Free Attention All Passengers by William J. McGee Page B

America West, Continental, Delta, Northwest, TWA, US Airways, United, and—as of last year—American. Some majors have filed more than once; US Airways, for example, sought Chapter 11 protection in 2002 and again in 2004. Amazingly—or perhaps not so amazingly—both Northwest and Delta filed on the exact same day, September 14, 2005, less than three years before those two carriers merged.
    Among the largest carriers, the notable exception has been the Dallas-based airline Southwest, which has never filed. Last year former Southwest and Braniff CEO Howard Putnam said, “Now almost every airline has been through it. All but American, and they probably wish they had.” He could be right: back in 2003, American CEO Don Carty was forced to abruptly resign after a Securities and Exchange Commission filing revealed he had received a $1.6 million bonus. The New York Times reported that American had made a $41 million pretax payment into a trust fund created to protect the pensions of 45 executives. 4 All this occurred as Carty was negotiating with American’s unions for $1.62 billion in concessions.
    In the years after the terrorist attacks in 2001, another wave of bankruptcies swept the airlines. But as industry expert Hubert Horan points out: “All the post-9/11 bankruptcies were due to the reckless overexpansion of the late 1990s, even though the airlines falsely blamed their losses on some combination of Osama bin Laden and evil unions.” In recent years U.S. airlines have been disciplined about “restraining capacity” by parking airplanes in the desert, laying off employees, and reducing the number of available seats. Airlines for America reported that in 2009 domestic seating capacity had fallen to its lowest point since 1942, when the airline industry was mobilized by the War Department.
    The Same Old Victims: Employees and Passengers
    Kenneth Goodpaster, an academic who specializes in business ethics, wrote a case study for Harvard Business School titled “Braniff International: The Ethics of Bankruptcy.” I asked Goodpaster if employees should be rewarded when and if the company does turn itself around; in other words, shouldn’t executives give back the givebacks? “It certainly would be a nice gesture,” he said. “It could be seen as appreciating that labor gave back. As long as the company’s financial health could sustain such increases. Is it a legal obligation? No, of course not. Is it a moral obligation? I’m not even sure. But it could be the morally admirable thing to do.”
    Givebacks may be too much to seek. For workforces that have seen their jobs dissolve and their paychecks reduced, the salt in the wound has been that not everyone shares the pain, particularly in airline executive suites. In 2007 a lengthy article analyzing bankruptcy and executive compensation in the Northwestern University Law Review found that “recent reform efforts to limit executive pay in bankruptcy are largely misplaced.” However, even this report added that data show “disproportionately large grants” to CEOs in the years leading up to Chapter 11 filings; the report noted that such grants are better explained as severance payments, and courts should give them further scrutiny.
    That same year, airline labor unions participated in the “Enough Is Enough” rally on the Mall in Washington, D.C., to protest out-of-control management self-interest. The Aircraft Mechanics Fraternal Association stated: “United Airlines’ board bestowed $39.7 million in compensation on CEO Glenn Tilton in 2006, despite the airline’s continued poor performance. AMFA recently used the UAL shares the union owns to give the UAL board a no-confidence vote.” Columnist Joe Brancatelli is blunt in his assessment: “This was a guy who knew zippo about the airline business—and after 120 days he bought into the conventional wisdom and he