PAUL LEWIS / WASHINGTON DC
US subsidiaries face involuntary bankruptcy petition
The chances of rescuing Fairchild Dornier have suffered a further setback at the hands of its former US employees, who have filed a petition to put the company's two North American subsidiaries into involuntary bankruptcy. The move comes in an effort to force the ailing regional aircraft manufacturer to honour severance obligations.
A number of laid-off US Fairchild Dornier employees led by around 25 senior staff filed the petition against Fairchild Dornier and Dornier Aviation North America in a Virginia court late last week. They claim they are owed "several million dollars" in severance pay. "We had written agreements and the company has failed to honour those contracts. This petition is intended to get their attention," says a former executive.
In late March, Fairchild Dornier terminated all severance policies for the company's US employees shortly before laying off virtually the entire sales and marketing staff as well as others at its San Antonio plant. The company claimed it was no longer solvent and could not meet pay obligations. "We believe that the parent company in Germany illegally modified the policy without advising the officers and directors of the American subsidiaries," says James Campbell, a US attorney representing the company's ex-employees.
The situation has been further aggravated by comments attributed to the German court-appointed administrator Eberhard Braun, and the fact that US-based German employees, as well as sales and marketing staff in Germany, have not been laid off. The company has made around 500 US employees redundant since October.
In a statement issued as Flight International went to press, Braun says that the company had not received notice of the petition, but says that "if such an insolvency proceeding was to take place it would be settled at once", adding: "It is correct that a few employees who were laid off wish to make their entitlement to reimbursement of outstanding payments valid. These payments are included in the US subsidiary's financial planning, the financing of which will be carried out immediately."
Meanwhile, the struggling company's prospects of future sales have been damaged by news that its largest US operator Atlantic Coast Airlines (ACA) has begun looking at alternatives to the 32-seat 328JET. ACA is increasingly concerned that the manufacturer will be unable to meet future capacity needs, while deliveries of aircraft already on order have fallen behind schedule.
ACA has ordered 65 aircraft for its two regional feeder operations and planned charter service. The company's Delta Connection operation has taken delivery of all the 30 328JETs it ordered, but expansion plans may lead it to seek aircraft elsewhere. "We're considering every imaginable option, including dealing with other manufacturers," says ACA. It recently ordered three corporate shuttle versions of the 328JET, of which only one has been delivered.
The company's United Express operation has taken delivery of only two 328JETs of 32 ordered, while eight due for delivery this year are already a month late.
Adding to Fairchild Dornier's woes, Boeing senior management last week ruled out a rescue for the company, although chairman Phil Condit confirmed that the US company had considered buying the regional jet manufacturer. Condit said the regional sector represents 10%of the civil aircraft market and that Boeing had "looked at getting into it ourselves". Alan Mulally, chief executive Boeing Commercial Airplanes, says: "We decided it would be better to focus on big jets."
Additional reporting by Murdo Morrison in Chicago
Source: Flight International
