A federal district court judge struck a severe blow to the management of Mesaba Airlines last month when he overturned an earlier bankruptcy court ruling that gave the company permission to reject its labor contracts with its pilots, mechanics and flight attendants. Judge Michael Davis of the U.S. District Court of Minnesota reversed the earlier ruling because, in his words, Mesaba would not accept “snap-back” provisions that would return wages to existing rates at a later date. He also said management didn’t show that its proposals spread the burden of reorganization fairly among all affected parties.
In a separate ruling last month, a Minneapolis bankruptcy judge approved a debtor-in-possession plan that will give the bankrupt airline access to a $24 million loan from New York-based Marathon Asset Management for working capital and general corporate purposes. However, the deal hinges on Mesaba’s ability to lower its labor costs. The carrier claims it must cut its expenses by $66.4 million a year, including $17.1 million in labor costs, to emerge from bankruptcy. That amounts to about 19.4 percent–a giveback, according to the Association of Flight Attendants (AFA), that would reduce the salary of some cabin crewmembers to less than $10,000 after paying for insurance benefits.
Labor groups claim to have offered cuts of 14 percent–plenty, they say, to reach a deal. “We hope that this decision will encourage current management, if they remain in control of the airline, to come back to the table for productive discussions–this time with a proposal that is fair,” said AFA Mesaba unit president Tim Evenson. “Over 100 days ago, we presented the company with a cost-savings proposal that met its targeted concessions. We have heard nothing from them since. It is time for management to drop the litigation and negotiate fairly with the flight attendants.”