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PROTECTING EMPLOYEES IN AIRLINE 

BANKRUPTCIES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

COMMERCIAL AND ADMINISTRATIVE LAW 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

DECEMBER 16, 2009 

Serial No. 111–61 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

JOHN CONYERS, JR., Michigan, Chairman 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

JUDY CHU, California 

LUIS V. GUTIERREZ, Illinois 

TAMMY BALDWIN, Wisconsin 

CHARLES A. GONZALEZ, Texas 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California 

DEBBIE WASSERMAN SCHULTZ, Florida 

DANIEL MAFFEI, New York 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM ROONEY, Florida 

GREGG HARPER, Mississippi 

PERRY APELBAUM, Majority Staff Director and Chief Counsel 

SEAN MCLAUGHLIN, Minority Chief of Staff and General Counsel 

SUBCOMMITTEE ON COMMERCIAL AND ADMINISTRATIVE LAW

STEVE COHEN, Tennessee, Chairman 

WILLIAM D. DELAHUNT, Massachusetts 

MELVIN L. WATT, North Carolina 

DANIEL MAFFEI, New York 

ZOE LOFGREN, California 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

JOHN CONYERS, JR., Michigan 

JUDY CHU, California 

TRENT FRANKS, Arizona 

JIM JORDAN, Ohio 

HOWARD COBLE, North Carolina 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

MICHONE JOHNSON, Chief Counsel 

DANIEL FLORES, Minority Counsel 

(III) 

C O N T E N T S 

DECEMBER 16, 2009 

Page 

OPENING STATEMENTS 

The Honorable Steve Cohen, a Representative in Congress from the State 

of Tennessee, and Chairman, Subcommittee on Commercial and Administrative Law ........................................................................................................... 1 

The Honorable Trent Franks, a Representative in Congress from the State 

of Arizona, and Ranking Member, Subcommittee on Commercial and Administrative Law .................................................................................................. 2 

WITNESSES 

Mr. Chesley B. Sullenberger, III, Captain, US Airways Flight 1549 

Oral Testimony ..................................................................................................... 4 

Prepared Statement ............................................................................................. 7 

Mr. Arnold D. Gentile, Captain, US Airline Pilots Association 

Oral Testimony ..................................................................................................... 10 

Prepared Statement ............................................................................................. 12 

Mr. Robert Coffman, Captain, Director of Government Affairs, Coalition of 

Airline Pilots Associations 

Oral Testimony ..................................................................................................... 19 

Prepared Statement ............................................................................................. 21 

Mr. Marshall S. Huebner, Partner, Davis Polk & Wardwell, LLP 

Oral Testimony ..................................................................................................... 26 

Prepared Statement ............................................................................................. 28 

Mr. Robert Roach, Jr., General Vice President of Transportation, International Association of Machinists and Aerospace Workers 

Oral Testimony ..................................................................................................... 36 

Prepared Statement ............................................................................................. 38 

Mr. Stephen Nagrotsky, Deputy Director, Airline Division, International 

Brotherhood of Teamsters 

Oral Testimony ..................................................................................................... 46 

Prepared Statement ............................................................................................. 48 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Prepared Statement of the Honorable Lamar Smith, a Representative in 

Congress from the State of Texas, and Ranking Member, Committee on 

the Judiciary ......................................................................................................... 58 

Prepared Statement of the Honorable Henry C. ‘‘Hank’’ Johnson, Jr., a Representative in Congress from the State of Georgia, and Member, Subcommittee on Commercial and Administrative Law ......................................... 62 

Supplemental Prepared Statement submitted by Marshall S. Huebner, Partner, Davis Polk & Wardwell, LLP ...................................................................... 63 

Response to Post-Hearing Questions from Arnold D. Gentile, Captain, US 

Airline Pilots Association .................................................................................... 133 

Response to Post-Hearing Questions from Robert Coffman, Captain, Director 

of Government Affairs, Coalition of Airline Pilots Associations ....................... 141 

Response to Post-Hearing Questions from Marshall S. Huebner, Partner, 

Davis Polk & Wardwell, LLP .............................................................................. 145 

Page

IV 

Response to Post-Hearing Questions from Robert Roach, Jr., General Vice 

President of Transportation, International Association of Machinists and 

Aerospace Workers ............................................................................................... 148 

Response to Post-Hearing Questions from Stephen Nagrotsky, Deputy Director, Airline Division, International Brotherhood of Teamsters ........................ 152 

Letter to the Honorable Steve Cohen from Brendan M. Kenny, Director, 

Government Affairs Department, Air Line Pilots Association, International . 155 

(1) 

PROTECTING EMPLOYEES IN AIRLINE 

BANKRUPTCIES 

WEDNESDAY, DECEMBER 16, 2009 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON COMMERCIAL

AND ADMINISTRATIVE LAW, COMMITTEE ON THE JUDICIARY, Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:33 p.m., in room 

2141, Rayburn House Office Building, the Honorable Steve Cohen 

(Chairman of the Subcommittee) presiding. 

Present: Representatives Cohen and Franks. 

Staff Present: (Majority) James Park, Counsel; Adam Russell, 

Professional Staff Member; and (Minority) Zachary Somers, Counsel. 

Mr. COHEN. This hearing of the Committee on the Judiciary Subcommittee on Commercial and Administrative Law will now come 

to order. 

Without objection, the Chair will be authorized to declare a recess to the hearing. I now recognize myself for a short statement. 

The past 9 years have been particularly difficult ones for employees of the Nation’s major airlines. Of the eight largest U.S.-based 

airlines in 2001, five have since filed for bankruptcy. That is TWA 

of Howard Hughes fame, United Airlines, US Airways, Delta Airlines, and Northwest Airlines, with US Airways filing for bankruptcy twice in that time period. 

These are and were some of the Nation’s oldest and most respected air carriers, those that were part of the original cohort of 

companies that established commercial aviation as a viable and ultimately indispensable industry. I remember Fly Eastern and all 

those other airlines that no longer exist, Republic, et cetera, et 

cetera. Their success, in turn, was based on the dedication and 

commitment of talented and hardworking pilots, flight attendants, 

mechanics, customer service agents, baggage handlers, dispatchers, 

and other employees. 

In some of these airline bankruptcy cases, the airline initially 

used Section 1113 of the Bankruptcy Code to change existing wage 

rates, work rules, and other terms of collective bargaining agreements, to the detriment of workers. For example, US Airways successfully petitioned the bankruptcy court to reject collective bargaining agreements with several of its labor unions during its second trip to bankruptcy, the first time an airline was able to successfully reject a labor contract in bankruptcy in 23 years. 

2 

Similarly, United Airlines successfully convinced the bankruptcy 

court to terminate its collective bargaining agreements with new, 

harsher terms implemented in their place. United pilots, for example, took a 30 percent pay cut, less job security, harsher work rules, 

and a terminated pension plan. 

Ironically, Congress enacted Section 1113 to ensure that corporations would not use the bankruptcy process strategically to get out 

of their obligations under collective bargaining agreements. More 

specifically, Section 1113 was enacted in response to a Supreme 

Court decision that effectively allowed a business to reject the 

terms of a collective bargaining agreement unilaterally. Section 

1113 imposed specific conditions for rejection of a collective bargaining agreement in bankruptcy. 

Notwithstanding congressional intent, the experience of the previous decades suggest that the Section 1113 process is not working 

as intended, at least in the context of airline bankruptcies. We will 

hear about some proposals to fix these problems from some of our 

witnesses today. 

Employees covered under Title I of the Railway Labor Act are exempt from the procedures established by Section 1113, which covers railroad workers and rail carriers. Section 1113, however, does 

not extend this exemption to those covered under Title II of the act, 

namely air carriers and their employees. Yet, in most cases, rail 

workers and air companies are similarly situated under the Railway Labor Act for similar situations and logical reasons. 

