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News :: Economy |
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Airline Industry Crisis Continues to Unfold |
Current rating: 0 |
by Joe Futrelle
Email: futrelle (nospam) shout.net (verified) |
06 Jan 2005
Modified: 11:14:16 AM |
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Today, U.S. Bankruptcy Judge Stephen Mitchell nullified the collective bargaining agreement between U.S. Airways and the International Association of Machinists, the union representing its mechanics. The ruling will temporarily save the airline from having to liquidate. Pay cuts of about 35% and job losses of about 50% are expected to follow, although the bargaining agreement could be reinstated if the union agrees to accept the airline's final offer, which is due for a rank-and-file vote on Jan. 21. The ruling releases U.S. Airways from having to pay out pension benefits to retired union mechanics. The pension benefits, substantially reduced during the airline's previous bankruptcy, will now be paid by the federal Pension Benefit Guaranty Corp.
Mitchell acknowledged that "at bottom, it is clear that [U.S. Airways's] financial position is so precarious that even with the relief being sought, there will still be grave questions as to whether it can survive."
In other airline industry news, Delta announced earlier this week that it is slashing fares by as much as 50%, prompting concern that the action will trigger a price war that will send much of the industry into bankruptcy. Many analysts now believe that bankruptcy is all but inevitable for all the major carriers, especially since the likelihood of more rulings like today's makes bankruptcy an attractive cost-cutting option for airlines looking to cancel their obligations under labor contracts.
The price of oil remains above the $35/barrel many analysts say is the maximum price airlines can afford and remain profitable, even after having fallen from its record peak last fall. |
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Re: Airline Industry Crisis Continues to Unfold |
by Joe Futrelle
futrelle (nospam) shout.net (verified) |
Current rating: 0
06 Jan 2005
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Apparently the price war has been more limited than expected, with other carriers lowering rates only on routes where they compete with Delta.
http://money.cnn.com/2005/01/06/news/fortune500/airfares/index.htm?cnn=yes |
