Let the old airlines die
It’s time to let the sick legacy airlines die a dignified death. And it’s time to start over.
Something is rotten in the state of airline bankruptcy proceedings. And the stench is going to continue to damage the well-managed, financially viable airlines as long as bankruptcy judges continue to prop up failing carriers at the expense of efficient, money-making ones.
Billion-dollar airlines that have been flown into the ground by ineffective and inept managers are being artificially propped up by the government, protected from their creditors, and, at the same time allowed to engage in new routes and predatory pricing.
This is not bankruptcy protection. This is dangerous foolishness. And it is mortally wounding the airline industry, not helping nurse it back to health, and preventing new, economically stable airlines from growing to fill the void left by these flailing behemoths.
Case-in-point: Bankrupt United Airlines is trying to buy a piece of bankrupt Independence Air.
How ironic. Independence Air’s biggest competitor at Dulles airport, which is itself operating under Chapter 11 protection, has the chutzpah to bid for assets of its rival that it drove into the ground, with the help of the courts.
United Airlines could only match and undercut the prices of Independence Air and add flights to compete with the upstart because it was, in effect, subsidized by the government. United Airlines reneged on paying its bills, has wormed out of contracted leases, and abandoned its pension plan.
Delta Air Lines, which is also bankrupt, is exploiting the system as well. Just last week it asked for a six-month extension to file reorganization plan. For years, its management has proven that it has no idea how to turn a profit. How can a bankruptcy judge think that six months will make a difference?
In the meantime, while Delta doesn’t have to pay its bills, it is callously laying off workers. In addition, during this same period, the management is putting air travel “on sale.” How irresponsible is it to sell transcontinental flights for $99 while claiming the dire need for more operating cost cutting?
These actions are tantamount to spitting in the face of the bankruptcy courts. Unfortunately, and inexplicably, Delta will probably get away with it.
Not to let Northwest off the hook. The airline reportedly won’t make a dime of profit until 2009. Even with a near-monopoly in Minneapolis and Detroit that generated higher airfares than other airports with competition, and with its stranglehold on transpacific flights, the managers of this airline have squandered their stockholder’s money and their employees trust.
The intention of our bankruptcy laws was never to keep ailing, arrogant airlines alive for half a decade.
The bankruptcy laws were enacted to save livelihoods, jobs and pensions. That isn’t happening. The only livelihoods being protected are those of failing airline executives, foolish lenders and opportune lawyers.
Every day that inefficient airlines are allowed to sap the strength of healthy airlines with artificially low airfares and bids for new domestic and international routes, is another day of continuing ruin for our airline industry.
Keeping these failing airlines on life-support keeps our airline capacity artificially high, our pricing distorted, our use of labor inefficient and our municipal tax bases limited.
There is not an economist in the country that will stand up and say that if United, Delta and Northwest go bankrupt, the people of Detroit, Minneapolis, Atlanta or Chicago will go without air transportation for any significant time. There may be a few weeks of discomfort and disruption, but healthy airlines will fill the void.
Let’s take them off life support.
America will be better off with Delta, Northwest and United out of the way. And their workers will probably be better off in the long run finding more secure jobs with new entrants. Without a doubt, the pilots, flight attendants, ground staff and mechanics of the healthy airlines will be better off.
Nature offers the best analogy for what needs to happen next. Think of it as a forest fire. A fire doesn’t destroy the entire forest. It allows trees, sprouts and shrubs to renew the woods from the charred remains of the old. This new growth that quickly blankets the blackened landscape with vibrant greens would not have been possible without the sun that the old trees blocked.
It is time for our airline industries to be allowed to renew their growth rather than remain stunted by misguided long-term bankruptcy protection.