By BJ Bjornson
Not many easier ways to show just how the American middle class has found itself an increasingly rare species these days than this story about American Airlines filing for bankruptcy.
AMR said agreements with its workforce forced it to spend $600m (�384m) more than other airlines on staff costs.
. . .
It was the only one of the major US airlines operating international routes not to file for bankruptcy after the September 11th terrorist attacks.
Its competitors have successfully used bankruptcy to restructure their labour contracts and cut costs.
. . .
Mr Horton said the board had unanimously decided to file for bankruptcy on Monday night.
He announced that American would be looking to change its employees' terms and conditions. "We plan to initiate further negotiations with all of our unions to reduce our labour costs to competitive levels," he said.
So basically the system has been set up to reward those who failed first and could use that failure to stick it to their employees, ultimately forcing their competitors to do the same to remain competitive.
Little wonder that things just keep spiralling downwards.
If I'm not mistaken ordinary real citizens also don't get the same treatment as corporate unreal citizens when they go to bankruptcy court which I'd suspect aids and abets more real citizens joining the lower classes. I thought BO was going to change this - i.e. modify the bankruptcy law signed into force by W. He said he would during his campaign against McCain back in 2008 and he may and I'm not aware of it.
ReplyDeleteMy guess is that American's bankruptcy filing is to shift the company's pension liability to PBGC, a move which cannot happen otherwise. A quick search turned up this...
ReplyDelete"Every other airline used bankruptcy to wipe out pension liabilities and other costs (although Continental did preserve its pension benefits)."
Unions may cooperate but both management and labor know that getting defined benefits pensions off the books helps both. It's the equivalent of a gift to whatever company emerges from the "reorganization." 401k plans are replacing pensions.
PBGC is privately funded but government-sponsored, similar to how FDIC insures bank deposits up to a limit. Highly compensated covered employees will take a hit, but most will not, except that all future years of employment will add nothing to whatever benefits have accrued.
Company-funded pensions are relics of the past, replaced by employee-funded retirement arrangements.