Bankruptcies fuel airline crisis

Labor needs industry-wide fightback

By Milt Neidenberg

The airline industry is heading for a crash landing.

United Airlines, second biggest carrier in the country, has postponed exiting from bankruptcy. UAL has been operating under Chapter 11 for nearly three years.

Delta Air Lines is about to declare bankruptcy. Northwest Airlines is threatening bankruptcy to avoid a strike.

Continental Airlines, which had earlier gone in and out of bankruptcy, is on the verge of another. US Airways had been in bankruptcy and would not have survived if the government hadn´t approved its merger with America West.

What is feeding this crisis? A market overloaded with too many commercial planes and too few passengers; imperialist wars going badly in Iraq and Afghanistan, driving oil over $60 a barrel; and a debt-ridden, declining empire.

Wall Street/corporate strategy is to dump these vast problems onto the entire organized-labor movement. The airline unions and their hundreds of thousands of members are in management´s cross hairs.

With the combined support of the government, the courts and Congress, financial strategists have encouraged the industry to become leaner and meaner. In an intensely competitive industry, cheap non-union carriers like Southwest and Jet Blue are the shining examples.

UAL is the pace setter for this transition. It has already implemented a strategy that scrapped collective-bargaining agreements and imploded wages and benefits, including health care, pensions and working conditions.

Since December 2002, UAL has been in a Chapter 11 bankruptcy, enjoying the fruits of eliminating more than $3.4 billion in union wages and benefits. Management has been able to increase workloads and manipulate schedules to intensify productivity and speedups. The corporation has also ripped off billions of dollars more from the funded pensions of the four UAL unions.

An Aug. 3 New York editorial described the UAL pension default: “From 1999 through 2003 ... a huge gap opened between the value of the pension assets and the amount owed to present and future retirees from a surplus of about $2 billion to a deficit of $7 billion.’

Since 2003 the gap has widened to $13 billion. UAL has now dumped $10.2 billion of its under-funded pensions onto the Pension Benefit Guarantee Corporation, a government-insured pension agency. This dumping is a violation of the 1974 Employment Retirement Income Security Act--ERISA--which created the PBG.

The law states, “The pension insurance program is there to protect workers benefits ... it shouldn´t be used as a piggy bank to help companies restructure.’

UAL´s violation should be a major concern for the entire labor movement because 44 million workers are covered by pensions similar to UAL´s. The Bush administration´s Labor Department has refused to honor a written request from one of UAL´s unions for an audit to open the books.

The PBGC has picked up the tab for 3,200 failed pension plans since 1974. It is now $63 billion in the hole.

The PBGC made a deal with UAL to mitigate the airline´s pension liability. The PBGC will now be the trustee for the four under-funded UAL pensions, and will be given a seat on the corporation´s creditors committee.

This arrangement is a dangerous development--and it is illegal for the PBGC, a government agency, to get so deeply involved in a bankruptcy proceeding.

Under the protection of U.S. Bankruptcy Judge Eugene Wedoff, J. P. Morgan Chase, Citigroup, CIT, General Electric Capital, and Deutsche Bank AG are ripping off UAL assets. These banks loaned UAL billions of dollars to run the airline during bankruptcy. They are being rewarded with exorbitant interest rates and a guarantee that their loans are secured.

There are also more than 30 money managers, pension consultants and other greedy parasites who charged $125 million in commissions, fees and services while chewing up the $13 billion pension fund.

If UAL goes belly-up, the PBGC couldn´t underwrite the pension liability. The taxpayers and workers would be liable as the payers of last resort.

It would be a rerun of the debacle in 1989. Out of the eight biggest airlines that went bankrupt then, only two carriers emerged intact: Continental Airlines in 1993, and America West the following year. UAL could go the way of other bankrupt carriers: Eastern, Pan Am and Braniff.

UAL has delayed exiting from bankruptcy once again. The company “remains in the red and still has tasks--working out new financial terms for about 130 jetliners it leases from investors; finalizing terms of a planned $2.5 billion debt based exit-financing package; and determining whether it would need to augment that funding with a ... minority private equity investment.’ (Wall Street Journal, Aug. 3 )

UAL is still in desperate need of financing for its debt. Seeking a private equity corporation for further funding translates into hedge-fund speculators getting their claws into a sinking UAL.

On Aug. 26, the bankruptcy court will hold hearings on the UAL request for a postponement of its reorganization proposals that would open up the door for private speculators. At the same time, Northwest mechanics, represented by an independent union, are threatening to strike.

Shut ‘em down!

A fight-back summit should be convened to send all airline workers and their unions into the streets--an industry-wide strike. The appeal should be to shut down the industry unless the corporations cease and desist from destroying an industry built with the sweat and sacrifices of millions of airline workers and retirees.

Organizing such an effort is a tall order. But it is survival time.

The government, Wall Street and “corporate America,’ including the airlines, are united--hell-bent on dumping their problems on the union rank and file. The events in the airline industry mirror the history of the steel industry. Millions of steel workers lost their jobs, pensions and health care with no fight from the AFL-CIO.

The issue of organizing on an industry-wide basis was a factor in the recent split in the AFL-CIO. The Change to Win coalition has a plan to bring together unions connected by industry, referred to as the “density factor.’ At its recent convention, the AFL-CIO approved a plan to create an Industrial Coordinating Committee for the same purpose. Both camps represent workers in the airline industry--Teamsters in Change to Win; Communications Workers in the AFL-CIO.

The Association of Flight Attendants has merged with the Communications Workers, waging a struggle against UAL that the union calls CHAOS (Create Havoc Around Our System). Here is a golden opportunity for the rival camps to emulate CHAOS and test their industry-wide proposals in struggle.

In a recent statement examining the AFL-CIO split, the Million Worker March Movement raised a critical question: “Should diverse unions be reorganized and merged by sector in order to achieve enough density and power to stand up to the current anti-worker corporate offensive? ... These include how to transform and make democratic the existing structure of top-down business unionism; how to end the inequality, injustice and genocide of a racialized capitalism." In these words lie a perspective to unite a multinational labor movement made up of diverse nationalities--class-wide and independent--facing a common capitalist enemy.

History will judge the AFL-CIO and Change to Win on the basis of what they do, not on what they say.

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