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DL Employees Ch 11 Burden  
User currently offlineComorin From United States of America, joined May 2005, 4896 posts, RR: 16
Posted (8 years 11 months 3 weeks 19 hours ago) and read 2592 times:

Much has been said on A.net in the context of DL and NW's Ch 11 about free markets, 'investors' losing billions, and creditors stuck with heavy losses. I would like to add the usual 2c :

1. There are no free markets - just efficient and less efficient markets. That's because public policy sets economic ground rules, which trade off economic benefit for the public good. If we really believed in totally free markets, we would be auctioning off our children etc...

2. Shareholders are not really investors - they bought shares in the secondary market in the hope that prices would rise, and assumed the risk that they may not. If Delta's market cap lost a few billion dollars, it wasn't the same shareholders who took the whole loss - shares (and risks) get traded all the time. Nobody forced them to hang on to their shares.

3. Same for creditors. They lent money to make a profit, and priced the risk in. Also, they typically sell or participate out the loans in the secondary market. Secured loans can also get 'securitized' like bonds. Since money was lent with a default probability assumed, any sympathy here is also misplaced.

The only stakeholders who get burnt are Employees. You could say it reasonable to ask for pay cuts if fuel prices go up, but it could also be argued that employee pay cuts really fund debt service. To keep their jobs, employees will agree to any terms set. While an airline is very much the sum of its people, it's not clear if they have any say once Ch 11 is filed. Hopefully, they will get rewarded as the airline comes out of Bankruptcy,


Hope this is helpful.

13 replies: All unread, jump to last
 
User currently offlineAirRyan From United States of America, joined Mar 2005, 2532 posts, RR: 5
Reply 1, posted (8 years 11 months 3 weeks 18 hours ago) and read 2543 times:

Good stuff. I was wondering how this new retirement savings works on airlines like NW who have recently gone from their pensions to a 401(k) plan - does the airline put in a % of an employees pay off the bat even w/ no employee contribution and if so, how is that any different from the pensions they used to have where evidently these pensions were not being funded as they should have?

User currently offlineM404 From United States of America, joined Nov 2003, 2226 posts, RR: 5
Reply 2, posted (8 years 11 months 3 weeks 18 hours ago) and read 2516 times:
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AirRyan

Right now NW is a non-matching employer on 401ks and as far as contract union employees are concerned I don't believe any plans have been completely hammered out yet. It's another story for salaried employees, one that I do not know. For the IAM this is at the heart of negotiations since so many are at or near retirement age. I do not know if the employees will have a choice on the percentages, minimums, investment vehicles, or anything else. Even if this information had leaked out the BK filing probably has thrown it all up in the air again.



Less sarcasm and more thought equal better understanding
User currently offlineMariner From New Zealand, joined Nov 2001, 25173 posts, RR: 85
Reply 3, posted (8 years 11 months 3 weeks 17 hours ago) and read 2486 times:
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Quoting Comorin (Thread starter):
They lent money to make a profit, and priced the risk in. Also, they typically sell or participate out the loans in the secondary market

I wouldn't dismiss "the creditors" quite so casually. The big banks are one thing, but the small vendors are something else:

http://www.denverpost.com/business/ci_3036521

As the link shows, they get burned, too. Sometimes much more than the airline employees.

mariner



aeternum nauta
User currently offlineJetdeltamsy From United States of America, joined Nov 2000, 2987 posts, RR: 8
Reply 4, posted (8 years 11 months 3 weeks 16 hours ago) and read 2470 times:

Quoting Comorin (Thread starter):
The only stakeholders who get burnt are Employees.

What planet are you on? Vendors lose billions of dollars. And many Delta holdings are with institutional investors who have held the stock for decades.

Sure employees are going to lose billions as well, but we're hardly the only ones who will get burned.



Tired of airline bankruptcies....EA/PA/TW and finally DL.
User currently offlineComorin From United States of America, joined May 2005, 4896 posts, RR: 16
Reply 5, posted (8 years 11 months 3 weeks 9 hours ago) and read 2363 times:

Quoting Mariner (Reply 3):



Quoting Jetdeltamsy (Reply 4):

I totally agree, even though a 'purist' argument could be made that these vendors knowingly extended credit terms to a distressed firm.

While larger vendors can implement credit risk policies ( ie cash up front etc), many small vendors will get burnt disproportionately by BK.

Mariner, thanks for the link.


User currently offlineSkibum9 From United States of America, joined Nov 2001, 1229 posts, RR: 0
Reply 6, posted (8 years 11 months 3 weeks 9 hours ago) and read 2331 times:

Quoting Comorin (Thread starter):
The only stakeholders who get burnt are Employees.

While I feel for the employees, this statement is not entirely true. Using your methodology, employment is at will. That means that the employees were free to leave at any time and pursue other careers. Further, the taxpayers will now get burnt to fund the under funded pensions.



