Enilria From Canada, joined Feb 2008, 6775 posts, RR: 14 Posted (5 years 5 months 2 weeks 3 days 14 hours ago) and read 1803 times:
I didn't include them because they are so lengthy, but the Teamsters also presented several precedents showing that "boot-strapping" is not an acceptable 1113 justification.
Frontier is using the §1113 process to eliminate the jobs of 130 mechanics—30% of all Teamsters and about half of all mechanics—and to slash their wages and benefits (Stocker Dec., ¶17). Alone among Frontier’s employees, Teamsters are having their pensions eliminated completely (for a savings of less than $400,000 out of tens of millions allegedly needed) (Stocker Dec., ¶¶21, 130). Frontier is abusing the bankruptcy process and §1113 for the exact purpose prohibited by Congress—as an excuse to rid itself of the union and of contract provisions that it perceives as undesirable, but which have no appreciable impact on its emergence as a viable carrier.
The complete inadequacy of Frontier’s motion is manifest: It never presents the alleged business plan, the overall deficiency in its cash position, or the labor-cost (let alone Teamster-labor-cost) share of the needed remedy. Its argument consists primarily of claiming that subcontracting has become an industry-wide practice; and that it needs to reduce its costs below those of one competitor, Southwest Airlines, which while subcontracting some of its maintenance work, nonetheless has much higher maintenance labor costs than Frontier (Wilder Dec., ¶25; Craun Dec., ¶6).
Frontier’s legal position boils down to an assertion that it promised the court on August 5, 2008 it would not assert: That the DIP covenants, approved on the lesser and now-outlawed business judgment standard, at least insofar as collective bargaining agreements are concerned, “force” the court to approve rejection of labor agreements notwithstanding Frontier’s inability to meet the statutory criteria. Frontier thus raises the spectre of its own default and resultant liquidation unless the court grants its §1113 motion on any standard. This shameless bootstrapping was predicted (accurately) by the Teamsters in the DIP motion hearing. The court then assured the parties that it would not be amenable to this form of bootstrapping. Frontier nevertheless shamelessly and repeatedly argues that it has painted itself into a legal corner, from which it can only be rescued by a judicial hammer to break the union and the contract.
Frontier pursued the Teamster negotiations with a preconceived agenda that it had to achieve a particular set of concessions agreed upon with outside parties (the lenders), in violation of the §1113 standard of good faith. The real bargaining over the labor contracts took place between the lenders (who are not parties to the contract) and
Frontier long before the airline even let the union see the proposal.
The proposal was in direct contradiction to the prior statements of Frontier’s Maintenance Vice-President, Ronald McClellan, reported in the news article dated September 6, 2007, which confirmed the Company’s commitment to performing maintenance in-house, stating “When you have people wearing Frontier uniforms and getting a Frontier paycheck, there is an enhanced safety element.”
While the Company provided what it termed its C-check analysis to support its proposal for subcontracting, on questioning the Union learned that the Company did not have a request for proposal or a bid from a subcontractor for the C-check work now performed by 130 Teamster mechanics (Wilder Dec., ¶30). The estimate was created from a bid to perform C-checks on six planes in March 2007 by a company named Aeroman which had not been able to perform the work because of a lack of hangar space (Wilder Dec., ¶30).
There is a second, deeper flaw in the motion: To the extent Frontier has presented a business plan at all, it is not shown to be viable. Frontier argues that it must subcontract heavy maintenance because it plans decrease capacity and thus will have less need for mechanics. Decreased capacity leads to higher fares—it is in fact the reason why almost all airlines today are reducing capacity. At the same time however, Frontier hopes to expand its capacity in Denver to compete more effectively against United and Southwest. This expansion will require more, not less, service. Frontier assumes it will suffer the negative effects both of increased and decreased capacity—that it will not be able to raise fares despite decreased capacity in the face of a rising demand; but it also assumes it will be able to increase its market share in Denver despite having a smaller fleet.
Enilria From Canada, joined Feb 2008, 6775 posts, RR: 14
Reply 1, posted (5 years 5 months 2 weeks 3 days 13 hours ago) and read 1773 times:
Quoting Enilria (Thread starter): Frontier hopes to expand its capacity in Denver to compete more effectively against United and Southwest.
I would also question F9s quoted, but vague new business plan "expand its capacity in Denver to compete more effectively against United and Southwest". That seems like nonsense given that they just shrank saying they couldn't compete with WN. Even if they do get their costs down, the problem isn't so much that WN's costs are lower (even though they are), the problem is that WN is gigantic. WN can afford to lose money if F9 comes out swinging again.
Does anybody think that WN will pull back if F9 announced plans to add 30 flights back into DEN? WN is just going to match it.
Sometimes the prudent thing to do is to find the right level of capacity and leave it there (just ask YX). Either expand somewhere else or don't grow.
They can't beat WN, they need to figure out how to live with them or work around them.
Petteri From United States of America, joined Aug 2007, 264 posts, RR: 0
Reply 2, posted (5 years 5 months 2 weeks 3 days 13 hours ago) and read 1730 times:
Could the growth being talked about here be Lynx? I haven't seen any evidence of mainline growth plans for Denver. Where exactly is there a statement from F9 that there are plans for additional growth for DEN? Of course every airline is going to say that they "want" to grow, even in the face of capacity reductions. But outside of vague statements, what is the union talking about here?
As far as competing with WN goes, it just depends on how long WN wants to sustain losses at DIA to archive the market penetration that they want there. Again, the unknown here is what UA can or is willing to do in Denver. Frontier is Denver, WN wants to be in Denver, what are UA's plans, so far, they haven't changed that much.
The above comments are my personal comments and in no way should be viewed as the views,policy or statements of JetBlue
Enilria From Canada, joined Feb 2008, 6775 posts, RR: 14
Reply 3, posted (5 years 5 months 2 weeks 3 days 13 hours ago) and read 1694 times:
Quoting Petteri (Reply 2): Of course every airline is going to say that they "want" to grow, even in the face of capacity reductions. But outside of vague statements, what is the union talking about here?
It is in F9 1113 filing to strike their contract. Those documents are several hundred pages so I can't recite chapter and verse, but that is what they are referencing.
I doubt they really plan to expand in Denver. It is probably just a B.S. smokescreen that the Teamsters have caught on to. I would hope they have more exotic plans than that. Mariner seems to think they do. I think the point is that there is no business plan and without one the Teamsters argue what is at the end of the rainbow if they concede?
Quoting Petteri (Reply 2): Could the growth being talked about here be Lynx?
I agree that any growth in Denver is probably Lynx, but F9 describes how the growth would benefit the IBT in the 1113 filing. There are no IBT members at Lynx, so it is either double-speak or it would have to be mainline. I suspect the former which is why the IBT is incredulous.