Some have suggested the existing exclusion of those covered by 

Title I of the RLA from the Section 1113 process could be extended 

to airlines and their employees, thereby requiring that any changes 

to the terms of collective bargaining agreements be done under the 

arguably more worker-friendly procedures outlined in Section 6 of 

the Railway Labor Act. They have also suggested amending Section 

365 of the Bankruptcy Code to ensure that airlines are not able to 

effectively reject a collective bargaining agreement unilaterally. 

Protecting the rights of all labor unions is paramount. Last Congress, I cosponsored Chairman Conyers’s bill, H.R. 3652, the ‘‘Protecting Employees and Retirees in Business Bankruptcies Act of 

2007,’’ which would have made broader changes to the Bankruptcy 

Code to help protect workers in the airline and other industries. I 

intend to cosponsor that important legislation again once it is introduced, as we need a reform of bankruptcy laws. 

I am confident that our panel of witnesses can sharply define the 

contours of the problem and help craft meaningful solutions. I 

thank them for being here and for their testimony. And I thank the 

witnesses for appearing today and look forward to their testimony. 

I will now recognize my colleague, Mr. Franks, for an opening 

statement. 

Mr. Franks? 

Mr. FRANKS. Well, thank you, Mr. Chairman. 

And I also want to thank the witnesses for coming to be with us 

today. I know it is always a trip, and I am grateful that you are 

here. 

And, you know, in all deference to the rest of you, it is not unusual, I know, for someone to recognize especially Captain 

Sullenberger, who is certainly a true American hero. 

3 

We all owe you, Captain Sullenberger, a debt of gratitude, the 

Nation does, for saving the precious lives of so many on US Airways Flight 1549 this year. 

And I am glad he is a US Airways pilot. I fly on that one a lot, 

and I hope they are all like him. 

Mr. Chairman, bankruptcy law is often, really, about striking a 

proper balance between competing interests. The competition in 

bankruptcy between labor contracts and a successful airline reorganization has made modifying collective bargaining agreements one 

of the most difficult issues in an airline bankruptcy. 

And I know that rejecting collective bargaining agreements and 

reducing employees’ wages and benefits is not something that airlines take lightly, nor do I. However, many airlines have been so 

constrained by unaffordable labor costs and union work rules that, 

without relief, sometimes reorganization would have been impossible. Now, this is why Section 1113 of the Bankruptcy Code reasonably attempts to balance the rights of unionized employees with 

the bankrupt company’s ability to eliminate labor contracts. 

Collective bargaining agreements can only be rejected if rejection 

is, quote, ‘‘necessary to permit reorganization of the debtor,’’ unquote. Now, that is not true with nonunion employees; they can 

just be told the situation. ‘‘And rejection can only occur after the 

parties have met to try to reach an agreement on modification.’’ As 

you know, this has, Mr. Chairman, been something that, in many 

cases, there are several meetings, again, not afforded to workers 

that are not unionized. 

Some would like to make it more difficult for distressed airlines 

to reject collective bargaining agreements. But if airlines are forced 

to liquidate because labor costs cannot be reduced, employees will 

lose their jobs anyway and retirees, of course, will lose their benefits. 

I guess I use the example of US Airways again. It was the first— 

I think it entered bankruptcy in August of 2002, and, by mid-2004, 

management determined that a further realignment of its costs 

was unavoidable. US Airways entered into a second bankruptcy in 

September 2004, where it sought to rid itself of historical costs that 

made the carrier less competitive at the lower fare structures that 

had become the industry norm. 

During the second bankruptcy and as a result of steps taken to 

achieve a more competitive cost structure, US Airways was able to 

attract a merger partner. As it emerged from bankruptcy in the 

fourth quarter of 2005, US Airways was acquired by the former 

America West Airlines. 

Through the bankruptcy proceedings, US Airways was lawfully 

relieved of its pre-bankruptcy pension obligations. This was a very 

difficult and painful step which unquestionably impacted employees in a profound way. However, had US Airways not been relieved 

of pension obligations through bankruptcy, it is highly unlikely 

that America West Airlines would have sought to merge with US 

Airways in the first place. The America West-US Airways merger 

ensured that the jobs of many thousands of former US Airways employees were preserved. It saved the airline, and, of course, if it 

hadn’t, I may have had to ride a bicycle back and forth to Washington. 

4 

So the fundamental question we should ask ourselves is this: Do 

we want to make it impossible for airlines to reject their collective 

bargaining agreements, forcing them to liquidate, or do we want to 

allow them to make the cuts under the bankruptcy laws necessary 

for their reorganization? 

Mr. Chairman, the Bankruptcy Code currently attempts to strike 

a proper balance between distressed airlines and their labor 

unions. This balance allows the airline to make the necessary 

changes to its cost structure and obtain the financing it needs to 

successfully reorganize, saving jobs and preserving retirement benefits. 

And I look so forward to the witnesses’ testimony and yield back. 

Thank you, Mr. Chairman. 

Mr. COHEN. I thank the gentleman for his statement. 

And I would now like to welcome the witnesses. I thank each of 

you for participating in today’s hearing. 

Without objection, your written statements will be placed in the 

record, and we would ask you limit your oral remarks to 5 minutes. 

We have a lighting system that starts with green, goes for 4 minutes. When it gets to the last minute, it is yellow. And when it is 

red, Beulah does the buzzer and we are supposed to be finished. 

Subcommittee Members, after all questions are asked, will have 

5 minutes also to ask questions. 

Our first witness is Captain Chesley B. Sullenberger, III. Captain Sullenberger is an airline pilot and safety expert. And, as Mr. 

Franks mentioned, he rose to fame this year when he saved US 

Airways Flight 1549 and saved 155 people in quite a heroic action. 

But regardless of his action and his heroism that is recognized 

as truly being an American hero, he would lose his pension if his 

airline decided to go into bankruptcy, and he wouldn’t lose it if he 

was running a train. I would like him to explain that to us. 

He has been an international speaker on airline safety and has 

helped develop new protocols for airline safety. He is the author of 

‘‘Highest Duty,’’ a memoir of his life and the events surrounding 

Flight 1549. 

Thank you, Captain Sullenberger, for your service and for being 

willing to testify. And I would like to ask you to start. 

TESTIMONY OF CHESLEY B. SULLENBERGER, III, CAPTAIN, 

US AIRWAYS FLIGHT 1549 

Mr. SULLENBERGER. Chairman Cohen, Ranking Member Franks, 

thank you for your wonderful introduction and your kind words. 

But, before I begin, let me point out to the Committee that I am 

not the only one in this room today who had a hand in the remarkable events of January 15th, 2009. Just behind me to my left is my 

first officer, Jeffrey Skiles, also of US Airways, who has my eternal 

gratitude for his skill and his courage. 

Mr. COHEN. Would Mr. Skiles stand? 

Thank you, sir. I appreciate your being here. Thank you. 

You would also lose your pension, I guess. 

Mr. SKILES. I already lost it. 

Mr. SULLENBERGER. It is my honor to appear before you today to 

provide testimony regarding an issue that is critical to airline employees across our Nation. 

5 

I realize that I have been asked here largely because of the 

events of January 15th, 2009, but what I have to say to you, the 

value of my testimony is what took place in the 30 years prior to 

that. Like my colleague next to me, Captain Arnie Gentile, I am 

a US Airways pilot, and I have personal knowledge about how airline bankruptcies affect airline employees based upon my 42 years 

of flying and my 30 years as a line pilot. 

