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American Airlines Enters Bankruptcy

American Airlines Enters Bankruptcy →

Megan McArdle, on my American Airlines is entering bankruptcy.

But airlines do have another problem that's special to them: their unions, which are both powerful, and plentiful.

Whatever you think about the United Autoworkers, at least there's only one of them. The union doesn't want to kill the company any more than management does. In theory, at least, you should be able to work something out.

But when there are three or four unions--pilots, flight attendants, mechanics, and baggage handlers--things get complicated. All of those groups are completely necessary to make sure that the plane gets in the air. If one of them doesn't show up, you lose all the money on every seat.

... But when times aren't so flush, this dynamic becomes a problem. The company's past labor agreements don't leave much margin for error--particularly when there were sizeable pensions, as there have been at most of these legacy airlines.

It's not clear what will happen to American's $8 billion worth of pension obligations, which are underfunded by billions, but I'd expect that the company will push hard to shed them. It will also want the judge to rewrite its labor contracts.

This entry was tagged. Unions