Delta and Northwest airlines declare bankruptcy
By the Editorial Board
15 September 2005
Delta and Northwest, two of the largest airlines in
the United States, filed for bankruptcy on Wednesday.
Both companies indicated they would seek approval from
Chapter 11 bankruptcy courts to drastically cut airlines
workers jobs, wages and pensions, and dramatically
reduce the size of their fleets.
Delta, the nations third largest airline, and
Northwest, the fifth largest, join United Airlines and US
Airways, which are already operating under bankruptcy
court protection. Of the so-called legacy air
carriers that existed prior to the onset of deregulation
in 1978, only American and Continental are not in
bankruptcy, but commentators suggested that these too
might soon take the bankruptcy route in order to slash
costs at the expense of their workers.
Delta and Northwest made their filings under
conditions of ongoing and massive losses, exacerbated by
soaring jet fuel prices, despite having already slashed
thousands of jobs and imposed brutal reductions in pay
and benefits. Northwest went into bankruptcy court in New
York only one day after it began hiring permanent
replacements for mechanics and cleaners whom the company
forced out on strike on August 20.
The immediate motive behind the bankruptcy filings is
to utilize the courts to rip up existing labor contracts
and impose, by judicial fiat, the most sweeping attacks
on jobs and working conditions in the history of the
industry.
Last May, a federal bankruptcy judge ruled that United
Airlines could default on its pension obligations and
turn over control of its pension funds to the Pension
Benefit Guaranty Corporation. The federal agency, already
swamped by corporate pension defaults, at best provides
only a fraction of the retirement pay supposedly
guaranteed to workers under labor contracts with their
employers.
There is little doubt that Delta and Northwest will
seek judicial sanction for a similar theft of billions of
dollars, leaving retired workers bereft of a decent
income or any form of economic security. They are likely
as well to go after the health benefits of both active
and retired workers.
The airlines timed their bankruptcy filings to beat an
October 17 deadline, when new, more restrictive
bankruptcy laws go into effect that make it more
difficult for companies to cancel their debts. Filing in
advance of the deadline will alsoby no means
coincidentallyallow the companies to hand their top
executives lucrative bonuses for staying on while the
court process unfolds. The new laws place restrictions on
bonuses paid to executives of companies operating under
Chapter 11.
Delta, whose losses have totaled nearly $10 billion
since 2001, said it plans to reduce its fleet size and
Chief Executive Gerald Grinstein said the airline will
demand more job cuts beyond the 24,000 the carrier has
announced since 2001. There is no painless way out
of this and there will be reduction of personnel,
Grinstein said.
Just last September, Grinstein announced plans to
slash up to 7,000 jobs through 2006 and close the
airlines hub in Dallas. Earlier this month, Delta
said it would cut 26 percent of its flights from its hub
in Cincinnati, resulting in another 1,000 job cuts.
A year ago Delta obtained the agreement of the pilots
union to extract $1 billion in wage and benefit cuts.
This week, the airline asked for another round of cuts
from the union.
The company is due to make billions of dollars in
pension payments over the next three years, but said
Wednesday it did not plan to make its next funding
contribution to its pension plan.
Northwest, which has recorded over $3 billion in
losses since 2001, has under-funded its employee pension
plans to the tune of billions of dollars. It has been
lobbying Congress to change pension laws to allow it to
repay its obligation over 25 years instead of five. The
company stated in papers filed with the federal
government Tuesday that it had failed to pay $42 million
in bills and would not meet a $65 million contribution to
its pension funds that fell due on Thursday.
The airline obtained a 15 percent pay cut and other
concessions worth $265 million a year from the Air Line
Pilots Association (ALPA) last December, and earlier this
month demanded a new round of cuts estimated by the union
to total $322 million annually.
The company put an ultimatum before its other unions
for a total of $1.1 billion in annual labor concessions,
including thousands of job cuts, and targeted the union
representing mechanics and airplane cleaners, the
Aircraft Mechanics Fraternal Association (AMFA), for a
union-busting attack. Northwest forced AMFA to strike on
August 20 by demanding a new contract eliminating the
jobs of more than half of the unions 4,400 members,
slashing wages by 25 percent, and raising workers
health costs.