My pay was also drastically cut by 40 percent, and my contractual right to a retirement pension was stripped away, all under the 

veil of Bankruptcy Code provisions that are specific only to airline 

employees. Like me, thousands of our commercial pilots served our 

country in jet fighters or other cockpits of the armed services. We 

know what commitment is, and we know when commitments are 

broken. For professional pilots who had their retirement commitment broken in large part because they do not have the same 

rights during a business bankruptcy as every other organized employee in the United States, it is a basic and fundamental injustice 

that needs to be rectified. 

Airline pilots do not live in a vacuum, and we clearly understand 

and are sympathetic to the fact that many Americans have recently 

experienced economic difficulties. But airline employees had been 

hit by an economic tsunami that dates back to 2001. One of the 

driving forces has been the discriminatory application of the Bankruptcy Code to this specific group of employees. 

In all, over 100 airlines have filed for protection against their 

debtors since the late 1970’s, the time of airline deregulation. Airline managements have shown a willingness to file bankruptcy and 

use their leverage to ravage airline collective bargaining agreements, resulting in lower wages, loss of pensions, and poor working 

conditions for airline employees. 

I believe it is essential that our lawmakers realize the unintended consequences of exposing airline pilots during bankruptcy 

proceedings, which have directly led to working conditions that 

challenge even the most seasoned pilots. The rapidity and near 

unanimity with which the United States House of Representatives 

approved the ‘‘Airline Safety and Pilot Training Improvement Act 

of 2009’’ demonstrates the House’s keen appreciation of the fact 

that our industry has reduced the margins above the regulatory 

minimums on which we have historically relied. 

Pilot compensation was, for many years, comparable to what 

other professionals earned. That is no longer the case. At large carriers, many current airline pilot salaries are equal to 1989 to 1992 

levels, levels from 20 years ago, without any adjustment for inflation. Given a wide variety of career choices, military-trained pilots 

and other young, ambitious, well-educated individuals must weigh 

the financial sacrifice associated with the airline piloting profession. 

Because this profession isn’t valued as much as it used to be because of the other choices available to those entering the workforce, 

hiring standards at many airlines have been lowered significantly 

from when I started. Even as recently as 2001, a well-managed regional airline requested 3,000 hours of flight experience and 1,000 

hours in turbine-powered aircraft. That same airline today has 

dropped its requirements to 500 hours total. Other regional airlines 

6 

have hired pilots with less than 300 hours, requiring only 190 

hours of experience, the FAA minimum. 

In addition to compensation, pilot collective bargaining agreements have long provided margins developed over decades that pilots deemed necessary to ensure adequate rest and sufficient levels 

of training. In many cases, those contractual provisions no longer 

exist. Without the appropriate level of bankruptcy protection, these 

collective bargaining agreements will be in jeopardy of further erosion. 

When my company offered pilots who had been laid off the 

chance to return to work, 60 percent refused. Members, as I testified to the House Aviation Subcommittee in February of this year, 

I attempt to speak accurately and plainly, so please do not think 

I exaggerate when I say that I do not know a single professional 

airline pilot who wants his or her children to follow in their footsteps. 

It has been pointed out several times during testimony here 

today that airline employees stand alone in bankruptcy. We do not 

have the same rights under RLA that railroad employees do. And 

the absence of these rights has created a situation where airline 

employers may, as a practical matter, gut our wages, work rules, 

and pensions with near impunity. 

Let me be clear. I am not advocating the elimination of bankruptcy laws. Certainly, bankruptcy laws have played an important 

role in American industry. But there is no basis for the discriminatory treatment of airline employees inside the bankruptcy process. 

It certainly was not the intention of the framers of the RLA. 

Unfortunately, the current situation has created a tremendous 

disadvantage to airline employees. The result is the destruction of 

professions within the industry that are fundamental to the safe 

operation of our Nation’s air transportation system. 

Unlike all other organized labor, railroad and airline employees 

fall under the RLA. The logical solution is for airline employees to 

fall under Bankruptcy Code Section 1167, like their railroad counterparts. With airline employees under Section 1167, management 

and labor will better recognize each other’s needs and a certain 

level of cooperation will ensue, creating a partnership that will 

serve both sides better into the future. 

You can help us, honorable Members of Congress, to work together across party lines, end the inequity, and promote a better 

balance in the airline industry. We must keep the American commercial aviation industry safe and affordable for passengers and financially viable for all stakeholders, including those who work in 

the industry day to day. 

Accordingly, I ask the Members of Congress for the fair treatment of airline employees inside a business bankruptcy and strongly suggest this could be accomplished by having airline employees 

fall under Bankruptcy Code 1167. 

I thank you for the opportunity to share my perspective with you 

today. 

[The prepared statement of Mr. Sullenberger follows:] 

7 

PREPARED STATEMENT OF CHESLEY B. SULLENBERGER, III 


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Mr. COHEN. Thank you, Captain. And I appreciate your recognizing Mr. Skiles, as well. 

Our second witness is Captain Arnold Gentile. Captain Gentile 

is a captain for US Airways and the government affairs chairman 

of the US Airline Pilots Association. 

Prior to joining US Airways, he was the chief pilot for Corporate 

Air in Hartford and served as director of operations for Providence 

Airline Corporations and didn’t play first base for the Orioles. 

Thank you, Captain Gentile. And will you begin your testimony? 


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TESTIMONY OF ARNOLD D. GENTILE, CAPTAIN, 

US AIRLINE PILOTS ASSOCIATION 

Mr. GENTILE. Good afternoon, Chairman Cohen, Ranking Member Franks, and other Members of the Committee. My name is Arnold Gentile, chairman of the Government Affairs Committee of the 

US Airline Pilots Association and a US Airways captain with over 

38 years in aviation. 

I am grateful for the opportunity to give testimony today concerning the protection of employees in airline bankruptcies. I am 

here to ask this body to put an end to a particular inequity concerning the application of Bankruptcy Code and its effect on a single industry employee group: airline employees. 

It is not a question of the essence or merit of bankruptcy law, 

as we fully support the concept of permitting companies to restructure. Rather, it is a question of inequities in Bankruptcy Code application. 

As a US Airways captain, I have witnessed the effects of this inequity. Our pilot group experienced two bankruptcies that took 40 

to 60 percent of our salaries and terminated our pensions. The US 

Airways pensions, like all pensions, were earned by professionals 

year after year. They are now worth pennies on the dollar, and the 

burden of all remaining pension costs have been shifted to the 

PBGC and the American taxpayer. 

Just between the recent US Airways and United Airline bankruptcies, over 183,000 pensions were lost. Our pilot group witnessed family uprooting, the selling of houses, divorce, and even 

suicide. 

To add insult to injury, according to an October GAO report, US 

Airways pensions disappeared at a time when US Airways CEOs 

received over $120 million, plus collected over $40 million in stocks, 

plus collected over $30 million in reimbursements to pay for their 

income taxes. In addition, only 14 months to the day after the carrier exited bankruptcy, US Airways made an $8 billion bid for 

Delta Airlines and later raised that bid to $9.8 billion. 

The early 1980’s, 1990’s, and the last 8 years were all marked 

by waves of airline bankruptcies—over 100 airlines, as Captain 

Sullenberger mentioned, since 1978, and 11 airline bankruptcies in 

2008 alone. I point these facts out to demonstrate that airline corporations have comparatively easy access to the bankruptcy process 

and have shown a willingness to decimate airline collective bargaining agreements. 

To understand and address the vulnerability of airline employees 

in bankruptcy, let’s categorize all unionized labor into three groups. 

Group one: Railroad employees, covered by the RLA, fall under 

Bankruptcy Code 1167, where negotiations take place and the 

bankruptcy court nor the trustee may change the wages or working 

conditions of employees. 

