Sep 29, 2008 10:48 pm US/Central
Sun Country Defers Employee Pay After Petters Woes
(WCCO)
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In a letter to employees, the CEO of Sun Country Airlines said that employees will be taking a 50 percent pay deferral from now until the end of the year.
AP
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Sun Country CEO Stan Gadek said the 850 workers will get the money back but acknowledged it's going to be a tough few months.
CBS
For hundreds of Minnesota workers trouble in the economy really hit home Monday. In an e-mail to workers Sun Country CEO Stan Gadek announced a pay deferral of 50 percent for everyone through the end of the year.
Gadek said the 850 workers will get the money back but acknowledged it's going to be a tough few months.
At Sun County's Mendota Heights headquarters, employees not wanting to talk on camera said they plan to stand by the company even though their paychecks will be cut in half starting next week.
Gadek said he won't be paid at all until the end of the year.
"Normally, I would have gone to the parent company for short-term funding of that and then paid it back in the first quarter but given the events of last week that's not an alternative for us," Gadek said.
On Sept. 24, federal agents raided Petters Group Worldwide headquarters in Minnetonka and Chairman and CEO Tom Petters' home in Wayzata to collect evidence for a potential fraud prosecution.
Gadek said that business for the Mendota Heights-based airlines has never been better with high sales for fall and winter. However, it's always slow this time of year because of the way ticket payment works.
When you pay for a flight with a credit card that credit card company doesn't pay the airline until you take the flight. In Sun Country's case, it has a heavy winter flying schedule and that means money won't be seen until then.
University of St. Thomas Professor David Brennan calls it another sign of rough economic times for the airline industry but he said other business sectors don't face the same risks.
"Given that kind of a situation cash flow problems are a lot more likely than it would be with other kinds of businesses that have a steadier stream of income," Brennan said.
Gadek said employees can expect the money they're missing out on now at the end of the year something he calls his intention, but he's not making any guarantees.
"Obviously this action is painful, nobody is denying that, but everyone here at Sun Country is committed to making sure this company remains viable and successful," Gadek said.
The 50 percent pay deferral will be calculated from employees' full pay, not their current level of reduced pay.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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