From the Frontier (Union) Perspective...

derg

Apparently a "terse" writer
Staff member
June 22, 2009


Dear Fellow Pilots:

Frontier (including Holdings, Frontier Airlines, and Lynx) filed documents today with the bankruptcy court supporting a Plan of Reorganization (Plan) to be sponsored by Republic Airways Holdings Inc (Republic.) Republic’s offer begins the “auction phase” of the bankruptcy process that will end on August 11, 2009. During this auction phase other potential investors may submit competing bids for consideration by the court. Absent a better offer from another investor, and if Republic’s Plan is approved, they will acquire 100% of Frontier Airlines Holdings Inc. (Frontier) outright and fund Frontier’s emergence from Chapter 11 bankruptcy. In return Republic will pay $108.75MM, of which $28.75MM will be distributed to the Unsecured Creditors (including FAPA.) This potentially gives the Unsecured Creditors between 9 and 7 cents per each dollar of unsecured claim (depending on the final size of the unsecured claim pool).

Due in large part to our sacrifices and our continued commitment to providing the best service in the airline business, Frontier’s recent turnaround has been remarkable. In normal times, a successful turnaround such as this would no doubt attract significant interest from investors, but unfortunately these are not normal times. Many airlines have reported that the capital markets have their “no access” signs out and there is very little “at risk” money being made available to the industry. Despite innumerable overtures by Frontier management to investment banks, airlines, and hedge funds, Republic has surfaced as the only investor with a serious interest in Frontier, and as such, we must give Republic’s offer, along with its various terms, due consideration since Frontier simply cannot emerge from bankruptcy without receiving a significant cash infusion from a sponsor. The current $40MM DIP loan from Republic matures on December 1, 2009, and without a replacement loan Frontier would likely be forced to wind down its operation, sell its assets, and close the doors.

There are many terms and conditions within the Republic Plan that must be satisfied in return for this investment. Of interest to FAPA Members – the Republic Plan requires changes be made to our CBA including a 3 year extension (to March 2, 2015) of the amendable date and a change to Section 1.F allowing for “unlimited scope relief.” For all employees, the Frontier profit sharing plan will be replaced with a Republic profit sharing plan. Republic’s terms are initial “asks” and not changes that will be casually forced upon us. Republic has indicated that they plan to operate Frontier as a separate fenced off company and not merge seniority lists.

Republic is acting as an investor and has tasked Frontier Management to negotiate on their behalf, so we have begun negotiations over these terms with Frontier management. Once again, untenable circumstances shape our reality: capital market conditions dictate that we cannot simply dismiss these terms outright. We are forced to take a hard look at our circumstances just as we have had to each time concessions have been required of us. If negotiations are successful, these “asks” will become more palatable and still allow our Members and Frontier to move forward.

The CBA remains binding unless/until we agree to acceptable changes or unless/until the court, through contract rejection, forces changes upon us. In order to preserve our rights under the CBA we intend to dispute a breach of the Successorship language (1.H), which requires a successor entity acquiring the Frontier to assume the terms of our CBA in total. Republic is insisting we modify our CBA prior to their acquisition.

“1. This Agreement shall be binding upon any successor or assign of the Company unless and until changed in accordance with the provisions of the Railway Labor Act, as amended. For the purposes of this Paragraph H, a successor or assign shall be defined as an Entity, which acquires all or substantially all of the assets or equity of the Company through a single transaction or multi-step, related transactions.
2. No contract or other legally binding commitment involving a successor or assign shall be signed or otherwise entered into unless it is agreed as a material and irrevocable condition of entering into, concluding and implementing such transaction that the successor shall be bound by this Agreement, shall recognize the Association as the representative of the Pilots, and shall assume the employment of the Pilots. "

If we are able to reach an agreement with Republic and ratify changes to the CBA in accordance with what Republic seeks, the grievance will be dropped. If we aren’t able to reach agreement, we have the ability to object to the Republic Plan in court, but Republic has the ability to withdraw their sponsorship if we do not agree to the changes they are demanding.

In order to ensure that Frontier remains viable, our contract survives, and most importantly - that our jobs and futures are as secure as we can make them in these uncertain times, we must look at our situation as dispassionately as we are able. Negotiations between FAPA and Republic have begun and will be on the fast track. If another investor, prior to the deadline of August 10, 2009, makes a competing bid the auction will be held on August 11. Assuming we are successful in negotiating changes that we can live with, we intend to have roadshow style informational meetings starting after the July 4th holiday and prior to a voting period of at least 21 days. Sean Menke and Republic CEO Bryan Bedford have pledged to attend some of these meetings. This is the most important vote of the bankruptcy process and I encourage everyone to attend at least one meeting in order to make an informed decision prior to casting your vote. We will keep you advised of new developments as they occur.