Group two is all other employees except for airline employees. 

They are covered by the National Labor Relations Act and fall 

under Bankruptcy Code 1113. These employees have the right to 

strike. Of course, this right is not one that anyone is in a rush to 

exercise; it is fully understood that it may potentially damage both 

the employer and the employees. Nevertheless, this right is the poVerDate Aug 31 2005 10:28 Mar 16, 2010 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6601 H:\WORK\COMM\121609\54077.000 HJUD1 PsN: 54077
11 

tential for exercising this right that allows a union to temper the 

consequences of what is otherwise a very one-sided 1113 process. 

And, finally, group three: airline employees. Like railroads, they 

are covered under the Railroad Labor Act. Due to some historical 

anomaly, they do not fall under Code 1167 but, rather, Bankruptcy 

Code 1113. The result is, only airline employees are subject to the 

corrosive 1113 process without any recourse, and they are the only 

employees covered by the RLA without any access to 1167 and the 

Section 6 negotiating process. 

Airline employees have no means to temper employer’s rapacity; 

thus, can be stripped of their contractual rights with impunity. 

This vulnerability has been exploited time and time again, with no 

indication that it will cease. 

This was not the intent of the framers of the Railway Labor Act, 

who sought reciprocal rights in terms of changes in the status quo. 

And it was not the intent of the framers of 1113, who bestowed 

upon labor unions an ability to seek moderation of their employer’s 

demands. This situation exists although the Supreme Court has 

held, in the context of bargaining under the Railway Labor Act, 

quote, ‘‘Only if both sides are equally restrained can the act’s remedies work effectively,’’ end quote. 

The US Airline Pilots Association requests that Congress fix this 

inequity by treating all employees covered by the Railway Labor 

Act equally and subject to Bankruptcy Code 1167. What 1167 does 

is it makes us partners in the process and, in the long term, bolsters our companies’ chances for success. Pilots, more than any 

other professional workgroup, have a culture inside our company 

and a vested interest in its success. Proposed language to treat all 

RLA-covered employees equally has been drafted and is attached to 

this testimony. 

Thank you for allowing me the opportunity to share my perspective with this Committee. I will be happy to answer any questions. 

Thank you, sir. 

[The prepared statement of Mr. Gentile follows:] 

12 

PREPARED STATEMENT OF ARNOLD D. GENTILE


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Mr. COHEN. Thank you, Captain. I appreciate it. 

The third witness is Captain Robert Coffman, director of government affairs for the Coalition of Airline Pilots Associations, a trade 

association representing over 28,000 pilots, including the pilots of 

American, Southwest, NetJets, United Parcel Service, and Teamsters Local 1224, formerly Airborne Express. 


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19 

He is with American Airlines and has been since 1988, based in 

New York, Chicago, Dallas, presently in Miami—congratulations; 

international captain of the Boeing 767, 757 fleet. Before American, 

he was a physicist, employed by Hughes Aircraft Company as a 

systems analyst. 

Thank you, Captain Coffman. And will you proceed with your 

testimony? 

TESTIMONY OF ROBERT COFFMAN, CAPTAIN, DIRECTOR OF 

GOVERNMENT AFFAIRS, COALITION OF AIRLINE PILOTS ASSOCIATIONS 

Mr. COFFMAN. Good afternoon, Chairman Cohen, Ranking Member Franks, Members of the Subcommittee. Thank you for the opportunity to testify today. I am Bob Coffman, director of government affairs for the Coalition of Airline Pilots Associations and a 

captain for American Airlines, as introduced. 

CAPA is the largest airline pilot trade association in the world 

and represents more than 28,000 professional pilots from six 

unions, including the Allied Pilots Association, the Association of 

Shared Aircraft Pilots, the Independent Pilots Association, the 

Southwest Airlines Pilots Association, Teamsters Local 1224, and 

US Airlines Pilots Association. 

On behalf of our members, I want to address the urgent need to 

correct an unfair difference in the way airline employees are treated in Chapter 11 bankruptcies from rail employees covered under 

Railway Labor Act. In bankruptcy filings, railroad labor contracts 

administered under the RLA cannot be unilaterally abrogated, 

while airline labor contracts under the RLA are subject to judicially 

approved abrogation. 

This disparity in the Bankruptcy Code has resulted in numerous 

airline labor agreements being gutted in bankruptcy court, with 

only cursory attempts made to collectively bargain a concessionary 

contract with input from the affected labor group. As a direct result, there have been thousands of lost airline jobs and billions of 

dollars in lost wages, benefits, and pension cuts. 

Bankruptcy has become a standard course of business for the airline industry, per the previous witness who testified to the large 

numbers and frequencies of bankruptcy within our industry. In 

fact, of the six legacy carriers, four have filed for bankruptcy since 

2000. There have been more than 40 airline bankruptcies overall 

in this decade alone. 

I am afraid that the process has become an economic opportunity 

rather than a final attempt to survive. It has become a way to negate a company’s contracts, to the detriment of decades of collective 

bargaining history, including safety increments above the regulatory minimum. It has been called the new collective bargaining 

weapon to force extraction of concessions beyond those necessary 

for a successful reorganization. 

In the railroad industry, management must negotiate with its 

workers during the bankruptcy process. The railroad industry is 

covered by a provision of the Bankruptcy Code, Section 1167, which 

mandates that management cannot reject railroad labor contracts 

during the bankruptcy process without following the provisions outlined in the Railway Labor Act. So, unlike airline managements, 

20 

railroad management cannot use Chapter 11 to unilaterally abrogate, reject labor contracts as part of the financial reorganization. 

The courts have ruled, though, that Section 1167 does not apply 

to airlines, even though airlines are the only other industry covered 

by the Railway Labor Act. Therefore, airlines may reject their labor 

contracts in bankruptcy following the provisions specified in Section 1113(C) of the Bankruptcy Code. 

Under Section 1113, airline management only needs to show that 

changes to a collective bargaining agreement are necessary for reorganization, and the legal burden is placed on labor to prove otherwise. And although Section 1113 does require an attempt to negotiate, the bar to satisfy this requirement falls far short of the formal process required under the RLA used in a railroad bankruptcy. 

Recent history shows airline managements have almost always 

been able to get court approval to reject those labor agreements. 

Since 2002, the managements of nearly all major carriers, with 

the exception of Southwest Airlines, have used bankruptcy or the 

threat of bankruptcy to wrest enormously concessionary contracts 

from unions, a process that also included the determination of defined benefit pension plans. In fact, in early 2003, my airline, 

American Airlines, told its unions that it would declare bankruptcy 

on a specific date absent membership assent to highly concessionary changes to the contracts. 

To add insult to injury, some airline managements have used 

bankruptcy or the threat of bankruptcy to enrich themselves. For 

example, a recent GAO study showed how, in years leading up to 

the termination of two underfunded airline pensions, executives received more than $175 million in compensation, an amount that is 

about the same order as the pension-funding shortfall. At the same 

time, these terminations have contributed undue additional stress 

on the Pension Benefit Guaranty Corporation. 

Clearly, the capability to exploit this disparity in bankruptcy proceedings grants an airline management tremendously powerful advantage over its unions. The company can threaten the union to acquiesce to its demands or else. After bankruptcy is declared, it 

ceases to be a negotiation and, instead, becomes a unilateral imposition of threats and demands. 

The delicate balance of power codified by the Railway Labor Act 

between a management and its employees simply evaporates. Management’s ability to reject CBAs has essentially left unions with no 

choice but to cede substantial contractual benefits in the face of the 

potentially worse option of the wholesale rejection. 

