FacebookTwitterGoogle+RedditEmail

Airline Bankruptcies, Mergers and Profits

by CARL FINAMORE

Entering bankruptcy protection is as common for airlines the last few years as entering drug rehab is for contemporary pop stars. The only difference is that airlines leave the ‘treatment center’ flying higher than ever.

Of course, it’s the employees who are left to “bottom out” on their own. Prominent union financial analyst Dan Akins estimates workers have suffered reductions in wages and benefits totaling $11 billion from 2002 to 2005.

The results of these concessions are undeniable. The airline industry reported a 534% profit increase last year from 2005, soaring to $2-$3 billion in profits for 2006. The employer-controlled Air Transport Association expects 2007 to be “even more promising, with a projected profit of approximately $4 billion”

So while workers are in the dumps, the airlines are now on Cloud 9. These statistics confirm that the enormous concessions imposed by bankruptcy courts were based on deceptive business plans with inflated labor costs and underestimated assets.

The Association of Flight Attendants (AFA) at Northwest Airlines understands this. It recently filed a brief challenging Northwest’s reorganization plan, arguing that it was “now obsolete.”

In its brief, the union demonstrated that the pre-tax 6.5% profit margin originally anticipated by the bankruptcy court for 2010 is now expected in 2007. The AFA-CWA also documented that most other target economic projections submitted to the bankruptcy court last year by Northwest are already being exceeded.

The same criticism could be made of US Airways and United Airlines, both of whom walked out of the bankruptcy court with deep pockets.

In addition to dramatically lowered labor costs, increased fares and a record number of passengers stuffed into each aircraft also account for these profits.

Now Wall St. is circling the skies looking for wounded quarry. It smells big money from more mergers and acquisitions or simply the old staple of pumping up ticket prices.

Prey or predator, United Airlines, American, Continental, Delta, Northwest and US Airways have all been the subject of speculation by ravenous investors.

After receiving a steroid dose of new capital when recently acquired by America West, for example, US Airways made two unsuccessful offers for Delta in the last three months. They even upped their most recent offer this month by 20%.

Delta’s creditors committee rejected both offers, largely because they believe they can profit better flying solo after their planned bankruptcy exit in April 2007.

No honor among thieves. Why share when you can have it all yourself?

After all, experience demonstrates bankruptcy provides ample opportunity to dump pensions, rewrite collective bargaining agreements, and renegotiate debts.

But please remain in your seats, we may be experiencing some “bumpy air.” In fact, the merger mania may be slowing a bit because the mad dash for profits, following so soon after dumping pensions and tearing up contracts, is setting off some stiff opposition.

The International Association of Machinists (IAM), for example, opposed the Delta merger because contract negotiations to integrate the US Airways and America West workforces were not completed. IAM airport pickets at US Airway terminal doors earlier in the year declared “No Contract, No Delta”.

US Airways is also in hot water with five US Senators. The Senators recently sent a letter to the Pension Benefit Guaranty Corporation (PBGC) asking them to invoke their statutory authority and “explore the possibility of restoring the terminated employee pension plans at US Airways, in light of the airline’s substantially improved financial circumstances.”

The Senators objected to US Airways bidding $10.2 billion to purchase Delta, including $5 billion in cash, after previously defaulting on their employee pension plan, under-funded as it was by $4.8 billion.

The persistent stalking of Delta by U.S. Airways put the spotlight on the grotesque irony of an airline going on a Rodeo Drive-style buying spree only a short time after burying the pensions, benefits and wages of thousands of employees. Other carriers are subject to the same criticism.

Delta management is also the target of some controversy. Ground employees recently formed a union organizing committee right in the heart of the staunchly anti-union carrier’s main Atlanta hub. It’s not surprising. Delta’s non-union ground workers have fared far worse than their union counterparts at other bankrupt airlines, dropping to “second or third from the bottom in pay” among over 20 US carriers, according to the organizing committee’s Deltaramp.blogspot.com website.

Historically non-union, Delta urges workers to “Keep Delta My Delta.” But what does that mean when Delta’s “reorganization plan” calls for eliminating 7000-9000 jobs by the end of this year. So much for “Keep Delta My Delta.” The carrier’s pro-IAM ramp workers have a better idea: “Make Delta Our Delta.”

Experts still believe mergers and acquisitions will take off. But with increased public scrutiny and worker discontent on the rise, don’t expect the flight to be as smooth as originally expected.

