September 25, 2001

10:42 AM

Are the airlines pulling a Chrystler?"The President and Congress agree the airlines should get $5 billion in cash grants right away -- more than Federal spending this year on worker training, or food and nutrition assistance programs. Help with new security spending boosts the down payment on a rescue to $8 billion. This is close to the combined market value of American, United, Delta, US Airways, Northwest, America West, and Continental."
posted by theMargin (26 comments total)

Aack...good gravy...Chrysler.

(the shame, the shame)
posted by theMargin at 10:45 AM on September 25, 2001

It should be noted that in congressional hearings on the issue, industry spokesmen stated flatly that layoffs would occur regardless of whether or not the airlines received monetary assistance from the Feds.

What conditions, if any, should be attached to such an aid package?
posted by theMargin at 10:46 AM on September 25, 2001

i guess the whole deficit spending issue is out the window.
posted by tolkhan at 10:55 AM on September 25, 2001

dan gillmor has some ideas (as summarized by booknotes):
First, any bailout should give the American taxpayers an equity stake in the carriers.

Second, not one dime should go to the executives.

Third, governments should take over airline security.

Fourth, the airlines should be required to meet specific levels of customer service.

Fifth, there should be no more mergers and acquisitions in an industry that is close to being an oligopoly already.
posted by rebeccablood at 10:59 AM on September 25, 2001

i think it's messed up that the airlines are getting Billions of dollars while at the same time laying off 100,000 people (that number includes Boeing, though). I just hope that programs like social security and education don't vanish, or that deficit spending becomes a necessary evil.

But, I understand why they need it - airlines are like the interstate highway system, and your ass is the car. you're just paying tolls to get where you gotta go.

I understand further that without this money, serious shockwaves that have already hit the travel industry (hotels, cabs, restaurants, theme parks, etc.) will only get much worse, meaning the loss of many, many low-wage low-skilled jobs.

the other fun part about this is that every airline in the world is going to their country's government and asking for money too, since u.s. carriers becoming subsidized makes it harder for them to compete in a global market. So, governments around the globe are going to pump money into their airlines, which is a great cash infusion to hopefully prevent a global recession.

hi socialism! I just wish the republicans would own up to it.
posted by panopticon at 11:10 AM on September 25, 2001

panopticon: you have but half the equation: socialism for the wealthy; capitalism for the poor (get thelazy slugs off welfare etc.)
sotock options for workers that are empl;ued at airlines using (now) taxpayers money is the least that might be done.
posted by Postroad at 11:20 AM on September 25, 2001

did trickle down ever really work?
posted by panopticon at 11:24 AM on September 25, 2001

panopticon, one of the points in the article, specific to the labor issue, is that while the Chrysler bail-out was justified as a way to save jobs, the actual result was massive layoffs anyway.

This bait-and-switch played on the American public was the most regrettable aspect of the Chrysler bailout, and we should avoid a replay. There are two ways to do this: Explicit and enforceable job pledges can be built into an air-industry rescue. Or much of whatever money Congress comes up with can go toward adjustment help for laid-off airline workers. If neither theme figures centrally in the rescue package, it's cynical to use jobs as the justification.

Unless I've missed something in the coverage of this so far, the airline industry does not seem to want any job protection measures included in the aid package. They want their shareholders protected without any corollary protection to the actual workforce.
posted by theMargin at 11:26 AM on September 25, 2001

Too bad none of the CEOs with their million dollar salaries will voluntarily take even the SLIGHTEST cut in pay. But of course they're mostly right-wing types who don't want government intervention... Or socialism - when it benefits the poor...
posted by luriete at 12:22 PM on September 25, 2001

What I don't get is how it only took about a week for these airlines to lay off half their employees and require billions of dollars from the government. Were they that close to bankruptcy this whole time, living from week to week, secure in the knowledge that x number of people would fly each day? I can understand how the attack would irrevocably damage the industry, but this quickly?
posted by jga at 12:35 PM on September 25, 2001

"[$8 billion] is close to the combined market value of American, United, Delta, US Airways, Northwest, America West, and Continental." Where do these statistics come from? I have the eleven year comparative summary of American Airlines and its total operating revenues for 1999 was 17.730 billion dollars. (It has been in the 17's in the past years) The total assets go at 24.374 billion dollars.