We, therefore, ask legislators give airline workers the same protection that railroad workers are currently afforded by aligning the 

relevant portions of the Bankruptcy Code. This legislative fix would 

mandate the use of the Railway Labor Act negotiating process before management could reject a collective bargaining agreement. 

CAPA, my organization, believes that a negotiated solution, rather 

than one that is imposed, is always in the best interests of all concerned. 

Chairman Cohen, Ranking Member Franks, thank you for the 

opportunity to testify here. I look forward to your questions. 

[The prepared statement of Mr. Coffman follows:] 

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PREPARED STATEMENT OF ROBERT COFFMAN


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Mr. COHEN. Thank you, Captain. 

Our next witness is Mr. Huebner. And Marshall Huebner is a 

partner in the law firm Davis Polk & Wardwell, co-head of the insolvency and restructuring group, who routinely represents financial institutions and companies in major restructurings and bankruptcies, and has advised on several of the largest, most complex 

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nies, and boards of directors in many nonpublic distress matters; 

and provides risk management and bankruptcy advice on derivative products and other complex transactions which have almost 

put this country into bankruptcy. 

Thank you, Mr. Huebner. Will you proceed with your testimony? 

TESTIMONY OF MARSHALL S. HUEBNER, PARTNER, 

DAVIS POLK & WARDWELL, LLP 

Mr. HUEBNER. Good afternoon, Mr. Chairman and Ranking 

Member. Thank you for inviting me here today. It is a singular 

honor. 

Section 1113, for sure, presents unusually difficult issues. On the 

one hand, airline debtors are often fighting for their very lives, at 

severe disadvantage to newer market entrants and foreign competitors. On the other hand, the rights and needs of employees are core 

values of our great Nation. 

I provided as part of my testimony a list of the more than 185 

airline bankruptcies filed since 1978. Critically, 90 percent of them 

ended in liquidation. So while we must ensure fairness for employees who suffered, often greatly, at the 10 percent that are still flying, the deepest pain has been taken by those who lost 100 percent 

of their salaries, pensions, and benefits and are not here today testifying. 

Thus, the changes I suggest materially enhance employee protections and recoveries without unduly risking the survival of their 

employers, against whom the odds are already frighteningly 

stacked. 

I would make four suggestions today. 

One, courts must consider in all 1113 cases management compensation, levels, sacrifices, and enhancements, not only in bankruptcy but in the year prior as well. A true flash point of anger at 

Chapter 11 is the not-infrequent mismatch between the lack of executive sacrifice and sacrifice farther down the pay scale. 

To be clear, this does not mean that management must always 

take pay or benefit cuts. Sometimes management actually makes 

sacrifices, either before or during bankruptcy. But, as we all know 

all too well, management does not always lead by example. These 

abuses must be stopped, and everyone’s compensation must be considered when 1113 relief is sought. 

Two, a debtor’s 1113 proposal should not extend more than 4 

years past bankruptcy emergence. 1113 must not be used to impose 

inappropriately long concessionary agreements on unions. But a period shorter than 4 years would be dangerous and unwise, because 

a debtor’s cost structure must be locked in long enough for it to 

procure exit financing and encourage counterparties that it has 

staying power. 

Three, unions must get a damage claim for their members when 

their contracts are rejected under 1113. These claims can have very 

substantial value, and because they are often paid in equity, they 

provide meaningful upside when their employer’s situation approves post-emergence. In Delta, for example, where I represented 

the company, in addition to $650 million in notes and a profit-sharing plan, the pilots got a $2.1 billion agreed claim, which amounted 

to 13 percent ownership of the reorganized company. 

27 

Four, courts must consider not only the proposals made by both 

sides as of the commencement of the proceedings, but also proposals made during the 1113 process. As everyone is agreeing, real 

negotiation is what we want, and encouraging the parties to negotiate all the way through is a shared goal. 

But, while I feel very strongly that 1113 needs real revisions to 

protect American workers, I feel equally strongly that radical 

changes will not protect them. In fact, it will leave more of them 

with no jobs, pensions, or benefits. As noted above, the bankruptcy 

failure rate for the airlines is 90 percent. Making remedies and 

tools that they need more challenging or unavailable will only 

doom more airlines to liquidation. 

Moreover, with due respect to the other witnesses, a debtor seeking 1113 relief already faces the most daunting procedural and substantive hurdles in the entire Bankruptcy Code. Given my limited 

time, I will not list the nine gates a debtor must currently clear 

to get 1113, but I live them and they are very real. 

The unfortunate reality of insolvency is that companies cannot 

honor all their obligations. Many suffer: small businesses that may 

themselves close; individuals or pension funds who invested in the 

debtor’s securities; airports and communities with empty terminals 

and no service at all because their leases have been rejected. But 

if every sympathetic counterparty could convince Congress to protect its contract or give its claim special priority, no company will 

survive Chapter 11, and the losses to all will be immeasurably 

greater. 

Airline employees who suffered substantial cuts tell an absolutely compelling and sympathetic story, but employees who lost 

their jobs, pensions, and benefits entirely in the many airline liquidations—including ATA, Aloha, Eastern, Pan Am, Skybus, and 

about 150 more—have an untold story that is at least equally compelling. 

Filing for Chapter 11 unfortunately cannot increase demand for 

one’s product, nor allow a company to buy fuel or aircraft or pretzels below current market prices. Congress must consider meaningful changes to better protect America’s rank and file, but it is imperative that changes not be implemented that threaten to take the 

frightening failure rate of U.S. restructurings yet higher, which 

will ultimately hurt the rank and file most of all. 

Finally, Mr. Chairman and Ranking Member, one final thought 

for which I apologize in advance. I was stunned yesterday afternoon to read in Mr. Nagrotsky’s statement that Frontier Airlines 

used the 1113 process to, and I quote, ‘‘obtain an order from the 

bankruptcy court authorizing it to permanently outsource the mechanics’ work to El Salvador,’’ close quote. 

This is totally incorrect. This morning, I submitted a supplement 

that explains and documents with many of the actual documents 

attached what actually happened, which, in fact, is a great case 

study. It was unprecedentedly and amazingly protective of IBT’s 

jobs and members and a good example of 1113 working exactly as 

Congress wanted it to. The parties met 17 more times after the 

process started and the judge forced a deal, and, ultimately, no 

outsourcing at all was allowed. 

Thank you. 

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[The prepared statement of Mr. Huebner follows:] 

PREPARED STATEMENT OF MARSHALL S. HUEBNER


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Mr. COHEN. Thank you, Mr. Huebner. I appreciate your coming 

back here on Mr. Nagrotsky. We like a little Jane Curtin/Dan 

Akroyd every so often. 

Our fifth witness is Robert Roach, Jr. Mr. Roach started in the 

International Association of Machinists as a ramp serviceman for 

TWA and a member of Local Lodge 1056 in New York. 

He has been a union representative since 1979, holding numerous worker advocate positions. He became a member of the IAM 


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Executive Council as General Vice President of the Transportation 

Department, June 1, 1999, and most recently reelected in 2009. He 

oversees and coordinates 150 collective bargaining agreements covering U.S. rail and air carriers, foreign flag airlines, and airline 

service companies. 

Thank you, Mr. Roach. You are on. 

TESTIMONY OF ROBERT ROACH, JR., GENERAL VICE PRESIDENT OF TRANSPORTATION, INTERNATIONAL ASSOCIATION 

OF MACHINISTS AND AEROSPACE WORKERS 

Mr. ROACH. Thank you, Chairman Cohen and Ranking Member 

Franks, for this opportunity to speak to you today. As stated, my 

name is Robert Roach, Jr., general vice president of the Machinists 

Union, and I am here appearing on behalf of International President R. Thomas Buffenbarger. 

