Ueberroth Group Links Airline Sale, Union Concessions

A Newport Beach investment group headed by J. Thomas Talbot and former major league baseball commissioner Peter V. Ueberroth said Wednesday that it will not buy troubled Hawaiian Airlines as planned unless it gets hefty concessions from the airline’s unions.

In a filing with the Securities and Exchange Commission, the Ueberroth group said it is seeking a three-year wage freeze from the unions and changes in work rules that would increase productivity by 30%. The Ueberroth group told the SEC that it must obtain the concessions, worth an estimated $6 million over three to five years, by Oct. 5 to complete the Hawaiian Air transaction.

The Ueberroth group last month agreed to pay $22 a share, or about $22 million, to obtain a majority stake in HAL Inc., the airline’s parent firm. However, it is not clear whether the group will try to acquire the entire company, which is 20% owned by a subsidiary of Japan Air Lines.

The Ueberroth group also told the SEC that it expects to place “substantial additional indebtedness” on Hawaiian Air as a result of the transaction. The borrowed money would be used for working capital and equipment, the group said.

In addition, the Ueberroth group said it plans to replace the corporate officers of HAL Inc. and some of the airline’s senior managers.

In a telephone interview Wednesday, Talbot refused to discuss negotiations with the airline’s five labor unions, saying the talks were confidential. Spokesmen for the Airline Pilots Assn. and the Assn. of Flight Attendants, however, said talks had been productive and that they were hopeful an agreement would be reached.

Besides the pilots and the flight attendants, the Ueberroth group is negotiating with the International Assn. of Machinists, which represents mechanics and two smaller union groups that represent dispatchers and other communications workers. Talbot said about 83% of the airline’s 3,000 employees are members of unions.

The negotiations are unlikely to hold up the Hawaiian Air acquisition, said Daniel A. Hersch, aviation industry analyst with the Los Angeles investment firm of Bateman Eichler, Hill Richards. If the unions do not strike a deal with Talbot and Ueberroth, he said, members who work for Hawaiian are likely to be looking for new jobs, because the airline’s survival hinges on a sale or some other deal that will result in a sizable infusion of cash. And any deal is going to depend on union concessions.

HAL has reported losses of $30.6 million in the past 2 1/2 years and in June had a negative net worth--assets minus liabilities--of $8.5 million.

“At least Talbot and Ueberroth aren’t asking for wage cuts but for a wage freeze and changes in work rules to get more work for the same buck,” Hersch said. “That is a fair request because that company needs to improve its cost structure” to stop its losses, he said.

“I think all they are doing is trying to force labor to come to terms,” he said. Filing a report of stalemated talks with the SEC, Hersch said, “is just a negotiating tactic.”

The Hawaiian Airlines deal is the second attempt this year by Talbot and Ueberroth to acquire an airline. The two headed an investment consortium that bid on bankrupt and strike-bound Eastern airlines in April.