Frontier Eyes Union Pact, Airline Asks Court to Break Contract So It Can Cut Costs

Frontier Airlines has asked a bankruptcy court for permission to break its contract with the Teamsters union as the carrier attempts to lower labor costs and move some maintenance work - including 130 jobs - to El Salvador.

The Denver-based company filed a motion Friday afternoon to reject its collective bargaining agreement with the International Brotherhood of Teamsters, claiming that the union is employing "stonewalling" tactics and stalling negotiations over concessions.

The collective bargaining agreement covers wages, benefits, job security and other employment conditions for about 425 Frontier mechanics, technicians, aircraft cleaners and related workers.

Frontier, trying to cut costs while reorganizing under bankruptcy protection, has said it needs to lower its labor expenses and reach new agreements with its unions to emerge from Chapter 11.

Even though it has already trimmed tens of millions of dollars in expenses through various initiatives, "Frontier projects that it will continue to lose money" under its current cost structure, the carrier wrote in the bankruptcy court filing. "Absent additional cuts to its labor and other non-fuel costs, Frontier has little hope of survival."

Frontier said its proposal to the Teamsters would save an estimated $5.6 million annually. The plan calls for an extension of temporary wage and benefit cuts implemented earlier this year, additional concessions for some workers and the outsourcing of Frontier's "heavy" maintenance operations to El Salvador. Heavy maintenance involves comprehensive, time-intensive checks as opposed to daily work done on planes.

The company said the work, currently located in Denver, would be performed by Aeroman, a subsidiary of a company based in Montreal.

The Teamsters union came out against Frontier's concession proposal on Thursday, arguing that the company did not demonstrate a need to outsource.

On Friday, Teamsters spokesman Matthew Fazakas said, "We'll see them in court."

Frontier said in Friday's court filing that it is at a competitive disadvantage when it comes to maintenance costs, as many of its competitors already outsource to countries where labor is cheaper. The company also is seeing a "diminished" need for heavy maintenance because of its plans to sell nine planes.

Frontier and the Teamsters have met several times in recent weeks to hammer out concessions, but they apparently made little to no progress.

There's still time, however, for the two sides to reach an agreement. A court hearing on the issue isn't scheduled for several weeks, and Frontier is set to meet with the Teamsters again later this month.

"We still hope to have productive negotiations . . . and resolve this matter without the court's intervention," said Frontier spokesman Steve Snyder.

Frontier filed for bankruptcy in April and hopes to emerge sometime next year. It recently cemented an agreement with its largest unsecured creditors for up to $75 million in loans. To receive $40 million of that total, however, Frontier must meet certain financial benchmarks and win new concessions from its unions.

Other carriers have been able to break their labor contracts in recent years while operating under bankruptcy protection.

But experts and observers differ on the value of outsourcing to other countries. Some say it's a huge money-saver that can help companies survive. Others say it creates more problems than it solves and creates numerous safety issues.

"I think it's devastating for labor relations and for employees," said Thomas A. Kochan, a professor at MIT's Sloan School of Management, who contributed to an upcoming book on airline labor relations. "These are good-paying jobs that are so critical to safety and security. I worry about it from a labor relations standpoint, from an industry safety standpoint and from the long-term impact it has on jobs."