Someone GETS it: Airlines using bankruptcy as a BUSINESS TOOL!

[Bluebear]

There was a time when a major corporation's slide into Bankruptcy Court would have been freighted with significance, convulsion and shame. One example is the epochmaking bankruptcy and liquidation of the Rock Island Railroad from 1975 to 1980. Now, it's just another business tool.

With Wednesday's filings by Delta and Northwest airlines, four of seven major airlines will be in bankruptcy reorganization, along with several smaller carriers. America West merger partner US Airways has been there twice in recent years. Yet nothing seems to change as the industry lurches from crisis to crisis. Indeed, something seems fundamentally broken beyond the immediate crises, in this case the twin blows of Hurricane Katrina and higher fuel costs (plus a mechanics strike at Northwest).....

At the moment, labor is a convenient fall guy. If you consider the decisions of the flying public as an indicator, Americans have little sympathy for restive airline employees. Northwest appears to have felt little consumer backlash for using replacement workers when mechanics struck.

That's odd, considering that every worker who enjoys an eight-hour day, a safe workplace, benefits and whose children don't toil 12-hour days - every one of us can thank organized labor for these good things taken for granted. Those victories were dearly purchased in the 1930s. Today, average Americans are likely to complain about stagnant wages and declining benefits while also bemoaning those nasty airline unions....

http://www.azcentral.com/arizonarepublic/business/articles/0915talton15.html

[msongs]

1. LA Times editorial today (SAT) on the same subject - bkrpcy as

a business model to be used repeatedly.

Msongs
www.msongs.com/clark2008.htm

[liberalhistorian]

3. And businesses are given

far more leniency and sympathy in bankruptcy filings than ordinary Joe Shmoes, especially where repugs are concerned. In the mind of a repub, businesses always have good reason to file no matter what, whereas us lazy, no-good Joe and Jane Sixpacks never do. :eyes:

[SharonAnn]

5. Management's purpose is to increase their bonuses and benefits

They say it is to raise the stock price, excuse me "value", but all of corporate American management seems to now work on the principle that the goal is to increase their bonuses and improve the executive's life style.

When something doesn't make sense about what corporations are doing, look at what the result is for the executives. Ken Ray and his ilk have been running things for some time now, we just thought they were trying to run companies. Turns out, they were trying to run their private banks.

Of course this business bankruptcy is being used as a business tool. It allows them to get out of pension obligations and labor contracts and all kinds of other "onerous" regulations.

You can be sure that all corporations are now looking at how that would work for them.

BTW, remember that executive pensions are separately funded from the regular pension fund. They always make sure their pension fund is fully funded and that it is set up so that it cannot be touched in corporate bankruptcy.

[Bluebear]

6. The CEO of Northwest Airlines has a pension set up of $950K a year

And that is only one of THREE pensions he has set up for himself. His tenure at the company is only 13 years. And as you mention, the funding is constructed completely separate from the rank and file. It is disgraceful.

[OldLeftieLawyer]

2. There was never any shame associated with bankruptcy

It was designed to allow people (and businesses) a new start, a chance to reorganize, a way to buy some time and get things in better shape before creditors put the people (or businesses) away.

It's always been a business tool. We studied bankruptcy in Corporate Law in law school. That's all it is, and it's kept our major carriers afloat more than once, so it's worked.

How they'll deal with the exploding fuel prices is another issue completely. I can't imagine what's going to happen.

[TwilightZone]

4. They're not the only ones. Kmart used it brilliantly.

Kmart used bankruptcy to screw their creditors out of billions and then subsequently load up on cash - enough cash to buy Sears, in fact.

They also used it as an excuse to close a ton of stores that were losing money anyway - close the stores, get out of the leases, and lay off a ton of staff, including a bunch of potentially overpaid management execs.

It's sleazy, but it worked beautifully.

[Fescue4u]

11. I believe you, but why would Kmart need an excuse?

an excuse to close stores and fire people?

Heck NOT closing stores that are losing money is proably why they went bk in the first place.

[TwilightZone]

12. They didn't own a lot of the stores - they were leasing them.

So, by filing bankruptcy, they could break their leases well before the normal term dates at basically no cost to them.

Yes, ironically, part of the problem was that they could be stubborn about trying to make losing stores profitable. They had a horrible management team in place for a while - in fact, a couple of members of that team are under investigation by the SEC and others for fraud.

[The Backlash Cometh]

7. Well, the option is to nationalize the airline industry.

[ArbustoBuster]

8. Idea!

We gave them almost enough money to freakin' BUY them after 9/11, so perhaps we should just tell them they've already been bought and kick out the upper management...

[Bluebear]

9. Welcome to DU AB....and I like your plan!

Certainly the airlines in question were not given millions in taxpayer dollars to go directly to the upper management? And meanwhile the workers pensions and jobs are kaput?

[ArbustoBuster]

10. How to Waste Millions...

...the Bush Administration Way!

1) Give millions and millions and millions of dollars to an industry that screws its workers and its customers.

2) Conveniently forget that the industry is already given millions of dollars free in the form of airport construction and maintenance.

3) Let the same idiots who let the industry fall apart spend the millions of dollars in free government largesse.

4) Profit!

NOTE: Step 4 does not imply that any actual PEOPLE will profit. The profit may, for all we know, be dumped into large pits and burned. This is, if we think about it, quite likely the case since every airline that got huge infusions of cash after 9/11 is again in trouble. Less than four years later.

[Fescue4u]

15. Yea thats what is really bad about these airline failures

Is not the failures themselves, but the fact that government gave them billions of dollars in bailout after 9/11

All that bailout did was let them limp along a few more years.

If the government hadn't "bailed" them out, these airline failures would have occurred a few years sooner, and we would now be much closer to a industry model that works.

[Fescue4u]

14. If you like standing in line at the BMV

You LOVE waiting for your plane to show up.

Clearly the airline industry needs to revamped, but I cant imagine flying on a plane when the pilot has the attitude comparable to that of DMV, TSA or post office employees.

[The Backlash Cometh]

16. Well, you must have met different federal employees than I have.

I've never met a postal worker that I didn't like. They've always been very courteous. If anyone of them has ever gone "postal" I can imagine it's because of some of the the ridiculous efficiency standards that they were expected to meet. Like being required to stand within a painted box, trained like an animal.

There may have been problems with the way government was run when the Democrats ran things, but I think that we threw the baby out with the bathwater. For example, we all knew that most of the extra budget money was spent in the month of October because departments couldn't ask for more money if they spent less than they did the year before. We all knew that was a source of waste, but instead of focusing on ending those kinds of boondoggles, we went the way we did. We destroyed everything. Even NOLA.

[jmowreader]

17. I'd like to see the receipts on those $600 hammers

I still say most of those $600 hammers, $400 toilet seats and the like were bought on September 29, when the boss went to one of his underlings and told him to get rid of $100,000 right now and I don't care what you do with it.

Actually, the $400 toilet seat is almost excusable: it's for the C-5, and the kind soul who put the bathroom on that plane decided to put it in a place that no other toilet seat would fit.

[Bernardo de La Paz]

13. Republicans made it harder for individuals to use it as a "business tool".

The recent legislation makes it harder for individuals to invoke and to survive by bankruptcy.