Posted on 09/16/2005 5:25:33 AM PDT by OESY
...The immediate causes of the Northwest and Delta filings are failed labor negotiations and bad luck. Northwest is struggling with striking mechanics who refused to join other unions in negotiating $1.4 billion in annual savings to prevent bankruptcy. Delta has its own high-cost union contracts and has long been bleeding cash. Hurricane Katrina and sky-high fuel costs were the tipping point.
But the root of the problem for these "legacy" carriers is the burden of pension costs. And one tantalizing option is to use bankruptcy to pass them off to the taxpayer via the federal Pension Benefit Guaranty Corp. (PBGC). Congress created this government-run insurance system in 1974, promising to "protect workers" when companies failed. But as always with such government guarantees, Congress only created a future "moral hazard" that is now coming due.
Management and labor would agree in flush times on big pension obligations because they knew the taxpayer was their safety net. The PBGC charges paltry premiums that in no way cover the huge liabilities rolling in from steel, airline and retail industries. Its current deficit exceeds $23 billion, while pensions nationwide are underfunded by an estimated $450 billion. Delta and Northwest alone could dump another $12.4 billion in unfunded liabilities on the agency, with other airlines likely to follow.
By the way, current airline management isn't the major villain here. Northwest CEO Doug Steenland has been warning about the pension problems for years, and has suggested sensible reforms that might have saved both retirees and Northwest....
(Excerpt) Read more at online.wsj.com ...
Methinks the pot of Spaghetti & Noodles hath sprung up much higher in depth of much content.
This is a grip against the WSJ. I have been a print subscriber for over 20 years, and unless I pay MORE, I am unable to read their online news articles.
What a cheap shot to their faithful subscribers.
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