The IAM is among the Nation’s largest industrial trade unions, 

representing nearly 700,000 active and retired members under 

more than 5,000 contracts in transportation, aerospace, shipbuilding, defense-related industries, including more than 100,000 

U.S. airline workers, making us the largest airline union in North 

America. 

I am speaking to you today both as a union representative as 

well as a former employee of TWA with extensive bankruptcy experience, having been their lead spokesman for all airline bankruptcies since 9/11. I endured three airline bankruptcies at TWA 

as an employee, and today, after 30 years as a TWA employee, I 

receive a monthly pension from the Pension Benefit Guaranty Corporation of a mere $212 per month. 

While Chapter 11 bankruptcy can be a lifeline for struggling 

companies, unfortunately the law allows management to use that 

line to choke employees and retirees. Current bankruptcy law 

eliminates any incentive for a company to engage in good-faith bargaining. Under the unfair corporate advantage, employees have 

suffered greatly. I have some examples. 

At United Airlines, workers gave up jobs, endured wage cuts, 

and could not prevent United from refusing to fund their pensions, 

leading to plan terminations. Retirees saw their fixed incomes decrease and their cost of health care increase. In total, IAM members were forced to sacrifice more than $4.6 billion for United Airlines, while the CEO received total compensation the first year of 

United Airline’s bankruptcy of $39.7 million. 

And US Airways, the first bankruptcy in 2002, IAM members 

agreed to two rounds of contract concessions, totaling $276 million 

per year, or $1.8 billion over 6.5 years. US Airways CEO David 

Siegel was rewarded with $1.45 million a year as the airline exited 

the first bankruptcy and another $9 million in 2003, the year in 

between the two airline bankruptcies. It should be noted that the 

second airline bankruptcy was planned prior to US Airways exiting 

the first bankruptcy to get a Federal guarantee backing for a loan. 

After filing for bankruptcy the second time, the mechanics’ wages 

were cut by more than 15 percent. Management and salaried employees were reduced only by 5 percent. In this bankruptcy, Siegel’s 

successor, Bruce Lakefield, orchestrated massive benefit and job 

37 

cuts for front-line employees but refused to accept any wage cuts 

for himself. 

On Northwest Airlines, members saw their pension plans frozen 

and took an 11.5 percent pay cut as a result of management’s 

bankruptcy. With me here today are two Northwest Airlines employees, John Ketelstein and Ken McNair, who are now suffering 

under the bankruptcy contract that was forced down their throats. 

In contrast, Northwest Airlines CEO Doug Steenland was granted 

$26 million in stock upon the carrier’s 2007 exit from bankruptcy, 

plus a cash salary that year of over $500,000. 

In major airline bankruptcies, much of the financial sacrifices to 

save the companies were diverted into the pockets of people responsible for the company’s failure. This is not acceptable to me or the 

people I represent, and I hope it is not acceptable to the Members 

of this Committee. 

While airline employees have been hit hard by the impacts of 

bankruptcy, they are certainly not alone. Auto, steel, banking, 

newspaper, cable TV, trucking companies are among more than a 

hundred publicly traded companies that seek Chapter 11 bankruptcy protection each year. Bankruptcies are not restricted to just 

one sector of our country, and neither should bankruptcy reform. 

The Machinists Union believes that there is an immediate need 

for bankruptcy reform that should apply to all private-sector workers covered by collective bargaining agreements. Companies should 

not be able to use the Bankruptcy Code to eliminate decades of collective bargaining gains when there is no justifiable reason other 

than corporate greed. 

Court rulings should be overturned to allow airline workers the 

right to engage in self-help if the bankruptcy court terminates a 

bargaining agreement. And good-faith bargaining can only be 

achieved when there is a level playing field, and today bankrupt 

companies hold all the cards. 

If employees are forced to sacrifice in order to restructure their 

bankrupt employer, bankruptcy laws should require everyone from 

the break room to the board room to share their pain. Executive 

bonuses, stock grants, and other compensation enhancements proposed during bankruptcy must be strictly limited. 

IAM believes that companies should be required to pay into pension plans as benefits are earned. Additionally, the PBGC should 

have financial resources available to guarantee all vested benefits 

promised in a pension plan without reduction or maximums. Pension plan defaults in the steel, airline, and other industries helped 

the PBGC move from a surplus of $7.7 billion at the end of fiscal 

year 2001 to a deficit of $33.5 billion today. Congress must make 

bankruptcy a less attractive mechanism to dump pension obligations onto the PBGC. 

The Machinists Union supports comprehensive reform that would 

protect all our Nation’s workers and require shared sacrifice among 

all stakeholders. We are prepared to work with this Committee on 

such legislation. 

I look forward to your questions. Thank you. 

[The prepared statement of Mr. Roach follows:] 

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PREPARED STATEMENT OF ROBERT ROACH, JR. 


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Mr. COHEN. Thank you, Mr. Roach. I appreciate your testimony. 

As you see, we have 15 minutes to vote, and then we are going 

to have to conclude, I believe, because these are the last votes of 

the day. 

The final witness is Steve Nagrotsky, deputy director of Teamsters Airline Division in D.C., representing 43,000 members. For 27 

years, he has represented flight crew members in collective bargaining negotiations and contract enforcements. 

Thank you, Mr. Nagrotsky. And will you proceed with your testimony? 

TESTIMONY OF STEPHEN NAGROTSKY, DEPUTY DIRECTOR, 

AIRLINE DIVISION, INTERNATIONAL BROTHERHOOD OF 

TEAMSTERS 

Mr. NAGROTSKY. Good afternoon, Chairman Cohen, Ranking 

Member Franks. I am Stephen Nagrotsky, deputy director of the 

Airline Division of the International Brotherhood of Teamsters, 

which is the largest transportation union in the country. 

As a lawyer, I have represented cockpit crew members for the 

past 27 years in collective bargaining negotiations. On behalf of 

more than 1.4 million men and women Teamster members, and especially on behalf of more than 43,000 Airline Division members, 

I am honored to have this opportunity to share our views on the 

needed changes to the Bankruptcy Code regarding air carrier bankruptcy. 

The United States airline industry has been in financial turmoil 

since the fall of 2000, when the decline in the technology industry 

caused a precipitous drop in business travel demand. September 

11th worsened the industry’s financial troubles due to significant 

losses resulting from the temporary shutdown of the Nation’s airspace and passenger apprehension about flying following the attacks. 

Congress sought to alleviate the airline industry financial crisis 

after September 11, when it passed the ‘‘Air Transportation Safety 

and System Stabilization Act,’’ which provided $5 billion in direct 

emergency assistance and grants. Congress also authorized the Department of Transportation to reimburse air carriers for increases 

in their insurance premiums and provided billions of dollars of additional dollars for loan guarantees. 

Following record-high fuel prices earlier this year and the crash 

of the Nation’s financial markets, the airline industry is projected 

to lose between $5 billion and $6 billion this year. Despite passenger capacity reductions and recent cuts in fuel costs, the turbulent economic markets may continue to wreak havoc upon the industry. Indeed, although Congress has provided significant public 

assistance to the airline industry over the last several years, it may 

have to provide even more next year. 

In its deliberations, Congress should consider and further examine the fact that, since the industry received generous taxpayer 

grants and loans, it has largely terminated the defined benefit pension plans covering its employees. A number of large carriers have 

relied upon United States Bankruptcy Code Section 1113 to reject 

collective bargaining agreements in order to slash their employees’ 

wages and terminate their pension plans. While shedding their 

47 

funding obligations, these airlines shifted their liabilities to the 

Pension Benefit Guaranty Corporation and to United States taxpayers and caused huge reductions in the affected employees’ retirement benefits. 

