Judge Voids Mesaba's Power to Force Pay Cuts

Mesaba Airlines' power to impose concessions on its unionized workers was taken away Wednesday by U.S. District Judge Michael Davis.

Davis determined that U.S. Bankruptcy Judge Gregory Kishel erred in mid-July when he granted the airline the authority to nullify existing labor contracts with its pilots, flight attendants and mechanics. Ruling on an appeal by the carrier's unions, Davis decided that Mesaba didn't negotiate in good faith and failed a legal test requiring it to be "fair and equitable" in spreading the pain of its bankruptcy restructuring.

Without the authority to force pay cuts on union workers, Mesaba management now is left with two immediate options: liquidate a key provider of regional air service or negotiate deals that union workers will ratify.

Mesaba President John Spanjers warned Mesaba's 3,300 employees last week that they must quickly reach deals with the company or the carrier would impose labor cuts or "cease flight operations."

"We need to move from the court back to the bargaining table for real this time," said Nick Granath, an attorney for the Aircraft Mechanics Fraternal Association (AMFA). "This is not working for them to keep litigating this."

Mesaba, based in Eagan, filed for bankruptcy protection in Minneapolis in October. Nine months ago, it asked its unions to accept 19.4 percent labor cuts in contracts that span six years. Mesaba has been unable to secure deals meeting that target, and management cannot get its hands on $24 million in debt financing unless it reaches its labor savings goal.

"While we are disappointed with Judge Davis' decision and will review all of our legal options to address his concerns, we are committed to successfully restructuring this company," Spanjers said in a statement Wednesday. "What remains unchanged is the company's need to find a solution quickly to ensure the survival of the airline." He emphasized a desire to "reach consensual agreements with each work group."

Mesaba said it has scheduled meetings with the three unions "to share detailed information about the company's cash position, which is quickly deteriorating."

The pilots union offered 14 percent labor savings over three years, and pilot negotiators said in early August that they did not want to return to the table until Mesaba demonstrated substantial movement.

"If the company cannot pay competitive rates to the employees who work here, we'll simply have to work someplace else," said Tom Wychor, chairman of the Mesaba pilots union.

Carla Rogat, vice president of the Mesaba flight attendants union, said all of the unions want to join management in saving the company. But she stressed that for the airline to be worth saving, it must offer a viable future for employees.

She said Davis' ruling creates an opportunity for Mesaba to compromise with labor. "They can't simply use the courts to force their view of the world," she said.

In mid-July, Kishel approved Mesaba's request to void its current contracts. But he required the carrier to give the unions 10 days' notice. Mesaba has never given notice.

While Davis ruled that Mesaba met a majority of the legal standards for a contract to be abrogated, he wrote that he reversed Kishel because of "Mesaba's refusal to negotiate snap-back provisions" that would provide some ability for employees to get better compensation if the airline's financial condition improves.

Davis also said Mesaba failed "to demonstrate that its proposals fairly and equitably spread the burden of reorganization among all relevant affected parties particularly MAIR."

MAIR Holdings is Mesaba's Minneapolis-based parent company.

The unions have repeatedly criticized MAIR for taking money from Mesaba in recent years but distancing itself from its subsidiary when Northwest Airlines reduced Mesaba's fleet and missed payments.

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