CEO Threatens To Shut Down Airline Over Pilot Pay Dispute

While not directly relevant to customers, negotiations between airline work groups and management can be fascinating.

Negotiations can often get pretty tense, and at some point one party just has to call the other’s bluffs. For example, a few years back British Airways was having huge issues with their flight attendant union, at which point Willie Walsh, the CEO, made a threat. He basically said that if they weren’t willing to compromise more then he’d never hire another flight attendant under their contract.

They didn’t believe him, but he followed through with it, which is how “mixed fleet” crews started. They’re paid substantially less, have shorter layovers, stay at worse hotels, and in many cases are a fraction of the age of their more “traditional” colleagues. Heck, there are some 21 year old British Airways mixed fleet customer service managers out there.

Which brings me to Sun Country. While I haven’t ever flown with them (I actually forgot they still existed until I read the below article), management and their pilots are going through a fascinating negotiation process regarding pilot pay.

Via MPR News:

The chair of Sun Country Airlines’ board is threatening to ground its planes in the midst of the company’s pay dispute with its pilots union.

A letter from Marty Davis to the union said the company’s management has “begun the process of downsizing the airline, for what will need to be its ultimate shut-down.”

The company declined to comment. The pilots union dismissed the letter as a bargaining tactic.

“We are disappointed Mr. Davis has chosen to respond to us with the threat of a shutdown,” Capt. Brian Roseen, the pilots union’s chairman, said in a news release Thursday.

What makes Sun Country especially unique is that:

  • Sun Country is privately owned, so we don’t have all the details of their financials; that being said, federal records indicate that they’ve been profitable since 2009
  • Sun Country only operates 19 planes, and all of them are leased; so given their lack of assets, it would be easy enough for them to shut down

That being said, it seems rather ludicrous to threaten to shut down an airline over pilot pay issues when oil prices are as low as they are, and US airlines are reporting record profitability.

Their pilots do seem to have a case, though, arguing that they haven’t received a pay raise in five years, and that no other “sizable airlines” pays pilots less to fly 737s. Based on the Sun Country pilot pay rates published at airlinepilotcentral.com, that really doesn’t surprise me. Then again, I’m not really sure Sun Country could be considered a “sizable airline.” 😉

Sun-Country-Routes

Bottom line

This seems like a pretty dirty and bad-faith negotiation tactic on the part of management. Threatening to shut down a profitable airline when the US airline industry is experiencing record profitability seems harsh. Not only that, but it certainly doesn’t instill any confidence in consumers considering booking a ticket on Sun Country.

I’m very curious to see what becomes of this…

What do you make of Sun Country’s scare tactic with their pilots?

Comments

  1. I’d say that this isn’t even close to happening in real life. The threat was probably used to generate more “loyal” pilots (can they be called loyal when they’re scared into it?) and for extra publicity. Just my opinion.

  2. It would not be the first time that an union mis-reads the financial situation of an employer, see Hostess Brands… I think you are probably right in this case, but considering the limited amount of info, I would be careful drawing conclusions.

  3. Bummer – thanks for posting. I have been trying to work them into my travel plans for the last year or so but will hold off until this thing gets settled.

  4. Thanks for posting the route map. I was always baffled why an airline based in Minnesota would call themselves “Sun Country,” but now I see why (other than MSP-SEA and MSP-ANC, which may as be spun off as “Drizzle Country, a subsidiary of Sun Country Airlines”).

  5. More than 250 pilots (out of 900) resigned because of wage issues 2 days ago.

  6. “That being said, it seems rather ludicrous to threaten to shut down an airline over pilot pay issues when oil prices are as low as they are, and US airlines are reporting record profitability.”

    This statement makes me cringe. Is there anything in the world more volatile than airline profit and oil prices? Less than a year ago, oil was over $100 and I didnt hear anyone predicting that it would get more than cut in half and then it happened in the virtual blink of an eye. Yet you want to bake in these current low prices into your long term profit forecast and start handing out extra cash to pilots?

    I dont know the specifics of this case at all. Maybe these guys are woefully underpaid. Or maybe they were grossly overpaid up to 2009 and now are just in-line after no raises for years. But Im not going to tell this guy how to run his business, especially one as boom-bust as the airline biz.

  7. These days it seems as though the management is usually the party making the threat. Then regardless if the employees accept the terms or decline the offer they eventually end up losing out to inflation. Call the bluff, don’t call the bluff, it doesn’t really seem to matter in the end. These days it’s surprisingly common for Americans to be extremely suspicious of and cynical toward unions, despite their growing impotence. Meanwhile on the other side of the fence there seems to be very little suspicion or concern over whatever path the management takes or whatever role they play in forging or sabotaging a compromise.

  8. Sun Country is actually a pretty good little airline. I think it has the respect of most folks here in MSP. It’s not really an airline for regular business travelers but they certainly have a sizable share of the leisure market in town. They are good to have around to keep Delta in check on many routes as well. Hope they don’t shut down that’s for sure.

  9. @ Mike — Not talking about a long term profit forecast here, but rather the situation now. The CEO seems to be threatening that the airline will shut down imminently, which seems ridiculous given how low oil prices are right now. Which isn’t to say that couldn’t change long term, but it’s just not a good argument right now.

    It’s one thing if the CEO said “we have to plan long term and those wages aren’t sustainable,” but to basically argue “oh, we can’t afford that and will shut down next week if we have to” is a bit different.

  10. The assumption that they are profitable is nothing more then an assumption. As a privately traded company there is no requirement that they report revenue or expenses. The moves and the fact that the entire fleet is leased lead me to believe they probably have a weak balance sheet and poor finances. The pilots are playing chicken and I doubt management would be so cavalier as to make such an announcement without some underlying reason. It is likely that some of their debtors may have covenants that may require certain debt to equity ratios. Assuming just because fuel is low that they are profitable is nothing more then foolhardy. We will see if the pilots prevail in their actions how it turns out and if management is bluffing. I doubt they are.

  11. @Nick

    I also wondered where the name came from and until I saw the map I discovered it, they fly to all the Mexican beaches that have sun almost year-round, perhaps that’s why they’re called Sun Country.

  12. “That being said, it seems rather ludicrous to threaten to shut down an airline over pilot pay issues when oil prices are as low as they are, and US airlines are reporting record profitability.”

    As @Al says, that didn’t stop Qantas’ Alan Joyce from locking his employees out a couple of years ago (and Qantas was a much larger airline, and if you took out the Jetstar cross subsidises, profitable even then). Personally I think the rise of ego driven CEO’s is what makes these OTT threats more common these days – raises their profile considerably.

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