American Airlines: Another bankruptcy due to labor costs

The AMR Union Warning


GM. Chrysler. For that matter, Greece. Now add AMR Corp., the holding company that runs American Airlines and filed for bankruptcy Tuesday, to the growing roll of union-induced failures.


American has been negotiating since 2006 with its major unions representing pilots, flight attendants, mechanics and baggage handlers, but the talks stalled this month when the pilots union refused to allow he rank and file to vote on a management proposal for a 3.2% pay raise followed by 1% annual increases. The pilots demanded 10% upfront and 7% for each of the next three years, among other la dolce vita demands.

American's wages, benefits, work rules and pensions are the most costly in the industry, a disadvantage that it puts at $800 million compared to its peers. The company is the last major U.S. legacy carrier to file for Chapter 11, which has allowed its profitable competitors like United and Delta to rationalize their labor obligations and extract union concessions. Perhaps those unions understood that sooner or later one of these airlines won't muddle through but instead go into Chapter 7 liquidation. The wonder is that it takes a strategic bankruptcy to underline this reality.

Around the world, we are hearing the death knell for the expansive benefit systems that were built in and for other era, whether union compensation or government entitlements. The numbers simply don't add up. American's bankruptcy is merely the latest omen.

Comment: My sister has 28 or 29 years of service with American Airlines

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