(k), the employee chooses the types of investments and is responsible for the resulting risk and return.

The contract rejected by the pilots allowed for 1 percent annual wage increases for the first two years followed by wage arbitration the third year tied to wage levels at other airlines. It also offered a fallback plan on the pension issue if a new retirement plan wasn't negotiated between now and Jan. 1, 2012. The fallback agreement allowed the pension plan to remain in place for seven years. After that time, pilots who are now 50 and older would be allowed to stay in the plan while those under that age would be converted to a defined-contribution plan in which the company would contribute 15 percent of the local union's annual total wage cost.

Both contracts were constructed to keep the company's pilot labor costs flat at $54 million a year.