CARL FINAMORE is President of IAMAW Air Transport Local Lodge 1781.

 

Carl Finamore is Machinist Lodge 1781 delegate, San Francisco Labor Council, AFL-CIO. He can be reached at local1781@yahoo.com

More articles by:
June 28, 2016
Jonathan Cook
The Neoliberal Prison: Brexit Hysteria and the Liberal Mind
Paul Street
Bernie, Bakken, and Electoral Delusion: Letting Rich Guys Ruin Iowa and the World
Anthony DiMaggio
Fatally Flawed: the Bi-Partisan Travesty of American Health Care Reform
Mike King
The “Free State of Jones” in Trump’s America: Freedom Beyond White Imagination
Antonis Vradis
Stop Shedding Tears for the EU Monster: Brexit, the View From the Peloponnese
Omar Kassem
The End of the Atlantic Project: Slamming the Brakes on the Neoliberal Order
Binoy Kampmark
Brexit and the Neoliberal Revolt Against Jeremy Corbyn
Ruth Hopkins
Save Bear Butte: Mecca of the Lakota
Celestino Gusmao
Time to End Impunity for Suharto’s Crimes in Indonesia and Timor-Leste
Thomas Knapp
SCOTUS: Amply Serving Law Enforcement’s Interests versus Society’s
Manuel E. Yepe
Capitalism is the Opposite of Democracy
Winslow Myers
Up Against the Wall
Chris Ernesto
Bernie’s “Political Revolution” = Vote for Clinton and the Neocons
Stephanie Van Hook
The Time for Silence is Over
Ajamu Nangwaya
Toronto’s Bathhouse Raids: Racialized, Queer Solidarity and Police Violence
June 27, 2016
Robin Hahnel
Brexit: Establishment Freak Out
James Bradley
Omar’s Motive
Gregory Wilpert – Michael Hudson
How Western Military Interventions Shaped the Brexit Vote
Leonard Peltier
41 Years Since Jumping Bull (But 500 Years of Trauma)
Rev. William Alberts
Orlando: the Latest Victim of Radicalizing American Imperialism
Patrick Cockburn
Brexiteers Have Much in Common With Arab Spring Protesters
Franklin Lamb
How 100 Syrians, 200 Russians and 11 Dogs Out-Witted ISIS and Saved Palmyra
John Grant
Omar Mateen: The Answers are All Around Us
Dean Baker
In the Wake of Brexit Will the EU Finally Turn Away From Austerity?
Ralph Nader
The IRS and the Self-Minimization of Congressman Jason Chaffetz
Johan Galtung
Goodbye UK, Goodbye Great Britain: What Next?
Martha Pskowski
Detained in Dilley: Deportation and Asylum in Texas
Binoy Kampmark
Headaches of Empire: Brexit’s Effect on the United States
Dave Lindorff
Honest Election System Needed to Defeat Ruling Elite
Louisa Willcox
Delisting Grizzly Bears to Save the Endangered Species Act?
Jason Holland
The Tragedy of Nothing
Jeffrey St. Clair
Revolution Reconsidered: a Fragment (Guest Starring Bernard Sanders in the Role of Robespierre)
Weekend Edition
June 24, 2016
Friday - Sunday
John Pilger
A Blow for Peace and Democracy: Why the British Said No to Europe
Pepe Escobar
Goodbye to All That: Why the UK Left the EU
Michael Hudson
Revolts of the Debtors: From Socrates to Ibn Khaldun
Andrew Levine
Summer Spectaculars: Prelude to a Tea Party?
Kshama Sawant
Beyond Bernie: Still Not With Her
Mike Whitney
¡Basta Ya, Brussels! British Voters Reject EU Corporate Slavestate
Tariq Ali
Panic in the House: Brexit as Revolt Against the Political Establishment
Paul Street
Miranda, Obama, and Hamilton: an Orwellian Ménage à Trois for the Neoliberal Age
Ellen Brown
The War on Weed is Winding Down, But Will Monsanto Emerge the Winner?
Gary Leupp
Why God Created the Two-Party System
Conn Hallinan
Brexit Vote: a Very British Affair (But Spain May Rock the Continent)
Ruth Fowler
England, My England
Jeffrey St. Clair
Lines Written on the Occasion of Bernie Sanders’ Announcement of His Intention to Vote for Hillary Clinton
FacebookTwitterGoogle+RedditEmail