Interesting. Somehow these deals have to be recut or the jobs just go away. Megan McArdle:
Details of the American Airlines bankruptcy are emerging. And the details are that AMR wants all of its creditors to take a deep haircut, especially the workers:
The company aims to cut labor costs 20% under bankruptcy protection, and will soon begin negotiations with its three major unions. Some management jobs would also be cut.
AMR also proposes to end its traditional pension plans. The move has been strongly opposed by the airline’s unions and the U.S. pension-insurance agency.
CEO Thomas Horton said the company hopes to return to profitability by cutting spending more than $2 billion per year and raising revenue by $1 billion per year.
. . . Horton said cost-cutting will include restructuring debt and aircraft leases, grounding older planes, and changing labor contracts.
This is just the opening salvo in what promises to be a bruising negotiation with the unions. It’s not clear that the company actually expects to be allowed to terminate the pension plan. But the threat certainly gives them leverage with the unions, especially the pilots, because if the plan is terminated and taken over by the Pension Benefit Guaranty Corp, the payouts will be capped at around $50,000 a year–far less than pilots get from the current plan.
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The airlines would make more money if flying had not become such an unpleasant experience. I myself haven’t flown for years. Every time I think about taking a trip by air, I think about what an unpleasant experience flying has become and decide against taking the trip.
The need for security has been blamed for part of the unpleasantness of flying. However, if the airlines used their influence to the fullest, the procedures for security could be modified to make them more acceptable for the public. For example, ways could be found so that checked baggage could be inspected under the observation of the baggage owners, after which the baggage would be re-locked. The airlines could insist that passengers be treated respectfully and courteously. It’s not as though they have no influence over the TSA.
Until very recently, the airlines had charges and fees of which passengers were denied knowledge until arriving at the airport; there was no excuse for that. Airlines could also insist that passengers not be forced to pay monopoly prices for food service and items purchased at airports. Food service on flights could be made available for passengers who want it.
In short, by paying more attention to making flying a more pleasant experience for passengers, airlines could increase their revenue and profits thereby reducing the need to terminate pension plans and layoff employees.