ALPA seeks to block contract rejection by Pinnacle

Washington DC
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The Air Line Pilots Association (ALPA) says Pinnacle's motion to reject its collective bargaining agreements with pilots should be denied because the airline "has failed to satisfy the stringent requirements for obtaining such relief" under Section 1113 of the US bankruptcy code.

The union's latest filing in Pinnacle's five-month-old bankruptcy case objects to the Memphis-based regional's move on 14 September to reject its collective bargaining agreements with the ALPA and the Association of Flight Attendants-CWA (AFA). A judge will hear the case next week on 16 October.

ALPA says that $33 million in annual cost improvements Pinnacle requested from the union in May has now risen to $59.6 million. It says that additional costs are unreasonable, citing that they are "not necessary for Pinnacle to emerge from bankruptcy" and would not be fair to pilots if imposed.

The costs increased because Pinnacle revised its annual labour cost savings target to $76 million in August, up from $43 million in its previous six-year business plan.

Pinnacle chief executive John Spanjers told Pinnacle employees when the cuts were announced that Delta's plan to reduce its 50-seater aircraft to opt for larger 76-seaters was the reason for revisiting the business plan.

Delta announced its plans to substantially reduce its 50-seat fleet in early June after forming a tentative agreement with ALPA. The pilots had ratified the contract by the end of the month.

Spanjers said that Delta was receiving bids "significantly below" what Pinnacle was charging for its Bombardier CRJ900 flying and brought in outside firms to investigate this cost gap. As a result, it calculated that it would need the extra $33 million from labour savings.

But ALPA says the carrier has not offered ample analysis to substantially justify the price difference it requested when it revised its cost savings target. It notes that the carrier assumed those costs with the same fleet plan it had outlined in its previous proposal.

ALPA says in the filing that Pinnacle had suspended negotiations with the union on 22 June, after the tentative agreement was reached, and said it needed to revise its business plan, says ALPA. Bargaining resumed in mid-August, the union says.

Pinnacle's unsecured creditor's committee says in a new filing that it hopes the reorganization process moves forward as fast as possible, noting that 70% of Pinnacle's controllable costs come from labour and need to be adjusted. However, it underscores that the unions and airline must work together.

"The committee is mindful that a delicate balance-having a cost-effective labor pact that ensures the future viability of the airline, on the one hand, and compensating labor with a market competitive pay and benefits package to ensure the retention and recruitment of the skilled labor necessary to run the airline, on the other hand-must be struck," says the filing.