It’s terribly ironic that the federal government’s (IMHO, correct) decision to deny United taxypayer backing for billion-dollar loan may have lead to the situation where the federal government is taking on an even larger liability for the airline’s pensions.
Of course it’s possible that providing the loan would still leave the government in the position of picking up the pensions also.
But United provides an interesting illustration of failed U.S. industrial policy. The airline has been operating under bankruptcy protection for two and a half years and continues to lose nine-figure sums each month. Despite cost-cutting and layoffs the airline has no path towards profitability, and labor relations are at a low point.
The airline has been kept afloat by the government, by the courts which have kept aircraft lessors at bay (though a recent ruling scales this back somewhat), and by the bankruptcy process itself which privileges obligations to repay new money for the carrier encouraging big bets with limited risk.
A piece in Sunday’s New York Times asks who would even notice if the carrier were finally allowed to fail?
Airline employees would be hurt, left without jobs and at the mercy of the market. Airlines picking up United assets would in some case pick up employees as well. Union contracts disadvantage union employees switching carriers, as in most cases employees are paid based on seniority which they lose when switching employers. Unions would lose power but union members might benefit from a market system where employees could make lateral or even career-advancing moves between airlines.
While profitable routes would likely be picked up quickly by other carriers, and in the long run few passengers would be inconvenienced, those holding United tickets for immediate travel would face disruption at best. And unmentioned in the Times are the customers with a vested interest in the continuance of the carrier — those with large frequent flyer balances. Airline elite members, with access to perks like international upgrades, can simply request a status match from most carriers they would choose to switch their business to. But large mileage balances could well be lost.