The Delta Scam

Recently, Delta airlines was under chapter 11 bankruptcy protection while it re-organized the company to return to profitability. Perhaps the most intriguing section of chapter 11 of the US Bankruptcy code is section 1113, which sets the rules regarding an employer's rejection of a collective bargaining agreement, specifically in subparagraphs c, d, and e. Its important to have a basic understanding of the kind of leverage that these paragraphs give the employer during the bankruptcy restructuring process.

Subparagraph e provides for those notorious little interim contract changes that the employers are allowed to make during the negotiation process. To put it simply, 'e' allows the employer to go through the current labor contract with a red pen and white-out and slash wages, benefits, and any other allowances that it previously agreed upon with the employee union. I know what you're asking now- What would the bankruptcy judge have to say about that?? Here's the answer: if the cuts proposed by the employer (referred to here as the "trustee/debtor") are "[1] essential to the continuation of the debtor's business, OR [2] in order to avoid irreparable damage to the estate, the court, after notice and a hearing, may authorize the trustee to implement interim changes in the terms, conditions, wages, benefits, or work rules provided by a collective bargaining agreement. Any hearing under this paragraph shall be scheduled in accordance with the needs of the trustee." -quoted from US Bankruptcy code 1113(e), emphasis added. So there you have it folks. All your company has to do to keep afloat while under their bankruptcy umbrella is prove to the court that YOUR wage cuts, not theirs, will save the company from floundering. I think that the most important word in this subparagraph is the word "or," which I have bolded, italicized, and all-capsed for your viewing clarity. Lawyers call this a disjunctive test, meaning that only one criterion must be met in order to get approval from the judge to make the changes, not both.

An article by ALPA clearly illustrates the point:

On Thursday, June 5, [2008] ALPA Managing Attorney Marcus Migliore and AFL-CIO representatives testified before the U.S. House Committee on the Judiciary’s Commercial and Administrative Law Subcommittee to urge Congress to swiftly reform Section 1113 of the Bankruptcy Code. Migliore underscored the urgent need to prevent airline and other management from exploiting the law to gut employee labor contracts and deny workers their most powerful leverage in bargaining—the right to strike—while corporate executives pay themselves millions in bonuses.

“Employers, including airlines, have successfully hijacked the 1113 process from Congress’ original intent to protect workers and their families and now use it as a 51-day countdown to unilaterally terminate employees’ hard-won contracts,” said Migliore. “Skyrocketing fuel costs and a sluggish economy mean that bankruptcy continues to loom as a threat to airline employees--the time is now for Congress to act decisively to protect U.S. workers.”

“Management uses current bankruptcy law to rubberstamp multi-million dollar rewards for the very corporate executives and stakeholders who made the business decisions that led to the airlines’ bankruptcies in the first place,” said ALPA’s President, Capt. John Prater, when commenting on Migliore’s testimony. “Meanwhile, pilots and workers are locked into long-term, deeply concessionary contracts."

This is like ordering all the second and third class passengers on a sinking ship to toss their belongings overboard while the first class passengers keep their thousands of pounds of junk that are ultimately causing the ship to sink in the first place. Our bankruptcy code actually protects a similar practice that is happening today in airline management. Which is exactly what happened to the employees of Delta Airlines. Delta executives pushed for a reduction of salaries, pensions, benefits, and so forth from its employees in order to stave off destruction. Now, why on earth would a pilot with a mortgage, a wife, and kids agree to a pay cut? Because if the company goes under, he's back on the street and has to start over at a new airline at the bottom of the seniority list, with the worst schedule and the worst pay that his next company has to offer. So its understandable that the pilots union accepted their pay cuts in order to help Delta airlines, and their livelihoods, remain afloat. Where did their millions of dollars go? Into the pockets of the delta executives who used the money to pad their severance packages and to give themselves bonuses.