As part of its "get well" plan, AMR intends to reduce employment by 15%, or 13,000 employees. It also plans to terminate its pension plans and convert them to 401k plans. It further expects to modernize its fleet, outsource work and improve internal productivity in an attempt to restore the company to a competitive and profitable condition.
Why bankruptcy? Why didn't the company, with the agreement of its unions, take these very necessary steps years ago? Why didn't the unions play a constructive role and prevent the situation from getting out of hand? Why was it necessary to involve the courts? Why does the government continue to side with the unions? And what about the taxpayers?
Basically, the answers to all of the above questions involve the power, intransigence and brinksmanship employed by the unions for many, many years, both at AMR and elsewhere in the airline industry as well.
AMR incorrectly believed it could work effectively with the unions to regain competitiveness and profitability. It tried much harder and longer to work things out with the unions than its competitors did. And now it's going to continue to pay the price for having done so.
Simply stated, the unions wouldn't agree to make the changes required to save the company and the employees' jobs. They preferred to see the company go downhill until it entered bankruptcy. Now the unions will sit and harshly criticize the company and bankruptcy court as they are forced to do the necessary and unpleasant work all by themselves.
That union posturing will allow the unions to oppose company proposals and the court's approval thereof, and thereby the unions will maintain their pro-employee facade. At the end of the bankruptcy proceeding, they will be able to say to their membership and the public, and after the company's go forward plan has been approved, "Don't blame us. We fought them all the way."
And in fact, they will have done just that.
One more thing. Lest we forget, all this game playing by the unions will also cost U.S. taxpayers lots of money. Later we'll get to the taxpayer and the role of the PBGC (pension benefit guaranty corporation), a federal pension insurer.
But now let's look more closely at this AMR story.
AMR Seeks to Cut 15% of Jobs has several relevant pieces from which we'll quote:
1 ... "American Airlines parent AMR Corp. Wednesday said it will seek to cut 13,000 jobs and terminate pensions in pursuit of $2 billion in annual cost savings, tipping its hand for the first time in what could be a long and painful bankruptcy proceeding.
The company said it wants to reduce labor costs by $1.25 billion a year, or 20%. That includes cutting its work force of 88,000 by nearly 15%, imposing new productivity measures and outsourcing some work. The company also aims to terminate its four underfunded pension plans, a move that would represent the largest pension default in U.S. history.
"The world has changed around us and this is our moment to adapt or lose the opportunity forever," AMR Chief Executive Tom Horton said in a letter to employees.