Airlines Sink Deeper

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For the record, on March 11, the Air Transport Association predicted “a serious risk of chaotic industry bankruptcies and liquidations” that could result in “forced nationalization of the industry.” Within days of the start of hostilities in Iraq, those predictions are already coming true. On Friday, Hawaiian Airlines filed for Chapter 11 protection. The 73-year-old carrier told the bankruptcy court it had $256 million in assets and $399 million in liabilities. Northwest Airlines is laying off 4,900 people, or 11 percent of its workforce, and grounding 20 planes. And that’s not all … actually that’s not even close to all. Well, Uncle Sam Air has not yet landed and there’s no George Dubya Express on the drawing board, but there’s no doubt this is an industry in trouble and the carnage has just begun. US Airways is pinning its thin hopes of survival on dumping its pension plan for pilots and turning it over to the Pension Benefit Guaranty Corp., a quasi-public insurance agency. The airline says it’s the only way it can avoid liquidation. United, which is already in bankruptcy, ordered managers to take a look around them and decide who is absolutely necessary to keep the company running. Everyone else is going on “authorized no-pay status,” which seems to mean they still have their jobs and keep their seniority but they don’t get paid and don’t have to come to work. And the war has a silver lining of sorts for the industry’s cost-cutting efforts. Airlines can invoke the force majeure clauses in contracts with unions. Force majeure is the legal term for uncontrollable circumstances that release parties from contractual obligations, such as those governing the extent and nature of layoffs.

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