Joesy:
The company has scheduled a hearing on September 10 to seek emergency relief from the IAM and possibly the CWA contracts.
It is my understanding the bankruptcy code says before a court can alter the contract, the debtor-in-possession (DIP) must prove to the court the changes are fair and equitable, the DIP provided the court with all of the information necessary to evaluate the proposed changes, the IAM rejected the proposal without good cause, and the balance of the equities favor contractual changes.
After the DIP presents its case, the IAM attorney's will present their defense on why their members rejected the company's terms. If the court finds the proposed changes, likely to be much deeper than originally proposed (for example the company could seek to end mechanic push backs & with the ATSB requiring UAL to give 20 percent cuts the company could argue a new bench mark has been established for deeper cuts), the court can order contract changes with IAM approval.
At this point the only IAM option would be to accept the agreement or strike, which could cause the immediate cessation of operations and liquidation of the airline, clearly a very real risk.
The contract rejection also places the DIP financing and federal loan guarantee at risk.
David Siegel, US Airways chief executive, said in a prepared statement, "We now regrettably must pursue changes to the mechanics' contract through the bankruptcy court if we are unable to quickly reach a new agreement." The company noted it was extremely disappointed by the mechanics' vote.
What the CWA and IAM must realize is there are specific labor concessions required to get the loan guarantee. The ATSB has been very quiet on their demands, but today's article in the USA Today indicates the Board is looking at a 20 percent across-the-board labor cost reduction. In the case of US Airways, Siegel opted for an appraoch that some believe was "socialized" with the pilot group taking a higher than 20 percent cut so other employee groups could take less.
Clearly the company has major leverage in court because the ATSB business plan has a July 1 implementation and the cuts must be retroactive to obtain the loan guarantee and the Texas Pacific MOU, DIP and emergence financing. The court is going to have to decide what's in the best interests of the creditors and it's my understanding the IAM leadership clearly identified the risks of the membership failing to ratify the restructuring agreement.
These are uncharted waters never before navigated by labor and when a party enters a proceeding, nobody usually wins and the results are at best uncertain.
I disagree with your comments and the IAM's decision could lead to a rpaid cessation of operations and liquidation of the company because the creditors committee will now enter the picture. I'm sure those disgruntled creditors who have been stiffed will not be happy with labor, who has further hurt their opportunity for a return of their investment.
It appears the company is going to make one last attempt to negotiate changes, which may need IAM leadership ratification or an immediate vote before September 10.
Chip