Additionally, these carriers have increasingly outsourced critical, 

highly skilled airline maintenance jobs to foreign repair stations. 

According to the DOT Inspector General’s September 30, 2008, report on the outsourcing of aircraft maintenance, airlines have more 

than doubled the amount of repairs and heavy maintenance work 

they outsourced, from 34 percent in 2003 to 71 percent in 2007. 

The increased foreign outsourcing has contributed significantly to 

the dramatic loss of jobs in the United States airline industry. 

Several carriers have relied upon Bankruptcy Code Section 1113 

in order to accomplish their foreign outsourcing objectives. For example, Frontier Airlines, a low-cost carrier based in Denver, Colorado, petitioned the United States Bankruptcy Court to reject its 

collective bargaining agreement covering its aircraft mechanics so 

that it may permanently outsource its Denver-based heavy-check 

maintenance operations to a company located in El Salvador. 

Faced with the prospect of losing their jobs entirely or slashing 

their wages to below-market rates, the mechanics agreed to slash 

their wages. But Frontier still was not satisfied. Frontier used the 

Section 1113 process to exact even greater wage concessions from 

the mechanics and to obtain an order from the bankruptcy court 

authorizing it to permanently outsource the mechanics’ work to El 

Salvador. 

I hold to our characterization of what occurred in the bankruptcy 

court and will supplement our written statement with any additional material to establish that the bankruptcy judge, simply put, 

allowed outsourcing of U.S. Teamster mechanics’ jobs. 

Our objective is to participate constructively in a long-overdue 

dialogue to address and solve the financial and structural problems 

that plague the airline industry. Any such dialogue is significantly 

impaired because provisions of the Bankruptcy Code have been 

used by the carriers to slash, cut, and dump their employees’ wages 

and benefits. 

In order to prevent the further abuse of the Bankruptcy Code, we 

recommend that airline carriers covered by Title II of the Railway 

Labor Act be treated the same as their counterparts in the railroad 

industry. Rail carriers are covered by Title I of the RLA and are 

exempted from Bankruptcy Code Sections 1113 and 365. Accordingly, we recommend that air carriers likewise be exempted from 

the provisions of Section 1113 and 365. We have provided in our 

written testimony the amended language we suggest for Sections 

1113 and 365. 

Thank you for this opportunity to share the views of the IBT 

with this distinguished Subcommittee. 

[The prepared statement of Mr. Nagrotsky follows:] 

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PREPARED STATEMENT OF STEPHEN NAGROTSKY


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Mr. COHEN. Thank, Mr. Nagrotsky. 

We are going to limit our questions to 3 minutes; we can also do 

written ones, because we do have to vote. 

Let me ask you a panel question real quick. Anybody know the 

reason or a good social reason why the railroad workers should be 

treated differently than the airline workers? 

Mr. Huebner? 

Mr. HUEBNER. Mr. Chairman, I think the answer is that the subchapter 4 of Chapter 11, which is where 1167 is, provides for an 

integrated set of rules that govern a highly regulated industry that 

was never deregulated. 

And so, because railroads are governed by all sorts of things as 

they enter Chapter 11, like the mandatory appointment of a trustee selected by the Department of Justice and numerous other technical rules which all went by the wayside in 1978 when 1113 was 

enacted in 1984-1985 in response to Bildisco, only railroads were 

kept to the side, which, by the way, was intentional. 1113, as you 

may remember, was actually asked for by organized labor. 

And so the answer is, railroads are totally different because they 

have been heavily regulated forever. And, therefore, on the rare occasion when railroads go into bankruptcy, they are governed by a 

completely—— 

Mr. COHEN. Let me ask you this. Mr. Crandall of American Airlines, past, said that maybe airlines need to be reregulated. What 

would you be in favor of reregulation and then change the labor 

laws concurrently so they would be equitable? 

Mr. HUEBNER. Chairman Cohen, whether or not airlines should 

be reregulated is a question that I don’t think I could responsibly 

answer. I think it is beyond my skill set. 

But what I do know is that cherry-picking—— 

Mr. COHEN. I am going to take as a given that it is your skill 

set. That is a given. So what do you think it should be, they should 

be reregulated or not? 

Mr. HUEBNER. If 1167 is going to apply, then lots of other things 

that I imagine no union member in the country would like to apply 

to airlines would also have to fairly apply. 

Mr. COHEN. Anybody else have an idea about why this came 

about or why the distinction should continue? Does anybody disagree with what Mr. Huebner said? 

Mr. Nagrotsky, you ought to disagree. 

Mr. NAGROTSKY. I certainly would disagree, Chairman Cohen. 

First of all, I think that, as an industry, apart from price setting, 

the airline industry is incredibly heavily regulated, with respect to 

safety, with respect to training, with respect to all kinds of issues. 

So I disagree with the characterization that, because airlines are 

not as regulated as railroads, that there is a distinction there. 

Mr. COHEN. So you think the fact that neither one can strike, 

they are both under the Railway Labor Act, they are both essential 

to the economic vitality of our country, that they should be treated 

equally as far as the bankruptcy goes, too? 

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cality to the economy. And, therefore, they should be treated identically. 

Mr. COHEN. Captain Sullenberger, you have experienced a bankruptcy in the past? 

Mr. SULLENBERGER. Two bankruptcies at US Airways. 

Mr. COHEN. Tell us what losses you incurred as a result of those 

bankruptcies and how that affected the morale of the pilots. 

Mr. SULLENBERGER. It has greatly affected the morale of the pilots. 

US Airways has 33,000-plus dedicated employees who, in spite of 

our experiences, keep our passengers safe every day. It requires a 

great deal of concentration and dedication to compartmentalize and 

keep focused on what is at hand with all the distressing distractions that we have lived under for many years. 

I personally have lost 40 percent of my pay. My first officer, in 

January, Jeffrey Skiles, because he had been a captain before, in 

addition to the pay cuts, had to go from the left seat to the right 

seat with a staff reduction, has lost 60 percent of his pay. Our pensions were terminated. We are working longer days, more days per 

month. 

As Captain Coffman alluded to, the bankruptcy processes allowed airline managements to essentially go on a fishing expedition 

and to gut contracts in every area, even things that had little or 

no economic importance. It was a life-changing event for everyone 

in the industry and all their families. And that is true not just for 

the pilots but for every airline employee. 

Mr. COHEN. Thank you, Captain. 

I want to thank the other witnesses. 

I am going to yield to Mr. Franks, because we do have to do— 

Mr. Franks, questions? 

Mr. FRANKS. Thank you, Mr. Chairman. 

And thank, again, all of you for coming. I hope you have a wonderful Christmas season. 

And let me just quickly—I was, kind of, fascinated by the one instance where some of the jobs were ostensibly outsourced to El Salvador. I would be interested if both Mr. Nagrotsky and Mr. 

Huebner might be willing to respond to the Committee later in 

writing as to give us the real picture on that, because I don’t know 

what it is. 

In the meantime, let me just ask this one question. Mr. Huebner, 

I will ask it to you. 

Other witnesses have suggested that Congress should extend 

Section 1167 to cover airline unions in bankruptcy. Would such a 

change to the Bankruptcy Code, in your opinion, make it more likely or less likely that airlines could successfully reorganize? 

Mr. HUEBNER. Sure. Thank you for the question. 

You know, as you heard in my testimony and as you will see in 

greater length in my written statement, I think that very real proemployee changes to 1113 are needed. But importing 1167 would 

not change the playing field; it would obliterate the playing field. 

