The Washington Post this morning published the latest chapter in the ongoing saga of American Airlines' bankruptcy and its effort to terminate four employee pensions for 130,000 workers and retirees. The airline, which has saved $2.1 billion thanks to two congressional measures that allowed it to reduce contributions to its pension plans, now wants the federal government’s Pension Benefit Guarantee Corp. to bail out its unfunded pension obligations to the tune of $9 billion.
That news came along with the airline's announcement that it intends to cut 13,000 jobs, or 15% of its workforce.
That American Airlines is in serious financial trouble and needs to take drastic steps to improve its balance sheet is indisputable. It's the only major airline that, in the aftermath of 9/11 and the Great Recession, did not avail itself of the benefits bankruptcy proceedings can provide to troubled companies.
But the question is if the company's books should be balanced on the backs of its retirees and employees.
“This is not a case of runaway labor costs. This is a case of poor management,” Jamie Horwitz, spokesman for the Transit Workers Union, told the Post. And then the kicker: the bankruptcy filing revealed that amid its poorhouse pleadings, the airline bought a $30 million London home for its recently named CEO, Tom Horton.
Now $30 million won't exactly cover a $9 billion pension shortfall, but if American spent that kind of money on a home for one executive, what other dubious spending has it done?
That question was hinted at in the Post story by Josh Gotbaum, director of the PBGC.
“We know that other airlines have successfully restructured, preserved their jobs and kept their pension plans. We don’t see why American can’t, too,” said Gotbaum, a former investment banker who spent two years as bankruptcy trustee for Hawaiian Airlines and ultimately restructured the company by repaying creditors and preserving its defined benefit pensions. “We hope that before American takes the drastic action of terminating the pension plans covering 130,000 American employees that it tries hard to find an alternative and shows the world that there is no other alternative.”