Sincerely,


John Stemmler
President
Frontier Airline Pilots Association
 
So it sounds like the pilots can give up scope to save their jobs in the short term while Republic almost certainly moves to fully exploit "unlimited scope relief" (i.e. buys more 190s and transitions all of their flying to their own seniority list, the wage debate continues), or maintain scope and the original company starts to shut down by the end of the year.
 
Sounds like they're damned if they do, damned if they don't.

Let's face it, there is a reason why RH wants "unlimited scope relief." They have made a business in the past taking advantage of scope relief from major airlines, usually coming via bankcruptcy proceedings. In this case the agreement is, "you want money? Get rid of scope."

Perhaps they'll stay as fenced off companies. But let's see what happens when F9 pilots don't agree to salary cuts etc.
 
Sounds like they're damned if they do, damned if they don't.

Let's face it, there is a reason why RH wants "unlimited scope relief." They have made a business in the past taking advantage of scope relief from major airlines, usually coming via bankcruptcy proceedings. In this case the agreement is, "you want money? Get rid of scope."

Perhaps they'll stay as fenced off companies. But let's see what happens when F9 pilots don't agree to salary cuts etc.

... and thus it begins.

Anybody think regulated pilot minimums wages are a bad idea now?
 
... and thus it begins.

Anybody think regulated pilot minimums wages are a bad idea now?

Yes.

I don't want the Government telling me what I can earn. Can you not see the communist mentality in this?

If the market values my skills at $30k-$60k/year then that's what it will pay.

Sucks I got stuck in the FO seat, if I was a CA right now I'd at least be logging PIC and making OK money. Not that I can go anywhere though.
 
Yes.

I don't want the Government telling me what I can earn. Can you not see the communist mentality in this?

If the market values my skills at $30k-$60k/year then that's what it will pay.

Sucks I got stuck in the FO seat, if I was a CA right now I'd at least be logging PIC and making OK money. Not that I can go anywhere though.

I'm all for a free country and little government...but without the presence of morals and ethics you need more rules just to keep people from destroying each other. That's just my 2 cents.
 
Yes.

I don't want the Government telling me what I can earn. Can you not see the communist mentality in this?

If the market values my skills at $30k-$60k/year then that's what it will pay.
.

This goes back to the idea of "regulation/de-regulation."

Keep in mind the airlines despite being "deregulated" are still one of the most highly regulated industries out there. Aside from telling you what you're paid, the gov is all over us down to how and when we can use the bathroom.

Pay is a little different of an issue but it's worth looking at.
 
It looks like Frontier is done for. "unlimted scope felief" is a death sentence for the current pilots. It's a smart move on RAHs part rather than just out right demanding that the pilots be replaced with RAH pilots. This way the transition will occur slowly with the possibility of bringing the E190s or other mainline airplanes.
 
It looks like Frontier is done for. "unlimted scope felief" is a death sentence for the current pilots. It's a smart move on RAHs part rather than just out right demanding that the pilots be replaced with RAH pilots. This way the transition will occur slowly with the possibility of bringing the E190s or other mainline airplanes.

It's the precursor of another Frank Lorenzo-style Eastern/Continental debacle.

Just wait.
 
I know I'm gonna sound stupid... but what exactly does "scope" mean?
Scope is the section in an airline pilot working agreement that protects that pilot group from management outsourcing their flying. For example, a scope clause might start out as "No flying done by, for or in the service of the company shall be done except by pilots on XYZ Airlines Seniority list."
 
Yes.

I don't want the Government telling me what I can earn. Can you not see the communist mentality in this?

If the market values my skills at $30k-$60k/year then that's what it will pay.

Sucks I got stuck in the FO seat, if I was a CA right now I'd at least be logging PIC and making OK money. Not that I can go anywhere though.

The government already says what you can earn in a round about kind of way. Through the RLA the NMB dictates what the Union is allowed to negotiate for. If the NMB says the Union is asking for too high of a wage then they essentially shut down negotiations. This happened to XJT for about six months after we showed them our compensation proposal. The direct quote from the mediator was, "Come back when you've stopped smoking crack." He put us on ice for six months. This kind of thing has been going on since airlines and railroads have been under the RLA.
 
I know I'm gonna sound stupid... but what exactly does "scope" mean?

Surprisingly enough, a lot of pilots have neglected this part of the contract or have had to give up on it through pressure of management. That is why we have the continued degradation of the airline business. Why we have regionals flying half of all domestic flying.
 
When the dust settles in a a few years we will be left with perhaps 3 'legacy carriers' flying primarily lon-haul, interenational routes. The remaining flying will be handled by an equally paired down group of codeshares operating a fleet of 70-100 seat airplanes to feed the legacy partner. There will be less capacity in the future, higher fares, higher load-factors and higher yields/revenue passenger mile. All this adds up to fewer and fewer 121 jobs, with a job market flooded with applicants seeking the few positions available. I think this is what the airline industry wants, and I think it's a reality that we all better get ready to face sooner than later.
 
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