Sun Country Airlines Restores Back Pay to Employees

Back in October, Sun Country Airlines CEO Stan Gadek announced that all employees would have to take a 50% "pay deferral." The announcement, which came after some planned-for short term financing for the airline fell through, included plans to pay back the "deferred" wages to employees, with interest, when the company got back on solid ground financially.

People were skeptical about that last bit -- and who could blame them? Just days after announcing the drastic pay cuts, Sun Country filed for Chapter 11 bankruptcy protection, although the carrier continued to operate.

Now it looks like Gadek's promise to employees was more than empty words or wishful thinking. Yesterday a bankruptcy court authorized a credit line for the carrier's operating expenses, and Sun Country's CEO announced today that employees' wages would be restored immediately to pre-bankruptcy levels. Moreover, an additional wage increase will occur on January 1, 2009 to reflect the expiration of voluntary pay cuts taken in early 2008.

In a statement to the media, CEO Stan Gadek said, "Yesterday's ruling is great news for Sun Country, its customers and employees. With access to capital, the support of our aircraft lessors and lower fuel prices, we now have the ability to continue operating through our peak winter season and beyond...

"I am proud of and grateful to our 850 dedicated employees, from maintenance and baggage handling, to our airport and flight crews who have continued to display their dedication to this airline. Regardless of the challenge, our employees have continued to serve our passengers by providing them with the best customer service in the industry," Gadek added.

This news should leave Sun Country crews believing that there is a Santa Claus after all!

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Sun Country Airlines cuts paychecks by 50% and issues WARN letter

Things are in tumult at Minnesota-based Sun Country Airlines. Like so many other carriers, Sun Country has been struggling financially for months in the face of huge increases in fuel prices, coupled with a general economic downturn. More recently, another significant problem arose when the CEO of the airline's parent, Petters Group Worldwide, was arrested on federal charges of mail and wire fraud, money laundering and obstruction of justice. While the federal investigation that led to the arrest apparently pertained to a unit of the Petters Group separate from the airline, continued financing for the aviation unit has been jeopardized as a result.

Late last week, Sun Country CEO Stan Gadek met with the airline's pilot and flight attendant unions to explain that a planned-for loan from the parent company to cover expenses during the current quarter would not be possible, now that the airline needed to separate itself financially from the Petters Group. With such financing suddenly unavailable, Gadek told employees that in addition to rescheduling payments to vendors and generating other sources of cash, the airline would have to further reduce wages in order to stay in business. To that end, Gadek announced that all employees would have to take a 50% "pay deferral," beginning with their October 7, 2008 paychecks.

Under terms of the "pay deferral," communicated to employees in a letter from the Sun Country CEO, the "reduction in payroll will be recorded as back wages owing to employees and accruing interest at a nominal rate." In other words, the intention is to pay back the "deferred" wages to employees, with interest, when -- and if -- the company gets back on solid ground financially. The letter to employees also stated that Gadek himself will "work without pay until this crisis is resolved."

Everyone wants to believe that Sun Country will be able to make it through the cash crunch intact, but things are shaky enough that the airline issued a WARN letter to employees on October 1, notifying them of the possibility that they might be jobless by December 1, 2008. [Under the provisions of the federal Worker's Adjustment and Retraining Act (WARN Act), employers are required to provide notice 60 days in advance of a shutdown or mass layoff.] The letter said, in part:

...[T]his is to notify you that should Sun Country not be able to obtain additional financing or obtain relief from our major creditors in the near future there is a distinct possibility that the airline will be shut down and/or you will be furloughed. While the timing of this action is not predictable at this time, you should prepare yourself for the possibility that such a shut down or furlough could impact your employment as early as December 1, 2008. Depending on what happens, such an employment loss could be temporary or permanent and could affect all Sun Country employees or a subset of employees that includes you.

Sun Country's pilots, represented by the Air Line Pilots Association (ALPA), released a statement in response to the WARN letter, saying that they had made no commitments to management and no negotiations are scheduled at this time. The pilots' union states that they are leaving all options open "during this period of evolving circumstances."

Last spring, 45 Sun Country pilots were furloughed involuntarily in conjunction with a capacity reduction. At the time they were announced, those furloughs were expected to run from May 1, 2008, through October 31, 2008.

UPDATE Oct. 6, 2008: Local media in Minnesota are reporting this morning that Sun Country Airlines has filed for Chapter 11 bankruptcy protection. Airline officials announced that Sun Country intends to continue to fly its regular schedule.

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Sun Country Airlines furloughs 45 pilots

On May 1, 2008, nearly 30% of Sun Country Airlines pilots will be out of work, at least until Autumn. The privately owned Minnesota-based airline recently announced involuntary furloughs for 45 of its 156 pilots. The pilot layoffs will be in effect from May 1, 2008 through October 31 2008.

The reduction in the number of pilots on Sun Country's payroll reflects a trimming of capacity by the airline, in an attempt to cope with skyrocketing fuel prices. Sun Country will continue to operate seven of its Boeing 737-800 aircraft over the next six months, but the airline will sublease two others to Dutch carrier Transavia, according to a recent article in Minneapolis-St. Paul Star Tribune.

More details, from the Star Tribune:

Sun Country's 2008 budget was created on the assumption of oil costing $85 to $90 a barrel. Now, [Sun Country CEO Stan] Gadek said, he is taking a number of steps to help Sun Country survive the brutal fuel price environment.

Those steps include halting growth plans and reducing flights to some markets. For example, Sun Country will cut service to Washington, D.C., from twice-daily flights to a single flight. In addition, it has backed away from plans to add a second flight to San Diego.

"Clearly the world has changed with high fuel prices," Gadek said.

Buddy Scroggins, chairman of the Sun Country pilots union, said that the pilots' contract provides for summer layoffs. While the pilot layoffs are involuntary, Gadek said some flight attendants have taken voluntary leaves. Depending on the month, 65 to 98 flight attendants will be on leave.

Another article about the Sun Country pilot layoffs, in USA Today, quoted a Sun Country spokesperson who said that the pilots will continue to accrue seniority but won't fly at all from May until the end of October.

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