These airlines are not just crying wolf. International giant Eastern Airlines went bankrupt following two days of 30% capability strikes. These airlines have endured a few days of 0.00% capability - equivalent of an airline-paid strike. There are many other financially devastating events: each emergency-diverted flight costs hundreds of thousands and emergency full-airport shutdown cost millions. Don't let your anti-coporation or anti-conservative sentiments create or spread an unfair judgment.
posted by alex3005 at 12:43 PM on September 25, 2001

luriete: while I generally agree with your sentiments, I might point out that the CEO of American (IIRC) has refused to take a salary for the rest of the year, which is something like a $200K pay cut. Not much, true, but it is a cut in pay.
posted by louie at 12:43 PM on September 25, 2001

luriete: I don't think you can say that with any certainty. Mostly what the airlines care about as far as politics goes is, um, whether they're in the black this year or not and whether government can help them or hurt them in regard to such. The airlines have wavered between Republican and Democrats in their PAC giving to candidates, according to opensecrets.com. There is with Northwest, though, a fairly cosistent preference for Democrats, and Delta and United have sometimes shown the same. Note that in 1996, the Democrats won more from pretty much every airline, as they did in 1994. Repeat - 1994, the year the GOP came into power, followed by a Dem. preference in '96. The auto companies show a vastly more consistent Republican giving streak.
posted by raysmj at 12:43 PM on September 25, 2001

Too bad none of the CEOs with their million dollar salaries will voluntarily take even the SLIGHTEST cut in pay

At American Airlines, CEO Donald Carty announced he is giving up his pay the rest of this year.... (about halfway down the page)
posted by rebeccablood at 12:45 PM on September 25, 2001

now we just need the rest of the airline's country club set to renounce their pay, and I'd feel a bit less raped as a taxpayer.
posted by themikeb at 2:34 PM on September 25, 2001

Unfortunately, "Pulling a Chrysler" doesn't mean what you think it means. The US gave loan guarantees to Chrysler because Chrysler didn't have any credit. But Chrysler used those loans that it was suddenly able to get and paid them back and the loan guarantees ended up not costing the US government anything. There was no direct grant of cash from the US government to Chrysler at all.
posted by Steven Den Beste at 3:05 PM on September 25, 2001

My reference to "Pulling a Chrysler" is really directed toward the way the bailout is being framed by the airline industry and the media, i.e., required for the security of the industry, to protect jobs, etc. As the article pointed out, Chrysler's justifications for asking for assistance played to the sympathies of the public, but essentially amounted to a "bait and switch" as the eventual outcome in regards to those issues was little changed by the federal assistance.

I agree with you, though, that under rigorous inspection the phrase doesn't really hold up. Still, as was the case with Chrysler, the trend at this point does seem to be toward assistance for the airlines that will protect shareholder and executive interest while not providing protection or assistance to the "rank and file" within the companies themselves.

I'm not surprised to see that some exeuctives have agreed to take symbolic pay cuts. It would be sticky not to in this case, from a PR standpoint. I would hazard a guess, however, that the majority of their compensation is in the form of stock, not an annual salary. I know few people who would not be willing to take a minor, short-term hit in order to protect their longer-term interests.

Federal assistance to industry is probably necessary in this instance. I am just cynical about the way that this will be structured and who will be the ultimate beneficiaries of the government's (our) largess.
posted by theMargin at 3:36 PM on September 25, 2001

Unless the executives of the airlines agree to massive pay cuts, their companies should not get any government aid. Period. (If you want to compare this to Chrysler, please note that when Lee Iacocca went hat-in-hand to Congress, he cut his yearly salary to ONE DOLLAR.)

