Memphis-based Pinnacle Airlines Corp. has proposed to United Steelworkers union leaders that all employees represented by the union take a 5 percent pay cut as the regional air carrier struggles to rework its financial arrangements with employees and major airlines.

The talks with the three USW locals were under way last week. The union acknowledged them publicly late Friday, Jan. 6, in a written statement that characterized the talks as “difficult” and “fluid.”

Pinnacle President and CEO Sean Menke announced in mid-December the company had hired lawyers and a consulting firm specifically to rework agreements that company executives inherited from previous leadership. He said the review would cover labor agreements as well as agreements with major airlines that Pinnacle flies for under various brand names.

The company’s stock price tumbled below a dollar in the days and weeks that followed.

“The USW understands that management has described the urgency of this process to its employees, its creditors and the media,” the union statement reads. “However, your union also understands that in bargaining, it is important to understand whether the company has a legitimate basis for its demands, whether the changes sought are fair and equitable, and whether the company actually has a reasonable opportunity to restructure.”

Pinnacle Airlines Inc., a subsidiary of Pinnacle Airlines Corp., and flight attendants represented by United Steelworkers local 772 in October reached an agreement on a five-year contract.

It covered nearly 900 flight attendants who work out of Memphis, Atlanta, Detroit, New York and Minneapolis.

The deal, ratified by union members months after they had rejected a previous offer, included what union leaders described as “significant wage increases and improvements to working conditions and the quality of life for flight attendants.”

In the Jan. 6 statement, union leaders indicated they have made counterproposals to the 5 percent cut Pinnacle has proposed.

The union leadership didn’t go into specifics on the counteroffers but said they “reflect our view that the company’s employees should not bear the burden of this restructuring and that the workers should receive something in return for any sacrifices given.”

The union also acknowledged that a bankruptcy reorganization filing by Pinnacle is possible.

“If these negotiations fail, it is possible that the company could file for bankruptcy protection and ask a bankruptcy court to allow it to restructure its agreements with the unions and others,” the statement reads.

If Pinnacle files for bankruptcy reorganization, it could seek to do away with its collective bargaining agreements as a separate process from the bankruptcy filing. But USW leaders say it requires more attempts at bargaining as part of a process they have pursued with other companies.

“If management forces us to carry our struggle to a bankruptcy court, we will be prepared to engage,” this month’s union statement reads.

The same month USW flight attendants ratified the new five-year contract, the union took a position against Pinnacle’s move to have itself considered a “single integrated transportation system.” The designation would have affected how flight attendants were classified.

The union opposed the move, which has been a key part of Pinnacle executives’ strategy for reorganizing the company that is a set of three regional air carriers – the Pinnacle Inc. brand, as well as the Mesaba and Colgan brands, which were acquired later by Pinnacle. The plan, which was launched before the current restructuring effort when Phil Trenary was the CEO of the company, was to have two divisions of Pinnacle – one for jets and the other for turboprop aircraft.

Once Pinnacle acknowledged its Mesaba Airlines subsidiary would end its operations at the end of 2011, the union told federal regulators it was against the designation.

“These two airlines will continue to operate separately, under their own distinct identities and certificates, flying for different major carriers and maintaining separate flight attendant workforces,” attorney Edgar N. James of Washington wrote to Eileen Hennessey, an investigator for the National Mediation Board. “Neither of the two subsidiaries will succeed to and continue the flying that Mesaba previously performed.”