Tailwinds!!!
User currently offlineComorin From United States of America, joined May 2005, 4896 posts, RR: 16
Reply 7, posted (8 years 11 months 3 weeks 8 hours ago) and read 2265 times:

Quoting Skibum9 (Reply 6):
Further, the taxpayers will now get burnt to fund the under funded pensions.

Taxpayers funded the PBGC as a part of public policy to insure pensions. Like any other insurance company, its funding comes from premiums and not from taxpayers.

I agree that employees are at will technically, but they do at least deserve the sympathy afforded smaller creditors. However, I don't have the reasoning in place for this yet Smile

The score so far:

Deserving of Sympathy ('Burnt'):

Smaller Vendors
Employees

The Undeserving ('Unburnt'):

Shareholders
Taxpayers
Banks and Larger Creditors like GE


Question: What category should DL management be in?


User currently offlineBucky707 From United States of America, joined Aug 2000, 1028 posts, RR: 3
Reply 8, posted (8 years 11 months 3 weeks 8 hours ago) and read 2259 times:

Quoting Comorin (Reply 7):
Taxpayers funded the PBGC as a part of public policy to insure pensions. Like any other insurance company, its funding comes from premiums and not from taxpayers.

taxpayers do not fund the PBGC. It is funded by premiums that companies pay. The worry is that the taxpayer may have to bail out the PBGC, as it will not have enough money to handle all the pension terminations going on......the premiums were never enough to handle what is going on now.


User currently offlineComorin From United States of America, joined May 2005, 4896 posts, RR: 16
Reply 9, posted (8 years 11 months 3 weeks 7 hours ago) and read 2248 times:

Quoting Bucky707 (Reply 8):

You're quite right. I would like to share these interesting links on the subject:

http://www.pbgc.gov/media/news-archive/2005/pr05-61.html

http://www.sfgate.com/cgi-bin/articl...?f=/c/a/2005/09/18/BUGKVEP8CH1.DTL


User currently offlineLono From United States of America, joined Apr 2004, 1335 posts, RR: 1
Reply 10, posted (8 years 11 months 2 weeks 6 days 22 hours ago) and read 2091 times:

Quoting Comorin (Thread starter):
To keep their jobs, employees will agree to any terms set.

Problem with DL employees is they have had the DL "kool Aid" drink for years...originating when DL had a history of taking care of their employees... hense no unions... now the non union DL employee is left out in the cold.... they have no choice but to accept the inevitable... they will go down with the ship... they have no bargaining power.... they are along for the ride be it successful or more likely tragic...



Wally Bird Ruled the Skys!
User currently offlineGilligan From , joined Dec 1969, posts, RR:
Reply 11, posted (8 years 11 months 2 weeks 6 days 22 hours ago) and read 2037 times:

Quoting Lono (Reply 10):
they have no bargaining power.... they are along for the ride be it successful or more likely tragic...

So are the pilots and mechanics, as well as lower and middle management. In bk it has been proven time and again that a union will not help you.


User currently offlineKellmark From United States of America, joined Dec 2000, 692 posts, RR: 8
Reply 12, posted (8 years 11 months 2 weeks 6 days 22 hours ago) and read 2036 times:

I have a lot of sympathy for all of the employees that have been affected by the difficulties of the airline industry. In fact I am one of them. I worked for Eastern Airlines for 23 years until it failed in 1991.

But it is a different view of things that I have now regarding some of what has been said here. There is no longer a "guarantee" for a job or a career in the airline industry. It is dynamic, difficult and competitive.

Also, employees are not without blame here. The outrageous pilot contracts at United and Delta had a lot to do with those particular companies' troubles. And I remember clearly the labor war at Eastern which resulted in its demise. It was not one sided. Both management and labor had plenty of blame to share.

But the sooner an employee realizes that they are in trouble the sooner they should make plans to protect themselves, such as looking for another job, perhaps in a related or other industry, or by upgrading their skills in some way and investing in their own retirement. I understand that it is difficult for an employee who puts in 5-10 years with a company to just up and leave. Seniority and geographics and opportunity or the lack thereof have a lot to say about whether it is good to leave or not. But the days of lifelong employment at one company with defined benefit pensions are pretty much over, and eveyone has to adjust accordingly.


User currently offlineLono From United States of America, joined Apr 2004, 1335 posts, RR: 1
Reply 13, posted (8 years 11 months 2 weeks 6 days 22 hours ago) and read 2015 times:

Quoting Gilligan (Reply 11):
So are the pilots and mechanics, as well as lower and middle management. In bk it has been proven time and again that a union will not help you.

True that... I have to wonder however if the ground troops were represented if the DL story would have been different.... would they have filled sooner when they had more assets..???



Wally Bird Ruled the Skys!
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