Airlines in bankruptcy land

Even recent announcements by Delta Air Lines that its workers will share in the airline's profits once it emerges from bankruptcy are suspect, as the plans continue to treat executives as royalty. According to reports in the Atlanta Business Chronicle, Delta's 39,000 non-contract employees will share an estimated $480 million in stock and cash payments (or about $12,300 each) while 1,200 executives will share a jackpot of restricted stock, stock options and performance shares estimated at about $240 million (or about $200,000 each). My arithmetic calculates that the executives are receiving 16 times the share of the non-contract employees.

What happens to you when you don't pay your bills? Do you get a bonus or a lush retirement package? Of course not. And yet there seems to be no stigma attached to airline bankruptcy. In fact, the airlines are still being treated as highly respected corporations in the business community. They are allowed to compete and bid for new routes and they are allowed to restructure their fleets with multibillion-dollar purchases. It is business as usual — unless one of the bankrupt airlines is your employer or owes you money.

Theoretically, the bankruptcy courts approve major management decisions but, in fact, no bankruptcy court judge seems comfortable overriding airline management — even when unions fight the executives aggressively in court. The legal system seemingly follows a principle that the good of the corporation and its executives trumps the good of the employees, stockholders and creditors.

The inconvenient truth is that bankruptcy has become part of the management process in our country. In the airline industry, bankruptcy is the norm rather than the exception. It is used not to cull the weak and mismanaged airlines but to provide a shelter from which to pursue advantage.

Northwest Airlines is a case in point. It landed in bankruptcy court with more than a billion dollars in the bank. Management even claimed, as it declared Chapter 11, that it didn't need the protection of the bankruptcy court to keep operating. It was a bold and shameless maneuver to use the bankruptcy courts to batter its unions, avoid paying its bills and renege on its contracts.

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For years the airlines were a regulated industry whose salaries, benefits, pensions and profits (and sky-high airfares) were protected by a cozy relationship with the government. Though the industry has been deregulated for more than a decade, legacy airline executives have found a new way to suckle at the teat of the government — this time through the bankruptcy courts.

When a system allows continued mismanagement and provides no apparent consequences for the failing executives, it puts the burden of pain on creditors, stockholders and employees who have done nothing wrong. And while bankruptcy actions have not much affected airline schedules, ticket prices and frequent-flier programs, the public is certainly paying for these bankrupt airlines' mistakes. Taxpayers are footing more and more of the unpaid airline bills (money for the Pension Benefit Guaranty Corporation and for airport bonds both come from taxpayers) and court costs and higher prices are all passed along to consumers when the airlines don't pay their bills.

Our seemingly endless bankruptcy process is no longer serving the public good. In this upside-down, Alice-in-Wonderland world of bankruptcy relief, the ones wearing the smug, Cheshire-cat smiles are the airline executives who created the problem in the first place, along with their bankers and lawyers.

Go figure.

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