In re Continental Airlines Corp.
| Citation | 64 BR 882 |
| Decision Date | 27 June 1986 |
| Docket Number | Bankruptcy No. 83-04019-H2-5,83-04021-H3-5 and 83-04022-H3-5.,83-04020-H1-5 |
| Parties | In re CONTINENTAL AIRLINES CORPORATION, Continental Air Lines, Inc., Texas International Airlines, Inc., TXIA Holdings Corporation. |
| Court | United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Southern District of Texas |
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John J. Gallagher, David Callet, Charles Warren, Akin, Gump, Strauss, Hauer & Feld, Washington, D.C., for Continental.
Jay D. Roth, Larry C. Drapkin, Taylor, Roth & Bush, Los Angeles, Cal., for Union of Flight Attendants.
Harvey R. Miller, Bruce R. Zirinsky, Weil, Gotshal & Manges, New York City, Myron M. Sheinfeld, Lenard M. Parkins, Sheinfeld, Maley & Kay, Houston, Tex., for Continental Air Lines and Texas Intern. Airlines.
Bruce Simon, Michael E. Abram, James L. Linsey, Cohen, Weiss & Simon, New York City, Helen Brattin, Schwartz, Waterman, Fickman & Van Os, Houston, Tex., for Air Line Pilots Assn.
Claude Montgomery, Booth, Marcus & Pierce, New York City, for Official Union Labor and Pension Creditors' Committee.
FINDINGS OF FACT AND CONCLUSIONS OF LAW WITH RESPECT TO CLAIMS FOR FURLOUGH PAY FILED BY INDIVIDUAL PILOTS, FLIGHT ATTENDANTS AND THE UNION OF FLIGHT ATTENDANTS
The following facts are either stipulated, uncontested or established by the evidentiary record in this case, of which the Court takes notice and is considered a proper and adequate basis on which to make these Findings and Conclusions:
1. On September 24, 1983, Continental Air Lines, Inc. and Texas International Airlines, Inc. filed petitions for reorganization under Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. § 1101, et seq. Upon filing the bankruptcy petition, Continental temporarily suspended all domestic service and on September 27, 1983, Continental began rebuilding that service by reinstating a limited portion of its domestic service, initially requiring fewer employees than immediately prior to bankruptcy. The active employees worked under "emergency work rules" and were generally paid lower wages and benefits than they had received before the filing of the petition.
2. In response to Continental's implementation of the emergency work rules, the Air Line Pilots Association, International ("ALPA") and the Union of Flight Attendants ("UFA") called strikes which began October 1, 1983. The International Association of Machinists and Aerospace Workers ("IAM") had previously called a strike of all mechanics and related employees which began on August 13, 1983. The UFA and IAM strikes were terminated on April 17, 1985 when the unions instructed their members to offer unconditionally to return to work. The ALPA strike was terminated on October 31, 1985 pursuant to an Order and Award issued by this Court in accordance with procedures agreed to by ALPA and Continental.
3. Continental filed a Motion To Reject its collective bargaining agreements with ALPA and UFA on September 27, 1983. Following an extended hearing this Court approved Continental's motion to reject its collective bargaining agreements with ALPA (Order of June 19, 1984) and UFA (Order of December 5, 1984). Each contract rejection is retroactive to September 24, 1983.
4. This Court has previously found that "had Continental not made its unilateral changes in pilot pay and work rules, it would have been unable to continue its operations for very much longer for want of necessary cash and, because it could not compete effectively with the low cost carriers in direct competition with it, it would have continued losing money until it closed its doors." Findings of Fact And Conclusions of Law Relating To The Rejection Of The Collective Bargaining Agreement with ALPA ¶ 28; see In re Continental Air lines Corp., 38 B.R. 67, 71-72 (Bankr.S.D. Tex.1984); Memorandum of Authorities Authorizing Rejection Of ALPA Collective Bargaining Agreement at 12-13, 30. The Court also found that "without substantial concessions from the UFA contracts, Continental would run out of money and go out of business." Findings of Fact And Conclusions of Law Relating To The Rejection Of Collective Bargaining Agreements with UFA at 8.
5. This Court has also found that the emergency work rules applicable to pilots and flight attendants were modeled on work rules in use at Braniff Airways, Inc. and Southwest Air Lines, and that a substantial proportion of the unionized employees at Continental have indicated, by electing to cross the picket lines, "their willingness to work at the wage levels and under the working conditions (including increased productivity) offered by Continental." Memorandum Of Authorities Authorizing Rejection Of ALPA Collective Bargaining Agreements at 47-48; see Findings Of Fact And Conclusions Of Law Relating To The Rejection Of The Collective Bargaining Agreement With ALPA at ¶¶ 31, 32; Findings Of Fact And Conclusions Of Law Relating To The Rejection Of Collective Bargaining Agreements With UFA at 6-7, 10.
