It seems that everywhere people are talking about how bad things are these days. I’m not saying that I disagree, but generally I’m not quite ready to take Lemony Snicket‘s attitude either.
So today I read another story about the airline industry. In case you didn’t know it, things aren’t good in the airline industry (with a couple of exceptions). But the extent to which things are not good is surprisingly bad.
One thing we would depend on, or perhaps believe in – if we happened to have one – is a retirement pension. Someone says that they will give you something at a certain point, you expect that they will keep their word. If you haven’t qualified for that point, perhaps you should consider other options as well. Maybe even if you have reached that point you should consider other options. But it’s a bit difficult to change your thinking and start your planning once you have retired. Yet companies such as USAirways are changing their benefits once you’re already out of the workforce.
Not only do monetary benefits go down, non-monetary benefits (health insurance) rise! It’s like a double whammy! I appreciate that USAirways and other air carriers are in a financial pickle. What I don’t get is why they never get called to the table for it. If I can’t pay my bills, I get harassed endlessly. I get docked on my credit score. I can’t get the credit that allows me to pay bills any longer – at least without a serious financial cost, in the form of a deposit or perhaps a higher interest rate. But if a company does the same thing, they get to jump into bankruptcy, say “I can’t pay my bills any more”, have those bills drastically reduced or even eliminated, destroy the equity of those holding interest in the company, and start over. Who thought this was a good idea?
Update: So USAirways has declared bankruptcy. Again. So what, you say? Perhaps this is simply a culling of the herd? You’re right, of course. But what about of it? This isn’t to argue that we shouldn’t allow sick companies to die. That’s not it at all. But we ought to think about trying to keep them on life support in the first place.
Update: United is apparently getting back into the act as well, theoretically in the process of finally concluding their own bankruptcy filing, currently nearing the two-year mark. “We’ll start with the same people who have been with us from the beginning.” Well that’s nice. Except they are talking about their creditors. I appreciate that if you loan someone money, you ought to be first in line to get it back. I also appreciate that most companies don’t see a whole lot of gain from their initial stock sale(s), so the equity market probably isn’t their first concern. But once again the individual investors are getting the shaft, and will surely lose whatever they have invested. Nice.