Delta and Northwest airlines declare bankruptcy

Delta, the nation’s third largest airline, and Northwest, the fifth largest, join United Airlines and US Airways, which are already operating under bankruptcy court protection. Of the so-called “legacy” air carriers that existed prior to the onset of deregulation in 1978, only American and Continental are not in bankruptcy, but commentators suggested that these too might soon take the bankruptcy route in order to slash costs at the expense of their workers.

Delta and Northwest made their filings under conditions of ongoing and massive losses, exacerbated by soaring jet fuel prices, despite having already slashed thousands of jobs and imposed brutal reductions in pay and benefits. Northwest went into bankruptcy court in New York only one day after it began hiring permanent replacements for mechanics and cleaners whom the company forced out on strike on August 20.

The immediate motive behind the bankruptcy filings is to utilize the courts to rip up existing labor contracts and impose, by judicial fiat, the most sweeping attacks on jobs and working conditions in the history of the industry.

Last May, a federal bankruptcy judge ruled that United Airlines could default on its pension obligations and turn over control of its pension funds to the Pension Benefit Guaranty Corporation. The federal agency, already swamped by corporate pension defaults, at best provides only a fraction of the retirement pay supposedly guaranteed to workers under labor contracts with their employers.

There is little doubt that Delta and Northwest will seek judicial sanction for a similar theft of billions of dollars, leaving retired workers bereft of a decent income or any form of economic security. They are likely as well to go after the health benefits of both active and retired workers.

The airlines timed their bankruptcy filings to beat an October 17 deadline, when new, more restrictive bankruptcy laws go into effect that make it more difficult for companies to cancel their debts. Filing in advance of the deadline will also—by no means coincidentally—allow the companies to hand their top executives lucrative bonuses for staying on while the court process unfolds. The new laws place restrictions on bonuses paid to executives of companies operating under Chapter 11.

Delta, whose losses have totaled nearly $10 billion since 2001, said it plans to reduce its fleet size and Chief Executive Gerald Grinstein said the airline will demand more job cuts beyond the 24,000 the carrier has announced since 2001. “There is no painless way out of this and there will be reduction of personnel,” Grinstein said.

Just last September, Grinstein announced plans to slash up to 7,000 jobs through 2006 and close the airline’s hub in Dallas. Earlier this month, Delta said it would cut 26 percent of its flights from its hub in Cincinnati, resulting in another 1,000 job cuts.

A year ago Delta obtained the agreement of the pilots union to extract $1 billion in wage and benefit cuts. This week, the airline asked for another round of cuts from the union.

The company is due to make billions of dollars in pension payments over the next three years, but said Wednesday it did not plan to make its next funding contribution to its pension plan.

Northwest, which has recorded over $3 billion in losses since 2001, has under-funded its employee pension plans to the tune of billions of dollars. It has been lobbying Congress to change pension laws to allow it to repay its obligation over 25 years instead of five. The company stated in papers filed with the federal government Tuesday that it had failed to pay $42 million in bills and would not meet a $65 million contribution to its pension funds that fell due on Thursday.

The airline obtained a 15 percent pay cut and other concessions worth $265 billion a year from the Air Line Pilots Association (ALPA) last December, and earlier this month demanded a new round of cuts estimated by the union to total $322 million annually.

The company put an ultimatum before its other unions for a total of $1.1 billion in annual labor concessions, including thousands of job cuts, and targeted the union representing mechanics and airplane cleaners, the Aircraft Mechanics Fraternal Association (AMFA), for a union-busting attack. Northwest forced AMFA to strike on August 20 by demanding a new contract eliminating the jobs of more than half of the union’s 4,400 members, slashing wages by 25 percent, and raising workers’ health costs.

The AMFA strike has become a symbol of the collapse of the unions in the US. All of the other unions at Northwest—ALPA, the International Association of Machinists (representing baggage handlers and other ground workers) and the Professional Flight Attendants Association—have scabbed on the strike, allowing Northwest to bring in strikebreakers without any opposition.

Capitalizing on the treachery of the union bureaucracy—and the lack of any viable perspective on the part of AMFA—Northwest has since upped its concessions demands. It is now demanding a total of $1.4 billion in combined give-backs from its unions.

Its revamped contract offer to AMFA includes the elimination of 75 percent of AMFA members’ jobs and a pay cut of 28 percent. AMFA, for its part, agreed to these demands in negotiations last weekend, but balked at the company’s demand to reduce its previous severance pay offer. The AMFA leadership is disarming its members by encouraging illusions that they will fare better under the auspices of a bankruptcy judge.

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