6. This Court has previously found that the striking pilots and flight attendants retained their status as employees during the time they were on strike. See Uncontested Facts And Conclusions Of Law Relative To Debtors' Motion For Summary Judgment With Respect To Contract Rejection Claims Of Strikers (Sept. 10, 1985). This Court specifically found that upon filing its petitions for reorganization, "Continental immediately went on a campaign to get the remaining pilots to agree to fly under the emergency work rules," and that once the October 1, 1983 strikes began, "Continental maintained a telephone `bank' in which pilots were called and requested to fly." Memorandum Of Authorities Authorizing Rejection Of ALPA Collective Bargaining Agreements at 22. This Court has further found that Continental "made a strenuous effort to get striking pilots to return to service," and upon "instructions from its chief operating officer, Continental delayed hiring replacement pilots until it felt it had to do so to service its re-expanding route system." Id. at 22-23.
7. Although certain management, clerical and maintenance employees were furloughed on September 24, pilots and flight attendants were not furloughed. The pilots and flight attendants were so advised by letters dated September 24, 1983. Those letters expressly stated that furloughs would apply only to management, clerical and maintenance employees. In addition, John Adams, Vice President of Personnel, notified the chairman of ALPA's negotiating committee that pilots were not on furlough status but were considered active employees. There is no evidence that Continental informed pilots or flight attendants that they were being furloughed, or treated them as furloughed employees. No pilot or flight attendant received notice of furlough.
8. Beginning on September 24, Continental officials began calling pilots to ask whether they would be available to work under the Emergency Work Rules when operations resumed on September 27, 1983. The unavailability of pilots curtailed Continental's ability to resume and expand its operations following the 3-day shut-down. Memo.Op. at 22-23.
9. The furlough provisions of the ALPA collective bargaining agreement ("Red Book") required Continental to give pilots to be furloughed thirty days notice of furlough. (Sec. 23-3, A.) Affected pilots were to be allowed to bid on a system-wide basis and displace more junior pilots. (Sec. 23-2, D.) The amount of furlough pay was to be based on the pilot's years of service and was payable in a lump sum, regardless of the length of the furlough. Pilots were eligible to receive between one-half month and five months of salary as furlough pay. (Sec. 23-6, A-C.) This Court has already held that compliance with these ALPA Red Book provisions would have been "physically impossible" if the temporary shut-down of domestic operations were viewed as a "furlough". See Findings of Fact, ¶ 27 (Aug. 17, 1984).
10. The ALPA Red Book expressly exempts the Company from any obligation to provide either notice of furlough or furlough pay where the reduction in force "is occasioned by a strike, work stoppage, act of God or circumstances over which the Company had no control."
11. Under the furlough provisions of the UFA collective bargaining agreement ("Black Book"), Continental was required to give furloughed flight attendants fifteen days notice of a furlough. Flight attendants who would be potentially affected by a reduction in force were to be allowed to bid on a system-wide basis and displace more junior flight attendants. Attendants were eligible to receive two weeks of salary as furlough pay.
12. Under the furlough provisions of the TXI-AFA collective bargaining agreement ("Brown Book"), TXI was required to give furloughed flight attendants fifteen days notice or two weeks pay, with similar bidding procedures.
13. Both the Black Book and the Brown Book provided for exceptions to the furlough pay provisions, however, requiring no notice when a reduction in force is caused by a "strike, work stoppage or act of God" (Black Book § 18 S) or "strike, work stoppage, act of God, or circumstances reasonably beyond the control of the Company" (Brown Book § 12 D).
14. This Court has previously held that Continental's management made exhaustive attempts, prior to September 24, 1983, to renegotiate its collective bargaining agreements with ALPA and UFA to permit the Company to survive as a going concern. The temporary shut-down and restructuring of operations that occurred on September 24, 1983 was a desperate last-ditch effort to save the Company, and did not take place until after the unions had denied Continental the necessary relief. See Memorandum of Authorities Authorizing Rejection of ALPA Collective Bargaining Agreement at 12-13.
15. Despite Continental's efforts to find a way to survive economically prior to the bankruptcy, Continental was unable to do so and filed for...
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