Bankruptcy and Our Contract

What would happen to the AFA Contract if United files for bankruptcy?

A company files for bankruptcy (under Chapter 11 of the U.S. Bankruptcy laws) because its debts exceed its assets, and the company can’t keep paying its bills in a timely manner.

Once a company files for bankruptcy, all debts are put on hold and the court assigns a trustee to oversee the bankruptcy process. The company then submits a business plan to the trustee, laying out all of its debts and its plan to pay them off. The trustee oversees this process and ensures an orderly payment of debts so the company can start anew.

United Airlines CEO Jack Creighton has said a number of times that he didn’t take the job to preside over a bankruptcy. But regardless of Creighton’s claims, and the fact that the airline continues to keep approximately $2.5 billion in cash on hand (based on SEC 10K filings), the press and some analysts speculate that United may file for bankruptcy in the future.

Under the Bankruptcy Code, when a carrier files for bankruptcy, collective bargaining agreements with the company’s work groups remain in full force and effect, and any changes are supposed to be negotiated.

If a company wants to alter a collective bargaining agreement, or have it voided, even during bankruptcy, it must first negotiate with AFA.

Here’s how the process is supposed to work: If United filed for bankruptcy and wanted to change our Contract, the company would first make a contract proposal to the trustee that demonstrates the necessity of the proposed changes and shows that the proposal treats all of the affected parties “fairly and equitably”.

The trustee is then supposed to negotiate in good faith with AFA in an attempt to reach a mutual agreement on any changes the Company wants to make to the Contract. If an agreement is reached and the changes are approved by the members, then the approved changes to the Contract would go into effect.

If the parties do not reach an agreement on the changes, the court decides. Bankruptcy law says that for the court to alter or reject our Contract during bankruptcy, the company must prove all of the following to the court:

1. the changes are fair and equitable to all parties;
2. the company provided all of the relevant information necessary to evaluate the proposal;
3. AFA rejected the contract proposal without good cause; and
4. the balance of the equities clearly favors the changes being proposed.

AFA would also present our case to the court, detailing why the changes were rejected by the Flight Attendants. If the court finds that the changes meet all of the criteria outlined above, it can change our Contract without Flight Attendant approval.

History has shown that sometimes the workers’ contract gets upheld, and sometimes the court orders changes. Just like any other legal proceeding, the judge and the appointed trustee overseeing the bankruptcy have the most influence on the outcome. Sometimes you get a judge sympathetic to the rights or workers, and sometimes you get one that sides with corporations.

If United decided to satisfy its debts by selling off the pieces of its assets, any and all successors must recognize the AFA United Flight Attendant Contract.

The standard National Mediation Board certification, which covers AFA representation at United, applies to the carrier and its successors.

Absent unusual circumstances, any successor employer would have to recognize AFA as the bargaining agent for the Flight Attendants and would have to honor the AFA United Contract.

There has been a substantial amount of change in ownership of airlines in the past twenty years. And in every case involving our Union, every successor employer has recognized AFA certification.

AFA will continue to monitor the situation closely and will provide you with updates as we receive more information.

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