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An Airline Crashes

Recorded on November 29, 2011

From The Heritage Foundation, I'm Ernest Istook.

Following the lead of its competitors like Delta, United, Continental, TWA and US Airways, American Airlines has sought protection in bankruptcy court, but they're not canceling any flights.

What's called a Chapter 11 proceeding is a reorganization that does more than let American avoid some of its debts; it also gets to cancel many of its contracts. That includes labor union contracts. Other airlines used Chapter 11 several years ago to reduce their pay and benefit costs for pilots, flight attendants, mechanics and ground workers. That enabled them to reduce their overhead while American was saddled with higher expenses.

When the unions would not accept enough changes, American went into bankruptcy court like other airlines had. But they're allowed to keep flying while they make adjustments.

Sometimes expenses just get too high to be able to pay. Are you listening, Uncle Sam?


From The Heritage Foundation, I'm Ernest Istook.