Northwest Airlines Corp. said it has bought the operating certificate of bankrupt FLYi Inc., a key move toward starting a new subsidiary for regional flying.
Northwest will pay $2 million for the certificate, FLYi disclosed in a bankruptcy court filing. The Federal Aviation Administration requires airlines to have operating certificates, and buying someone else’s is considered easier than completing the paperwork to start one from scratch.
Northwest said it hopes to “accelerate the development of this subsidiary” by buying the certificate.
The disclosure comes just days after Northwest reached a tentative agreement with its pilots that would allow it to form a subsidiary to fly jets with up to 76 seats. The agreement also gives Northwest’s 700 laid-off pilots the first right to any jobs at the subsidiary. It also caps its size at 90 jets unless additional jets are matched one-for-one by new jets flown by mainline Northwest pilots.
FLYi said it had other bidders for the certificate, but that Northwest’s was the highest. FLYi’s bankruptcy judge in Delaware still must approve the sale, according to the court filing made Thursday.
Last week Northwest reached a tentative agreement with pilots that allows it to start a subsidiary to fly planes with 51 to 76 seats — a key size in Northwest’s Midwestern markets.
Northwest had asked regional carriers for proposals for flying routes with jets with 76 or fewer passengers. The request went to Northwest feeders Mesaba Airlines and Pinnacle Airlines Corp. Pinnacle had acknowledged bidding on flying jets with up to 76 seats. Spokespeople for both companies declined to comment on Friday.
FLYi was the parent company of Independence Air, based in Chantilly, Va., which shut down Jan. 5 after about a year and a half of operation. FLYi filed for Chapter 11 protection in November.
The airline was started by former executives from Atlantic Coast Airlines who tried to turn a contract carrier for Delta Air Lines Inc. and UAL Corp.’s United Airlines into a discount carrier that eventually served 36 cities from Washington, D.C.
Also Friday, the union that represents Northwest baggage handlers and other ramp workers said no new talks had been scheduled. Those workers rejected Northwest’s proposed wage-cut deal in a vote earlier this week.
Bobby De Pace, president of the Northwest branch of the International Association of Machinists and Aerospace Workers, said the top issues in the contract’s rejection were the lack of extra severance pay for people who want to retire early, and the increased use of part-time workers.
Northwest’s contract with those workers used to cap part-timers at 15 percent of employees, but the airline wants to raise the cap to half. Workers worried that their full-time jobs would become part-time, De Pace said.
The union allowed members to vote on Northwest’s offer rather than risk having the bankruptcy judge throw out its contract. After the vote, Northwest said it would restart the process to have it thrown out. It has not said whether it expects to negotiate further.
Pilots will have their own vote on a tentative agreement soon. Union leaders have not yet decided whether to formally encourage a “yes” or “no” vote. But Mark McClain, chairman of the union’s Master Executive Council, is recommending that pilots approve it.
“While this tentative agreement will bring hardship to pilots and their families, there are no reasonable alternatives,” he wrote in a message to members this week.
McClain said bankruptcy Judge Allan Gropper helped the union and airline make a deal. Gropper delayed ruling on Northwest’s request to throw out the pilot contract so the two sides could keep talking.
“He proved to be skillful and patient as he pushed and prodded the parties to find their own solutions to the issues,” McClain wrote of Gropper. “A different judge may have prematurely issued a decision on the company’s contract rejection motion, plunging the parties into almost certain conflict.”