Bankruptcy Filings Common In Airline Industry

Tuesday, November 29th 2011, 10:46 pm
By: News On 6

All major US carriers, with the exception of Southwest, have now declared bankruptcy at one time or another. And union leaders say other airlines' experiences don't bode well for their workers.

American Airlines used to be one of the world's largest air carriers. But it's been muscled out of the top spot by Delta and United, five years ago both were under bankruptcy protection.

Navigating bankruptcy is starting to look like a familiar flight path for the US airline industry.

"All of our largest competitors have taken this path, some more than once," said Tom Horton, American Airlines CEO.

  •  US Airways filed for bankruptcy in 2002 and 2004.
  • United was under Chapter 11 for more than three years.
  • Delta and Northwest filed on the same day in 2005.

Leaders at the local transport workers union are looking across the skies for what may be coming on their horizon.

"Bankruptcy has never been considered an advantage for the workforce," said John Hewitt, Chairman of Maintenance for Local 514.

Northwest Airlines filed bankruptcy amid a workers strike in 2005. It replaced 4,400 striking employees with non-union labor. It emerged from bankruptcy, by slashing labor costs by nearly $1.5 billion.

Delta workers also faced steep cuts, some unions took up to a 23 percent pay cut. And the company ended up offering severance to 30,000 workers, nearly half its workforce, in 2008.

But Northwest and Delta have now partnered to create one of the world's largest airlines. American's new CEO says that shows how bankruptcy can actually strengthen a company. But local union leader say bankruptcy has never been good for workers.

"The workforce is asked to make sacrifices in bankruptcy while executives are given bonuses in order to stay and reorganize the company," Hewitt said.

"We're now at a point where we're going to restructure the company and we're going to make it very successful and that's to the benefit of all of our people, and that's what we're going to go do," CEO Horton said Tuesday.

The transport workers union rejected an agreement last summer because it included what they called too many sacrifices - concessions like no pension or retiree medical insurance for newly hired employees. Union leaders expect those terms to come back up in the negotiations in the days ahead.