Wednesday, September 14, 2005
Two Down
Both Delta and Northwest filed for Chapter 11 bankruptcy protection today, setting the stage for a third and fourth airline transfering their pension liabilities to the taxpayers in the past five years. The Administration should make reforming the Pension Benefit Guarantee Corporation a high priority. Simple solution: limit the Federal insurance role to companies in liquidation, not reorganization.
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6 comments:
This one was kind of a set up too. Both had previously announced that if United was allowed to shed its pensions that they would be required to do the same simply in order to compete.
That's true, though it means the taxpayers are subsidizing too many airlines competing for two few passengers in an era where fuel costs negate profits even on fully loaded flights. Let bankrupt airlines merge or let them liquidate--but don't let dart in and out of bankruptcy's shelter on the taxpayer's dime.
well over the last few years there has been a refusal to let them merge under the guise of wanting more competition.
And full disclosure here: I work for one of the airlines mentioned.
Tommy:
I agree that previously mooted mergers, such as CO-NW, should have been allowed. Also I have some sympathy for advocates of eliminating the current cap on foreign investment in US-flag carriers (49 U.S.C. § 40102(a)(15)), though it's a tough sell in the absence of EU concessions on ownership or open skies (cf. 49 U.S.C. § 40101(d)(8-9)). But we can't continue to allow air carriers to move in and out of Chapter 11 every five years, especially given the airlines' self-generated over-purchase of tails (and over-supply in the Arizona bone-yard).
Oh, and full disclosure: I'm outside counsel for ARINC, the airline-owned communications cooperative, providing inter-line, intra-company and air-to-ground datalink services to airlines, as well as satellite-based internet and telephony on biz jets. And I've never recovered from losing ID-50 privileges (half-price tickets) a decade ago.
Sorry for another geek moment, but it's my job.
Delta Airlines didn't go down because of the price of fuel or market forces. It went down because of managements culture of arogance. They thought they were too good to fall. "we are better than Southwest. We don't need to compete with them" How many times I heard that. If ever there was a company that deserved to go down it is Delta Airlines.
Well deregulation has been a misnomer, it would be more appropriate to refer to it as different regulation.
A case can be made that United and US Airways were condemned to bankruptcy when they were not allowed to merge and that Northwest and Delta were doomed to follow suit as soon as the United/US Airways pensions were turned over to the PBGC. Southwest is an odd entity just over it's business plan and route network and for the most part isn't as much of a direct competitor as it is given credit for being.
The real problem is too many hub and spoke carriers attempting to support too many hubs and the cities of those hubs doing everything they can to maintain that hub status. One of the natural ways of settling that would be mergers or allowing an airline to disappear(admittedly I'm not in favor of the last one if it involves my employer) but there has been an unwillingness to allow that to happen so far.
And I'm done talking about it, I get enough of it at work.
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