Having reached a deadlock with its
pilots union despite months of negotiations, Hawaiian Airlines has
requested bankruptcy court approval to extend and modify its labor
contract with the Air Line Pilots Association (ALPA). The company said it
would continue to try to reach a negotiated agreement. Trustee Joshua Gotbaum said, “We would much rather negotiate an agreement
—as we’ve done with every other union—than have the court impose one.
We have proposed a contract that would preserve the 40-plus percent wage
increases the pilots have enjoyed over the past four years, plus
additional wage increases, plus a pension plan as generous as any in the
industry, plus profit sharing. Unlike every other airline, we’ve proposed
no wage cuts and no cost cuts. From the onset of negotiations we have
sought to keep costs from rising more, by moving to industry standard
productivity and benefits. We think that’s what Hawaiian needs to do at a
time when every one of our competitors is cutting costs and lowering
fares.”

In its filing with the bankruptcy court, Hawaiian noted that over the past
four years the airline’s labor costs had risen to the point that they were
now higher than those of its major competitors. Since airlines are now
competing primarily on the basis of low fares, Hawaiian believes that to
compete its costs, including labor costs, cannot be out of line.
Nonetheless, the airline pointed out that it has not proposed to cut wages
or overall labor costs, but instead only to keep them from rising even
more.

Hawaiian has already negotiated agreements that meet this test with the
Association of Flight Attendants, the International Association of
Machinists, the Network Engineers, and the Transport Workers Union. Taken
together, the contracts already negotiated cover 89 percent of the union
employees. All of these contracts were recommended by these unions for
ratification by their members; some have already been ratified, and others
are now in process. However, Hawaiian cannot exit bankruptcy until new
contracts are in place for all unions. Gotbaum said the court process
would provide a deadline and help speed Hawaiian’s exit from bankruptcy,
and that was the reason for the company’s action.

In its other labor agreements, Hawaiian has negotiated wage increases,
combined with improvements in productivity and changes in benefits so that
overall costs would neither rise nor fall. The airline would not discuss
the details of any of the agreements, but said that it had made similar
proposals to the pilots.

The company noted that it had negotiated cost cuts from many of its
suppliers, including its aircraft lessors, that in 2005 alone these would
save Hawaiian some $66 million. Nonetheless, Gotbaum said, Hawaiian could
not succeed if its labor contracts or costs were uncompetitive.

Gotbaum also noted that everyone recognizes the contribution of the pilots
and other employees to the airline’s recovery. “Hawaiian’s success is due
in large part to the people who are Hawaiian Airlines. Our goal is
contracts that are fair and recognize the extraordinary contributions of
our employees, while meeting Hawaiian’s competitive needs. If Hawaiian is
to get out of bankruptcy and survive, we need both.”

After consulting with ALPA, Hawaiian requested a hearing on its motion by
the bankruptcy court on February 14 and 15, 2005. In the interim, the
company will continue to attempt to reach an agreement.
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