Legal Conflict Entangles Airlines

The question of whether bankruptcy law trumps labor law in the case of insolvent airlines hasn't been clearly answered yet, but the courts appear to be trying to finally find a solution.

Last week, a U.S. District Court judge ruled that letting Northwest Airlines(NWACQ Quote) cut flight attendants' pay under bankruptcy law and then immediately have them strike in response makes no sense.

In the ruling, Judge Victor Marrero of New York granted Northwest a preliminary injunction that prohibits a strike by the flight attendants. He also sought to resolve a conflict between bankruptcy law and labor law that had not been formally addressed despite a series of airline bankruptcies following the Sept. 11, 2001, terrorist attacks.

Under bankruptcy law, companies may void labor contracts that inhibit their efforts to reorganize. Labor law, however, allows strikes over unsatisfactory contracts. The Railway Labor Act, which governs airlines and railroads, allows strikes, but establishes an interminable process of negotiations and mediation that must be followed before they occur.

"Allowing an insolvent carrier to suffer a strike because it has implemented contract modifications under the authority of the bankruptcy court, that are determined to be necessary to the carrier's reorganization, undercuts the purposes of both the Railway Labor Act and the bankruptcy code," Judge Marrero wrote.

The Association of Flight Attendants had argued that the 9,000 Northwest workers it represents were free to strike after the airline imposed a contract July 31. The union said the carrier's decision moved the dispute to the final stage of the Railway Labor Act process. But Judge Marrero said the imposition was part of a legal proceeding, and that the flight attendants had not completed the Railway Labor Act process because they hadn't been released from mediation.