I think one thing that's missing in this discussion is the whole point of Chapter 11 bankruptcy. Its intent is to give a business breathing room to preserve value
for creditors and save jobs. Folks truly screwed are stockholders -- typically they end up with nothing, as the creditors own the company when all is said and done. A really good summary (and rationale) of Chapter 11 can be found over on Wikipedia
-- an excellent read.
In many cases, Chapter 11 works as intended. See, for example, Continental: during reorganization, it was forced to rationalize its fleet, cut unprofitable routes, and otherwise streamline operations -- all things that the other majors are scrambling to do. Of course, this isn't to say that CO
doesn't still have problems, but it is one of the healthier airlines in the US and, at least personally, I'm glad it had a chance (err, chances: 1983, 1991) to survive.
, I do find it ridiculous that UA
has been in bankruptcy for so long and that US's first plan of reorganization was approved by the court and creditors when it was clearly not viable. Lenient courts, political pressures (no Congressman wants tens of thousands of jobs in his state to go away), and unique creditor situations (e.g., GE
Capital) have conspired to, IMHO, abuse the process and perpetuate failed business models.
As far as the government "subsidizing" American airlines, for the most part, I disagree that there's any direct aid or overt attempts to prop up the airlines. One could argue about the loan guarantees (US, HP
), but I think reasonable people can agree that the circumstances under which such guarantees were granted (9/11) are unique and, hopefully, temporary.
A more solid argument, one that Airways45 mentioned above and with which I'll largely agree, concerns pensions. Yes, United has dumped its pension obligations onto the taxpayers and, presumably, other airlines will be doing the same.
Note that the Pension Benefit Guaranty Corporation
is intended to be an insurance plan for private pension plans. These pension plans pay premiums
to the PBGC to fund its operations which, theoretically, should fund pension defaults without taxpayer dollars. But, clearly, the size of the airline defaults is huge and, presumably not something the PBGC can handle without a government bailout.
So, I guess my take on this discussion is that Chapter 11 isn't inherently bad (in fact, I think it's generally a good thing); Chapter 11 has been abused by United and US Airways, to the detriment of the industry; with the possible exception of the pension issue, I disagree that the government is propping up the airlines with "subsidies"; and yes, capacity needs to be reduced for a healthy aviation market.
I guess that's enough for now...