Some with public voices think that our government’s helping hand should be stayed when it comes to aiding ailing airlines.
“U.S. airlines don’t need a bailout to stay in business,” read a headline early in the crisis, the case being made by Richard Squire, a professor of corporate bankruptcy law at Fordham University School of Law. Recalling previous major airline bankruptcies, Squire says of them, “Most of their customers didn’t even notice.”
Perhaps not, but their employees certainly did. Nary an airline bankruptcy in the last 20 years ended without job losses in the thousands.
United Airlines emerged from its most recent bankruptcy in 2006 after filing in December 2002. Before the terms were even settled, its workforce began shrinking. Delta Air Lines, which filed for bankruptcy in 2005, cut 6,000 jobs as part of its restructuring. American Airline’s 2011 bankruptcy also resulted in steep job cuts. This much is clear from reporting and the airlines’ Form 10-K filings with the SEC.
It is true that under previous bankruptcies, airlines continued to operate and ultimately avoided shuttering, but it came with an immediate cost to jobs.
Irwin Stelzer made another case in the Washington Examiner: “Let the airlines go bankrupt, but help their employees.”
His argument is driven by critiques of a typical airline management practice: using cash to buy company stock and, in doing so, reducing the cushion available for a rainy day, such as now. Bankruptcy would punish airlines for buying back stock, Stelzer argued, calling for the government to “help the innocent workers” instead.
Stelzer’s sentiment reflects a prevalent misunderstanding that a perfect separation exists between labor and management and that what is theoretically corrective (bankruptcy) for one group can go on without affecting the other. That’s not reality.
Airline workers are already taking pay cuts. Bankruptcy would likely sustain those cuts, perhaps even solidifying them in contract language, as has happened in the past. Without aid, several airlines would probably both enter bankruptcy and furlough workers.
If airline workers are willing to make those sacrifices so that management is effectively rebuked, that argument should be made clearly.
Criticizing stock buybacks is totally legitimate, but billions are being shelled out to businesses of all sizes that, for whatever reason, don’t have enough cash on hand to weather this situation. I don’t see demands that other businesses demonstrate ideal reinvestment and savings practices before qualifying for aid.
Jeremy Beaman (@jeremywbeaman) is a flight attendant and a former Student Free Press Association journalism fellow with the Washington Examiner commentary page.