If they do not cut their pay, and they get the bailout anyway, then Americans should stop flying those airlines permanently. Organize a nationwide boycott.
posted by aaron at 4:22 PM on September 25, 2001

better get started on that boycott aaron. It's already been approved, and there was no agreement on pay cuts. I tried to get my letters in to my "representatives", but it was too late.
posted by themikeb at 4:30 PM on September 25, 2001

Alas, such a boycott would be nigh-on impossible to bring about, given the effective collective monopoly held by US carriers over domestic air travel, and the local domination of carriers such as Delta in the southeast. (Although you could always take flights with a layover in Canada. Or Mexico. Or even London.)
posted by holgate at 6:09 PM on September 25, 2001

What is wrong with Airline companies, here in Australia our second largest domestic carrier is in recievership, US carriers seem to all be struggling and even Swissair looks like going bankrupt.

Is there like a clause the executives sign, that say's we have to run the company into the ground with no cash for backup when there is a downturn in the economy? ( And yes, i know terrorism hasn't helped. )
posted by Zool at 6:25 PM on September 25, 2001

You people just arne't aware of the huge cost of closing down ONE airport and even moreso, closing down ALL airports. Huge logistics problems for an airline can arise from uneventful closures. The little "plasitc gun smuggled to prove a point" bru-ha-has caused all flights for half a day to be cancelled at the particular airport. All fights going there and leaving from there are cancelled. Flights en route to there are diverted which takes up gate-space at other airpots. This causes further delays since gates are pre-assigned hours beforehand. The solution? departing passengers are relocated to another gate which delays takeoff for another hour. What happens if a connecting passenger misses his next flight?

Being an airline employee, I've known times where I've had to work 5 hours overtime due to small thunderstorms. I am sure that has cost the company hundreds of thousands of dollars. There are huge costs and problems that goes on behind the scenes. Don't be too quick to accept the "executives are using funny math" conspiracy.
posted by alex3005 at 8:29 PM on September 25, 2001

alex3005 said :There are huge costs and problems that goes on behind the scenes.

Ibm was losing 5 billion dollars a year when the shit hit the fan in the early nineties, they survived, airline executives should now these costs seeing that their employees are aware of them.

It's simple, bad management.
posted by Zool at 8:55 PM on September 25, 2001

Were they that close to bankruptcy this whole time, living from week to week, secure in the knowledge that x number of people would fly each day?

USAirways has certainly been posturing themselves that way. When their merger with United was kiboshed a couple of months back, they all but shut down the next day, and all of the local (Pittsburgh) government types started scrambling to save them, since they monopolise our airport and happen to be the second largest private employer in the region. They're in dire financial straits. Meanwhile, in the last year, the CEO's pay has increased 252%. Something doesn't quite parse.

While it isn't "simply" bad management, as Zool has suggested, there is a lot of fiscal mismanagement and outright idiocy happening in the upper echelons of the airline industry. To think that this tragedy is going to be exploited to give them a huge chunk of cash that they will also, unquestionably, mismanage (because they're apparently incapable of anything else) should enrage every taxpayer.
posted by Dreama at 11:27 PM on September 25, 2001

As it happens Chrysler has some bad financial news.
posted by mmarcos at 3:28 AM on September 26, 2001

let the airlines belly up, get regulated and militarized and resell them. No more bonus is the watch word of the hour. i love it. Loan them much and help them throgh the few days, even two weeks worth of cash they lost.(call it a last paycheck) Face it, Chrysler would have been snagged by G.M. if she were in that bad a state back then. The bail out was to keep Ford and G.M. cash rich so she could face the onslaught of the japanese market. Walt would have not let the company get in the shape it is in now nor then. Walt had a nice house in my adopted hometown, its still there, next door to the birthplace of General Motors, the largest industrial corparation the world has seen. No, not a penny for past wrongs, a trillion for defense, but not a penny for the past mistakes.
posted by newnameintown at 10:04 AM on September 26, 2001