CAPTAIN JOHN PRATER, PRESIDENT
AIR LINE PILOTS ASSOCIATION, INTERNATIONAL
THE COMMITTEE ON THE JUDICIARY
US HOUSE OF REPRESENTATIVES
SEPTEMBER 6, 2007
Good morning Madame Chairwoman and members of the Subcommittee. On behalf of the 61,000 ALPA members who fly for 41 airlines in the U.S. and Canada, I want to thank you for this opportunity to describe how airline managements exploited this nation’s bankruptcy laws following the tragic events of 9/11, and how you can act to level a playing field that kept workers on the sidelines.
Unfortunately, I am no stranger to airline bankruptcies. Having flown for Continental Airlines for 29 years, I know first hand the effects that the Deregulation Act of 1978 had on our industry, and on pilots. During the early 1980s we fought this battle to prevent unilateral abrogation of labor contracts and advocated for bankruptcy legislation to protect American workers. Nearly 20 years later, we are back, fighting once again to restore balance to the Bankruptcy Code.
The events of 9/11 presented a narrow window of opportunity for airline managements to crush workers. And they took advantage of that window of opportunity with complete abandon. While pilots and other workers rallied to save our airlines after that dark day in September, managements—and the law we discuss today—forced us to give too much. Now that the emergency is over, it’s time to fix the bankruptcy code.
Since 2001 pilots have given more than $30 billion in concessions to save our airlines and our jobs. As one example, pilots at United Airlines endured two rounds of concessions that included pay cuts of 30 percent, followed by another 12 percent, harsher work rules, less job security, and a terminated pension plan. After United returned to profitability, those pilots have so far been rewarded with only a 1.5 percent pay raise and forms of profit-sharing worth about 0.5 percent of annual W-2 earnings.
In contrast, United’s CEO received a compensation package last year worth over $40 million dollars, a 3,533 percent increase over the prior year. I ask you, who saved United Airlines? The CEO who made the business decisions that led to bankruptcy or the pilots and the workers who did their jobs flawlessly, gave up salary and pension, and flew more hours? I challenge any person in this room or in this industry to raise their hand and tell me the pilots and their fellow United employees did not save this airline. Hearing no objections, let me tell you a few more bankruptcy horror stories.
Pilots at Hawaiian Airlines faced a Section 1113 motion by a profitable company as a lever to wrest employee concessions to either facilitate a sale or to improve the carrier’s competitive position. After having already made pre-petition concessions demanded by management to avoid a Chapter 11 filing, pilots were then stunned when their management approved a self-tender of the airline’s stock at well below market rates following September 11 and before the bankruptcy filing. You can’t make this up – no one would believe us.
Delta management used the bankruptcy process to its advantage at two airlines. First they exacted deep concessions from mainline pilots while in bankruptcy. Then, they had the gall to claim that wholly-owned subsidiary, Comair, was simply not profitable enough and also needed to enter bankruptcy. The bankruptcy judge did not dispute ALPA’s argument that Comair’s Section 1113 motion for a 22 percent pay cut would qualify some full-time pilots for federal welfare assistance. He simply ignored that fact. In the end, we reached a concessionary agreement, but it wasn’t pretty.
Not long after that, Delta was boasting that it had plenty of cash on hand to fight a hostile takeover attempt by US Airways. And the only reason US Airways could try to buy another airline was because it had used the bankruptcy process twice to cut wages and work rules and terminate all of its defined benefit plans.
Wait…it gets worse. The most egregious case of bankruptcy abuse involved Mesaba Aviation, which flies as Northwest Airlink, which was also in bankruptcy. Not only did Mesaba refuse to bargain in good faith, but its management argued in court against the pilots’ right to withhold their services if their contract was rejected – a right that every other party to a rejected contract has under the bankruptcy code.
Two bankruptcy courts, a federal district court, and the Second Circuit Court of Appeals affirmed that airline employees can be forced to accept the utter destruction of their contract, but may not strike in response. Again, we couldn’t make this up—we’re living it. The willingness of the courts to enjoin any strike in response to the imposition of unilateral terms has taken away any incentive for airlines to negotiate. Why bother, when you can dictate your terms in bankruptcy court?
Clearly, Congress must once again overhaul the bankruptcy code. Managements have found the loopholes in the law – and judges have been only too willing to let them exploit those advantages. The current bankruptcy code must be overhauled, so that the breach of a collective bargaining agreement can be sanctioned only and when truly necessary, and only to provide the employer with what it truly needs to ensure the company’s survival.
After the terrorist attacks of 9/11, plummeting passenger and revenue numbers caused serious financial hardship on our airlines. Pilots were prepared to give our share – and we did. But managements have pushed the envelope to the breaking point and beyond. We need to ensure fair treatment and equitable sacrifices from both executives and workers in the bankruptcy process. It’s time to end this outrageous abuse.
I leave you with one final point: Congress must restore the right to strike in response to a breach of workers’ collective bargaining agreement when a consensual agreement cannot be reached. Taking away the right to strike doesn’t just tilt the playing field. It entirely abolishes the playing field. Management wins by default.
Once again, I thank you for the opportunity to testify today. I sincerely believe that, working together, we can restore balance to the bankruptcy process so that when the next crisis hits, our air transportation system will serve the public’s and the nation’s best interests. I’m happy to entertain any questions you may have. Thank you.