Under bankruptcy or the threat of it, the airlines have been shedding jobs, cutting pay, changing work rules and wringing concessions from vendors, leasers and suppliers. The largest airline, American, has avoided bankruptcy--so far--by negotiating labor concessions valued at $1.8 billion a year, and cutting almost 100 aircraft (to 807) and 700 departures a day (to 2,600). Delta and Northwest are each cutting 12 percent of their capacities.
The pain in this is severe. BusinessWeek reports that US Airways, which just emerged from bankruptcy, cut its pension costs by about $700 million over the next six years by turning its underfunded pension plan for pilots over to the government's Pension Benefit Guaranty Corp. So pilots, who used to get $50,000 to $70,000 a year in retirement, will have benefits capped at $28,500 a year for 60-year-old retirees.
But what the industry might need to shed is an airline or two, perhaps starting with the second-largest, United, which has about 16 percent of the domestic market. Eastern disappeared shortly after the 1991 Gulf War, followed by Pan Am, pushed by a terrorist bombing. Hawaiian Airlines, the nation's 12th-largest, filed for bankruptcy after two days of this year's war against Iraq.
Some good is being blown by all this ill wind. Consumers are benefiting from ticket prices at 1987 levels. The furloughing of younger pilots means there sometimes are two especially experienced pilots in the cockpit. The mothballed planes are generally the older ones, making for newer, safer fleets in the air.
The good that government can do is to facilitate what market forces demand. This should include shrinkage of capacity, perhaps cooperative arrangements and mergers, and binding arbitration of labor contracts. This is more than benign neglect as industrial policy, but it stops far short of trying to shore up an unsustainable status quo.
In medicine, an iatrogenic ailment is one ``induced inadvertently by a physician or his treatment.'' There was a danger that ``iatrogenic government'' (Pat Moynihan's phrase) would result when, immediately after Sept. 11, Washington created the Air Transportation Stabilization Board, with $10 billion to lend the airlines. Fortunately, it still has $8.5 billion of it.
Fortunately, because that sum, which exceeds the market value of the entire industry, whose debt is $100 billion, would have been wasted in any attempt to purchase what neither the industry nor the nation can afford--stabilization of untenable arrangements.
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