Recession strikes Iosco as Kalitta Air cuts 200 jobs
by Jason Ogden and Holly Nelson

OSCODA - Last week was a bleak one for northeast Michigan as one of the area’s largest employers, Kalitta Air, gave layoff notices to more than 200 employees.

The company, which specializes in airfreight and aircraft maintenance, reduced its Oscoda workforce by more than 200, according to Oscoda Division General Manager Don Nolan.
Before the workforce reduction, Nolan said, Kalitta and its subsidiaries employed 835 at the Oscoda site.

Nolan said every branch of the company is losing employees - the result of the eroding national economy - with 95 percent of the layoffs impacting full-time workers employed through Kalitta’s contractor service agencies, STS and AIRTECS.

“We hope to be done with it today,” Nolan said on Nov. 26. “That way, everyone can get it behind them.”

The workforce reduction was mainly contractors, according to Nolan, and was based on individual skills and productivity, as well as departmental requirements per managers.

Employees learned of the layoffs via a memo issued by owner and founder Conrad “Connie” Kalitta on Nov. 25.

“Although Kalitta Air has experienced a period of rapid growth, it is currently faced with the aftermath of unprecedented worldwide economic conditions,” wrote Kalitta.

“Maintaining strong business fundamentals requires us to evaluate and adjust every facet of our operations in order to ensure that we are operating in the most efficient manner possible during these volatile times. Unfortunately, passively waiting for things to improve and not being proactive is not an option.”

According to the letter, Kalitta met with his management group and determined that eight of the company’s 20 aircraft will be parked for 2009.

“Consequently, we are forced to reduce aircraft crews and support staff accordingly,” he wrote.

Nolan said most of the company’s business comes from flying freight around the world for companies such as DHL and UPS, also for the government.

“Maintaining strong business fundamentals requires us to evaluate and adjust every facet of our operations in order to ensure that we are operating in the most efficient manner possible during these volatile times. Unfortunately, passively waiting for things to improve and not being proactive is not an option.”

According to the letter, Kalitta met with his management group and determined that eight of the company’s 20 aircraft will be parked for 2009.

“Consequently, we are forced to reduce aircraft crews and support staff accordingly,” he wrote.

Nolan said most of the company’s business comes from flying freight around the world for companies such as DHL and UPS, also for the government.

Kalitta had hoped the Christmas airfreight rush would have brought the company out of the slump, Nolan said.

The economy, however, did not cooperate - in the United States or the rest of the world.

According to Aviation Week & Space Technology, airfreight moves almost in lockstep with the economy and began to notice the market cooling in Asia last summer. It is now slowing in North America, Europe and Latin America, with cargo traffic falling by almost eight percent in September alone.

The publication quoted Brian Pearch, chief economist for the International Air Transportation Association, as blaming the housing and credit crises which began in the U.S.

The situation, according to Aviation Week, has resulted in Kalitta customer DHL pulling out of the U.S. market.

It is not known how much privately held Kalitta Air lost, but Nolan commented that it was in the tens of millions of dollars.

Publicly traded airlines, aerospace and defense companies are all posting big losses for the year, most in the high double digits, one of nearly 90 percent, with industry analysts predicting many will go under.

Nolan said this is not the case with Kalitta Air and that there is currently no concern the company will pull stakes and leave Oscoda.

“There is nothing like that,” he said. “In order to survive, we have had to cut back.”

No one is predicting when the economic climate will improve for the airfreight industry and Nolan says he is uncertain of how long the layoffs will last or if workers will be called back at all.

“We would definitely consider them first, but don’t plan on that,” Nolan said. “What we don’t want is people sitting around the house waiting to be called back.

Nolan said, if an individual has a job opportunity somewhere else, he or she should take the employment.

“We don’t want to promise something we can’t deliver; it is all in the economy’s hands,” he said.

It was a grim Thanksgiving week for Kalitta employees, many of whom were in tears as their plight sunk in and they openly shared concerns about how they will feed their families and come up with the next house and car payments.

In some cases, the grief turned to anger, with a few employees and community members contacting newspaper staff with allegations that U.S. workers are being laid off at Kalitta Air while foreign nationals are retained.

According to Nolan, less than five percent of the total number of current Oscoda employees are foreign nationals. There are 34 remaining after 25 were cut in July and another 16 last week.

“Those who remain were brought into the workforce due to our specific need for qualified aviation structural mechanics to perform structural work necessary during heavy checks,” Nolan explained. “Our need for these licensed individuals has not changed and, prior to hiring them, we searched nationwide for qualified American technicians to no avail. That was then and getting them here on visas meant keeping them on until April 2009 when the visa agreements expire as a requirement.”

The Oscoda-Wurtsmith Airport and Oscoda Township were recently successful in obtaining state and federal grants for renovating older hangars and improvements to other infrastructure. A condition of one of the grants is that Kalitta increase staffing. Nolan was asked if the layoffs will jeopardize the grants.

“The recent grant agreement has a three-year window in which to meet our increase in staff and private funds ‘grant match’ spending. It is our sincere hope that the economic global climate will turn around prior to the end of this window in 2011,” he said.

Despite the recession and recent misfortunes, Nolan said, Kalitta Air is still hoping to increase the number of locally qualified individuals who work in aviation through the A&P preparatory program, which is being conducted at the Iosco Regional Education Services Agency.

“Connie Kalitta has provided a paid instructor and various tools and equipment [for the program],” Nolan added. “We must have a certain percentage of licensed staff due to FAA requirements of our repair station and its certificate.

“Also, we are looking for 145 repair stations or outside work,” Nolan added. “Unfortunately, many other airlines are drastically cutting back and mothballing aircraft in preparation for 2009’s dismal forecast.”

Kalitta Air, based in Ypsilanti and wholly owned by its founder, began service in late 2000 with three 747 aircraft, a fleet which now numbers 20.