Just so that Congress understands, that would mean that debtors have no rights and no tools. It is as if they are not in bankruptcy at all. The only thing they could do is ask the unions, won’t 

you please agree to change your contract? And if under the RLA 

55 

the contract had 3 years left to run, even though you are in bankruptcy and dying, if the union didn’t want to voluntarily give you 

changes, you couldn’t get any. 

To be clear, the RLA is an incredibly time-consuming process. I 

think Captain Coffman is at American Airlines. I imagine he will 

validate that they have been going for 3 years now waiting under 

the RLA process to try to reach agreement on a contract, and they 

still can’t. 

I represent lenders not infrequently, although I obviously represented Delta and Frontier. I can tell you, having represented the 

lenders in many of the largest bankruptcy loans ever done, airlines 

will not get financing in Chapter 11 and they will die if they have 

an uncertain period months or years before they are allowed to 

change the status quo and address their labor laws. 

There is a reason so many airlines go into bankruptcy, and it is 

not because it is fun and it is easy; it is because many of them fail, 

90 percent out of 185. Railroads are radically different, because 

there is one set of track and someone has to run on that track. The 

skies are not like that. And, as I said before, it is not just the timing, it is that the special railroad provisions are incredibly complex. 

You can’t pluck one of them out that you like and say, ‘‘We will 

take just that one’’ and ignore the system. 

But, again, given the time, I think that may be enough elaboration on the question. 

Mr. FRANKS. Thank you, Mr. Chairman. And I am going to yield 

back. 

Thank you all. 

Mr. COHEN. Thank you, Mr. Franks. 

I would like to thank all the witnesses for their testimony today. 

Without objection, the Members will have 5 legislative days to 

submit any additional written questions, which we will forward to 

the witnesses. 

And there will be some questions we will be submitting to you, 

because we have to get up there to vote. We would ask you to respond as promptly as possible. They will be part of the record. 

The record will remain open for 5 legislative days for the submission of any other additional material Mr. Roach or whoever would 

like to submit. 

I thank everyone for their time and patience. 

This hearing of the Subcommittee on Commercial and Administrative Law is adjourned. 

[Whereupon, at 3:28 p.m., the Subcommittee was adjourned.] 

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A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

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PREPARED STATEMENT OF THE HONORABLE LAMAR SMITH, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF TEXAS, AND RANKING MEMBER, COMMITTEE ON THE

JUDICIARY


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PREPARED STATEMENT OF THE HONORABLE HENRY C. ‘‘HANK’’ JOHNSON, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA, AND MEMBER, SUBCOMMITTEE ON COMMERCIAL AND ADMINISTRATIVE LAW

Thank you, Mr. Chairman, for holding this important hearing on protecting employees in airline bankruptcies. 

Today we will explore whether the Bankruptcy Code should be amended to make 

it easier to preserve collective bargaining agreements. 

Because of the record high fuel prices and the recession, the airline industry has 

suffered from economic distress. This is especially true when it comes to airline employees. 

It has been alleged that airline carriers have relied upon Section 1113, and other 

provisions, of the Bankruptcy Code to reject their collective bargaining agreements 

in order to slash their employees’ wages, terminate their pension plans, and even 

outsource their jobs. 

If it is true that airlines are abusing Section 1113, and other provisions, of the 

Bankruptcy Code, then Congress should act and seriously consider amending the 

Bankruptcy Code so that airline carriers, like rail carriers, are exempted from Section 1113 and other similar provisions. 

Millions of Americans traveled on airplanes last year. I, like many of my colleagues, travel by plane to commute between my district and the Capitol. Our airline employees work hard to safely get us to and from our destinations everyday. 

We should make sure that they are treated fairly by ensuring that airline employers 

engage in good-faith bargaining when seeking contract modifications. 

I thank the Chairman for holding this hearing today. 

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63 

SUPPLEMENTAL PREPARED STATEMENT SUBMITTED BY MARSHALL S. HUEBNER, 

PARTNER, DAVIS POLK & WARDWELL, LLP 


3A-1.eps
64 


3A-2.eps
65 


3B-1.eps
66 


3B-2.eps
67 


3B-3.eps
68 


3B-4.eps
69 


3B-5.eps
70 


3B-6.eps
71 


3B-7.eps
72 


3B-8.eps
73 


3B-9.eps
74 


3B-10.eps
75 


3B-11.eps
76 


3B-12.eps
77 


3B-13.eps
78 


3B-14.eps
79 


3B-15.eps
80 


3B-16.eps
81 


3B-17.eps
82 


3B-18.eps
83 


3B-19.eps
84 


3B-20.eps
85 


3B-21.eps
86 


3B-22.eps
87 


3B-23.eps
88 


3B-24.eps
89 


3B-25.eps
90 


3B-26.eps
91 


3B-27.eps
92 


3B-28.eps
93 


3B-29.eps
94 


3B-30.eps
95 


3B-31.eps
96 


3B-32.eps
97 


3B-33.eps
98 


3B-34.eps
99 


3B-35.eps
100 


3B-36.eps
101 


3B-37.eps
102 


3B-38.eps
103 


3B-39.eps
104 


3B-40.eps
105 


3B-41.eps
106 


3B-42.eps
107 


3B-43.eps
108 


3B-44.eps
109 


3B-45.eps
110 


3B-46.eps
111 


3B-47.eps
112 


3B-48.eps
113 


3B-49.eps
114 


3B-50.eps
115 


3B-51.eps
116 


3B-52.eps
117 


3B-53.eps
118 


3B-54.eps
119 


3B-55.eps
120 


3C-1.eps
121 


3C-2.eps
122 


3C-3.eps
123 


3C-4.eps
124 


3C-5.eps
125 


3C-6.eps
126 


3C-7.eps
127 


3C-8.eps
128 


3C-9.eps
129 


3C-10.eps
130 


3C-11.eps
131 


3C-12.eps
132 

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3C-13.eps
133 

RESPONSE TO POST-HEARING QUESTIONS FROM ARNOLD D. GENTILE, CAPTAIN, 

US AIRLINE PILOTS ASSOCIATION


4-1.eps
134 


4-2.eps
135 


4-3.eps
136 


4-4.eps
137 


4-5.eps
138 


4-6.eps
139 


4-7.eps
140 

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4-8.eps
141 

RESPONSE TO POST-HEARING QUESTIONS FROM ROBERT COFFMAN, CAPTAIN, 

DIRECTOR OF GOVERNMENT AFFAIRS, COALITION OF AIRLINE PILOTS ASSOCIATIONS


5-1.eps
142 


5-2.eps
143 


5-3.eps
144 

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5-4.eps
145 

RESPONSE TO POST-HEARING QUESTIONS FROM MARSHALL S. HUEBNER, PARTNER, 

DAVIS POLK & WARDWELL, LLP 


6-1.eps
146 


6-2.eps
147 

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6-3.eps
148 

RESPONSE TO POST-HEARING QUESTIONS FROM ROBERT ROACH, JR., GENERAL VICE

PRESIDENT OF TRANSPORTATION, INTERNATIONAL ASSOCIATION OF MACHINISTS AND

AEROSPACE WORKERS


7-1.eps
149 


7-2.eps
150 


7-3.eps
151 

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7-4.eps
152 

RESPONSE TO POST-HEARING QUESTIONS FROM STEPHEN NAGROTSKY, DEPUTY

DIRECTOR, AIRLINE DIVISION, INTERNATIONAL BROTHERHOOD OF TEAMSTERS


8-1.eps
153 


8-2.eps
154 

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8-3.eps
155 

LETTER TO THE HONORABLE STEVE COHEN FROM BRENDAN M. KENNY, DIRECTOR, 

GOVERNMENT AFFAIRS DEPARTMENT, AIR LINE PILOTS ASSOCIATION, INTERNATIONAL

Æ 


9.eps