United Airlines

After 9/11, then the sixth largest airline in the country, United applied for a government-guaran­teed loan from the Air Transportation Stabilization Board. In December 2002, the Board voted to deny the application in spite of concessions previ­ously given by its flight attendants and its pilots. The Board believed that United’s labor burden was still too bloated to allow it to compete in the exist­ing business environment. United filed for bank­ruptcy protection on December 9, 2002. In 2003, in bankruptcy court, United cut pilots’ wages 30 percent. Pilots pay then ranged between $33,000 for new hires to a high of $195,000. It also termi­nated its employee pension plan, the second airline to do so. Both of these pension plans were trans­ferred to the Pension Benefit Guaranty Corpora­tion, a federal agency set up to protect, at tax payer expense, employees’ pensions.12

Delta Airlines

After 9/11, Delta Airlines continued its downward spiral, losing $10 billion between 2001 and 2005. The third largest carrier in the United States, Delta entered Chapter 11 on September 14, 2005. Although Delta had been in financial straits for some time, its pilots pay ranged from $48,000 for beginning pilots to $275,000 for Boeing 777 captains. Delta froze its employee pension plan (which allowed Delta to forego any further contributions to the plan) by agreement with its unions. In September 2006, the Bankruptcy Court approved termination of Delta’s pilot pension plan. Delta has preserved ground and flight atten­dants’ pension plans based on the passage of the Pension Protection Act by Congress in 2006. This statute gives Delta (and Northwest) a period of 17 years to fund the employee plans.

Northwest Airlines

Northwest, the fourth largest U. S. carrier, entered Chapter 11 on the same day as Delta, September 14, 2005. Precipitating the filing, Northwest had been unable to win necessary wage concessions from its unions. In fact, Northwest had been operating for almost a month prior to filing with its unionized mechanics on strike. Like Delta, Northwest froze its employee pension plan in bankruptcy. Unlike other airlines in bankruptcy, Northwest preserved all of its pension plans.

As of September 14, 2005, four of the top seven carriers in the United States were in bankruptcy. They were all legacy airlines. See Figure 35-21.

ATA Airlines

AT A was a new entrant airline, receiving its air carrier certificate in 1981, post deregula­tion. As the country’s 10th largest air carrier, it filed for protection on October 22, 2004, citing fuel prices, competition, and lease payments on aircraft. This was necessary in spite of receiv­ing an ATSB loan guarantee in the amount of $168 million in 2002. As part of its restructur­ing under bankruptcy protection, ATA agreed to sell its hub operation at Chicago Midway to AirTran, one of its major competitors. It also sold its slots at LaGuardia and Reagan National to AirTran.