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Republic Airways ponders employee concessions: But union complains about 'disingenuous' memo

March 7, 2005

A memo by Republic Airways warns of the need for employee concessions if ailing partner U.S. Airways ceases operations, Teamsters officials said.

The union representing 1,000 cockpit crew members and 600 flight attendants at Republic's Chautauqua Airlines unit has found itself-not the Indianapolis company-on the defensive, however.

Union leaders are wrinkled at what they say is a disingenuous memo Republic CEO Bryan Bedford sent to workers about seven weeks ago, alleging that the union has withheld information from pilots and flight attendants about potential concessions.

The union said Republic required its leaders to sign confidentiality agreements preventing them from disclosing to workers any details of discussions the two began last September about U.S. Airways.

Those discussions involved "speculative doomsday scenarios," according to the Teamsters, which insists the regional airline has not presented any specific concession proposals.

"It left us looking like we had been talking concessions behind the pilots' backs," Local 747 spokesman Jason Hedgepeth said of Bedford's memo to pilots.

"In Bryan Bedford's weekly update, he took a swipe at your union leaders for purportedly failing to agree to wage concessions in the event of a possible U.S. Airways shutdown in the future," Ernest Sowell, president of Houston-based Local 747, wrote in a letter to pilots.

"We view this posting as an attempted end run around your union officials designed to divide our pilot group and place blame once again on union leadership should our pilots be furloughed."

Warren Wilkinson, vice president of government affairs at Republic, said he could not respond to the allegations.

"This is typical union rhetoric and we're not going to negotiate in the press," he said.

Republic and its Chautauqua regional carrier employ 2,500 nationwide, including 852 in Indianapolis.

Sowell told pilots that Republic brought up possible contingency plans about U.S. Airways last September, when the Virginia carrier filed its second Chapter 11 bankruptcy. He said the carrier had not brought up the topic during more recent meetings.

Sowell said the "what-if" scenarios about bankrupt U.S. Airways also included financially struggling Delta Airlines.

Twice-bankrupt U.S. Airways is expected to report a 2004 loss of more than $600 million. Many analysts believe it will not be able to survive.

U.S. Airways at the end of 2004 was Republic's largest customer, accounting for 43 percent of operating revenue. Delta was 35 percent of operating revenues.

Two other carriers-American Airlines and United Airlines-are responsible for 19 percent and 3 percent, respectively, of Republic's operating revenue.

Sowell said Bedford's January memo to employees is likely an attempt to dampen wage expectations of flight attendants, whose contract became amendable more than two years ago.

A federal mediator was tapped in January to help jump-start talks that center on pay and work rules.

"Essentially, I think the company was fishing for whatever kind of arm twisting they could do," said Barry Schimmel, business representative for Teamsters Local 135 in Indianapolis, which represents flight attendants.

Starting pay for Chautauqua flight attendants is about $15,000, Schimmel said.

The union is energized by the airline's consistent profitability under the helm of former Mesaba Airlines executive Bedford. Republic on Thursday posted a $15 million profit for the fourth quarter vs. $9.6 million for the same period in 2003.

For all of 2004, Republic earned $44.8 million vs $33.9 million in 2003.

Last year, Air Transport World named Chautauqua regional airline of the year.

The company operates a fleet of 116 Brazilian-made Embraer jets that seat 37 to 70 passengers. It has more than 525 daily flights serving 67 cities in 25 states.

Republic has already booked a $3.2 million allowance for doubtful repayment of money owed by U.S. Airways prior to its September bankruptcy filing.

Chautauqua's initial public stock offering last year raised $60 million.

Earlier this year, it filed a registration statement to sell 5 million more shares for "general corporate purposes" that may include acquisitions.

Some analysts have listed Republic as a possible acquirer of struggling Independence Air. Republic won't comment on such speculation.

"Bryan Bedford is a smart businessman. He could pull a new code-share partner out of his pocket," Hedgepeth said, referring to a partnership in which Republic would receive fees for flying shorter-haul routes for an airline.
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