US Airways And American Airlines Seek A Deadly Embrace

US Airways And American Airlines Seek A Deadly Embrace

April 24, 2012
Originally published in Forbes

As the legacy airlines limp toward oblivion crippled by expensive labor contracts, efficiency-killing work rules, and massive unfunded pension liabilities, word comes that the pilots, flight attendants, and mechanics unions — primary beneficiaries of these airlines remaining in business — are pushing for a merger of American Airlines and US Airways.

Hey, what’s not to like if you work for a bankrupt company and a white knight offers you an immediate 5.5% raise, annual 3% pay increases for five years, and no layoffs—all paid for with other people’s money? What about bondholders, shareholders, and customers? Let them eat $9.00 stale ham sandwiches.

The unions may get their wish despite the objections of American’s management, which still hopes to emerge from bankruptcy as a trimmed down, economically viable company. But that won’t be in the cards if a court doesn’t give the airline the go ahead to shed thousands of union workers, transform its defined benefit pensions into defined contribution plans such as 401(k)s, and rewrite contracts and work rules that are bleeding the company to death.

If the bankruptcy judge says no and a shotgun wedding with US Airways is arranged to “save” all those jobs, don’t be surprised if the combined operation ultimately comes begging to Uncle Sam for a bailout. Whether those creditors foolish enough to lend money to a heavily unionized company get shafted GM-style will depend on who is in the White House next time the money runs out.

Like Greece with wings, American Airlines has 130,000 retirees in its four underfunded pension plans and more non-producing dependents than revenue-generating employees. US Airways, which has already gone through bankruptcy twice, has fewer obligations. But the merger efficiencies US Airways is promising have no hope of making a dent in the $10 billion in unfunded pension liabilities American has racked up over the years as it made ever more generous pension promises to buy labor peace.

Did they have a choice? Remember when the Machinists union committed murder-suicide at Eastern Airlines? The “victory” achieved in 1991, which drove Eastern into the ground and all its former employees onto the unemployment rolls, made it clear to the other airlines that union leadership would rather destroy jobs altogether than allow non-union workers to have them.

For spineless managers, making false promises is the easy way to dodge such fatal strikes. After all, like Members of Congress who expect to retire before Social Security goes belly up, why should an executive pick a fight today that can be fobbed off onto a successor tomorrow?

That is what needs to be fixed, for tomorrow has arrived. But where to begin?

If there ever was an airline union that needed to be grounded, it is the flight attendants union. Take a good look at the superannuated attendants next time you board a legacy airline. They are as tired of flying as those of us that have been doing it for thirty years, but it’s the customers who pay the price. Frantic attempts to charge for all the amenities that once helped to make flying tolerable will soon progress to the point that they install coin-operated rest rooms. All so that crews that make post office employees seem cheery and polite can be paid three times what it would take to hire and train an unemployed sociology major eager to take the job just to escape living on mom’s couch.

Where is it written that being a flight attendant is a lifetime career? What’s wrong with a five-year, one renewal, and you’re out contract? Wouldn’t it be nice to be served by flight attendants that are actually excited to come to work? Yes, safety training is important. But there is no reason to believe that a fit and alert 29-year-old should perform less safely in an emergency than a weary, overweight 60-year-old.

Next comes the mechanics union, a militant bunch if you look at their history. Skilled and experienced specialists are hard to find, so the market would likely continue paying top dollar for the best mechanics, with or without a union. But the person who waggles the plane into its parking spot? Not so much. In addition, a lot of routine lower-skilled ground work could be jobbed out to local contractors, if you could find a way to protect them from club wielding unionists shouting “scab.”

Pilots are a lot trickier. I don’t know about you, but I get nervous when the pilot is my kid’s age. I’m happy to pay extra for a decade or two of experience for the person sitting in the left hand seat. Work rules can always use a tune-up, respectful of critical rest intervals, but moving these more highly compensated employees into a 401(k) plan similar to the ones the rest of us live with shouldn’t be asking too much to help assure their employer’s survival. Plus with a 401(k) they will at least know that the money is theirs and not co-mingled in the bowels of a terminally ill pension plan whose fate will surely end up in the hands of a bankruptcy judge sooner or later. And where will they be then?