The AMFA strike has become a symbol of the collapse of
the unions in the US. All of the other unions at
NorthwestALPA, the International Association of
Machinists (representing baggage handlers and other
ground workers) and the Professional Flight Attendants
Associationhave scabbed on the strike, allowing
Northwest to bring in strikebreakers without any
opposition.
Capitalizing on the treachery of the union
bureaucracyand the lack of any viable perspective
on the part of AMFANorthwest has since upped its
concessions demands. It is now demanding a total of $1.4
billion in combined give-backs from its unions.
Its revamped contract offer to AMFA includes the
elimination of 75 percent of AMFA members jobs and
a pay cut of 28 percent. AMFA, for its part, agreed to
these demands in negotiations last weekend, but balked at
the companys demand to reduce its previous
severance pay offer. The AMFA leadership is disarming its
members by encouraging illusions that they will fare
better under the auspices of a bankruptcy judge.
The bankruptcy filings, with their brutal implications
for tens of thousands of workers, are themselves the
culmination of a process of unrestrained profiteering and
self-enrichment that was set in motion by the
deregulation of the US airline industry in 1978. Nearly
thirty years later, it is abundantly clear that what was
billed as encouraging competition and unleashing the
dynamic impetus of the free market was a
means of plundering the assets of the airlines for the
benefit of the financial elite.
Hundreds of thousands of jobs have been destroyed,
wages and benefits have been repeatedly slashed, and now
the pensions and health provisions of retired workers are
being wiped out, while a small fraternity of corporate
CEOs gorge themselves with multi-million-dollar salaries
and bonuses.
Since deregulation was initiatedunder the
Democratic administration of Jimmy Cartermajor
airlines have disappeared entirely, such as Braniff, Pan
American, Trans World Airlines and Eastern. The removal
of government regulation has encouraged, not efficiency,
but irrationality and chaos in the organization of routes
and the setting of fares. Passengers, especially the vast
majority who cannot afford the exorbitant price of first
class tickets, are now handled little better than cattle,
crammed into overcrowded cabins and, on most flights,
denied a meal.
The airlines themselves have become milch cows for
CEOs who enrich themselves at the expense of their own
companies. Northwest Chairman Gary Wilson, for example,
the largest single shareholder, has been dumping his own
stock hand over fist. The Wall Street Journal reported
June 13 that, according to Securities and Exchange
Commission filings, Wilson cut his stake to 1.75 million
shares from 4.34 million between March 31 and the first
week in June.
Al Checchi, a former co-chairman who worked with
Wilson to acquire Northwest in 1989, sold $26.4 million
worth of Northwest stock between January and June,
according to the Minneapolis Star Tribune.
These top executives and company insiders dumped their
stock knowing that in so doing they were worsening the
financial position of the company and making bankruptcy
filing all the more likely. While they were protecting
their own fortunes, they were demanding ever more
draconian sacrifices from their employees.
The living standards of workers, the comfort and
safety of passengers and the general public interest have
all been subordinated to the naked drive for profit, and
unscrupulous asset-strippers and speculators such as
Frank Lorenzo and Cal Icahn have risen to the heights of
corporate power.
With the latest bankruptcy filings, the final act in
the drama is unfolding, as the airline industry undergoes
a further consolidation, resulting in a few mega-airlines
which will cut all unprofitable routes, close down hubs
and ratchet up ticket prices to previously unheard of
levels.
The bankruptcy of Northwest and Delta is one more
expression of the failure of the profit system. The same
fundamental tendencies of social dysfunction and decay
that have found an appalling expression in the needless
destruction of lives and communities from Hurricane
Katrina take another socially destructive form in the
chaos and collapse of the airline industry.
The requirements of modern air travel, which is today
a mass phenomenon of enormous complexity extending to
every part of the world, clash at every point with the
narrow, selfish and socially destructive prerogatives of
private ownership and a system based on profit-making and
the accumulation of personal wealth. Commercial air
travel demands public control and serious planning,
geared to the needs of society as a whole, not the
interests of a financial aristocracy.
The only rational and constructive solution to the
crisis in the airline industry is to place it under
public ownership as a public utility, subject to the
democratic control of airline workers, representatives of
the flying public and the working population as a whole.
This is the only basis for insuring safe, efficient and
affordable air travel, and securing the interests of
airline workers.
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