In this issue

Jonathan Tobin: Defending the Right to a Jewish State

Heather Hale: Compliment your kids without giving them big heads

Megan Shauri: 10 ways you are ruining your own happiness

Carolyn Bigda: 8 Best Dividend Stocks for 2015

Kiplinger's Personal Finance editors: 7 Things You Didn't Know About Paying Off Student Loans

Samantha Olson: The Crucial Mistake 55% Of Parents Are Making At Their Baby's Bedtime

Densie Well, Ph.D., R.D. Open your eyes to yellow vegetables

The Kosher Gourmet by Megan Gordon With its colorful cache of purples and oranges and reds, COLLARD GREEN SLAW is a marvelous mood booster --- not to mention just downright delish
April 18, 2014

Rabbi Yonason Goldson: Clarifying one of the greatest philosophical conundrums in theology

Caroline B. Glick: The disappearance of US will

Megan Wallgren: 10 things I've learned from my teenagers

Lizette Borreli: Green Tea Boosts Brain Power, May Help Treat Dementia

John Ericson: Trying hard to be 'positive' but never succeeding? Blame Your Brain

The Kosher Gourmet by Julie Rothman Almondy, flourless torta del re (Italian king's cake), has royal roots, is simple to make, . . . but devour it because it's simply delicious

April 14, 2014

Rabbi Dr Naftali Brawer: Passover frees us from the tyranny of time

Greg Crosby: Passing Over Religion

Eric Schulzke: First degree: How America really recovered from a murder epidemic

Georgia Lee: When love is not enough: Teaching your kids about the realities of adult relationships

Cameron Huddleston: Freebies for Your Lawn and Garden

Gordon Pape: How you can tell if your financial adviser is setting you up for potential ruin

Dana Dovey: Up to 500,000 people die each year from hepatitis C-related liver disease. New Treatment Has Over 90% Success Rate

Justin Caba: Eating Watermelon Can Help Control High Blood Pressure

The Kosher Gourmet by Joshua E. London and Lou Marmon Don't dare pass over these Pesach picks for Manischewitz!

April 11, 2014

Rabbi Hillel Goldberg: Silence is much more than golden

Caroline B. Glick: Forgetting freedom at Passover

Susan Swann: How to value a child for who he is, not just what he does

Cameron Huddleston: 7 Financial Tasks You Should Tackle Right Now

Sandra Block and Lisa Gerstner: How to Profit From Your Passion

Susan Scutti: A Simple Blood Test Might Soon Diagnose Cancer

Chris Weller: Have A Slow Metabolism? Let Science Speed It Up For You

The Kosher Gourmet by Diane Rossen Worthington Whitefish Terrine: A French take on gefilte fish

April 9, 2014

Jonathan Tobin: Why Did Kerry Lie About Israeli Blame?

Samuel G. Freedman: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Jessica Ivins: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Kim Giles: Asking for help is not weakness

Kathy Kristof and Barbara Hoch Marcus: 7 Great Growth Israeli Stocks

Matthew Mientka: How Beans, Peas, And Chickpeas Cleanse Bad Cholesterol and Lowers Risk of Heart Disease

Sabrina Bachai: 5 At-Home Treatments For Headaches

The Kosher Gourmet by Daniel Neman Have yourself a matzo ball: The secrets bubby never told you and recipes she could have never imagined

April 8, 2014

Lori Nawyn: At Your Wit's End and Back: Finding Peace

Susan B. Garland and Rachel L. Sheedy: Strategies Married Couples Can Use to Boost Benefits

David Muhlbaum: Smart Tax Deductions Non-Itemizers Can Claim

Jill Weisenberger, M.S., R.D.N., C.D.E : Before You Lose Your Mental Edge

Dana Dovey: Coffee Drinkers Rejoice! Your Cup Of Joe Can Prevent Death From Liver Disease

Chris Weller: Electric 'Thinking Cap' Puts Your Brain Power Into High Gear

The Kosher Gourmet by Marlene Parrish A gift of hazelnuts keeps giving --- for a variety of nutty recipes: Entree, side, soup, dessert

April 4, 2014

Rabbi David Gutterman: The Word for Nothing Means Everything

Charles Krauthammer: Kerry's folly, Chapter 3

Amy Peterson: A life of love: How to build lasting relationships with your children

John Ericson: Older Women: Save Your Heart, Prevent Stroke Don't Drink Diet

John Ericson: Why 50 million Americans will still have spring allergies after taking meds

Cameron Huddleston: Best and Worst Buys of April 2014

Stacy Rapacon: Great Mutual Funds for Young Investors

Sarah Boesveld: Teacher keeps promise to mail thousands of former students letters written by their past selves

The Kosher Gourmet by Sharon Thompson Anyone can make a salad, you say. But can they make a great salad? (SECRETS, TESTED TECHNIQUES + 4 RECIPES, INCLUDING DRESSINGS)

April 2, 2014

Paul Greenberg: Death and joy in the spring

Dan Barry: Should South Carolina Jews be forced to maintain this chimney built by Germans serving the Nazis?

Mayra Bitsko: Save me! An alien took over my child's personality

Frank Clayton: Get happy: 20 scientifically proven happiness activities

Susan Scutti: It's Genetic! Obesity and the 'Carb Breakdown' Gene

Lecia Bushak: Why Hand Sanitizer May Actually Harm Your Health

Stacy Rapacon: Great Funds You Can Own for $500 or Less

Cameron Huddleston: 7 Ways to Save on Home Decor

The Kosher Gourmet by Steve Petusevsky Exploring ingredients as edible-stuffed containers (TWO RECIPES + TIPS & TECHINQUES)

Jewish World Review Jan. 25, 2007 / 6 Shevat, 5767

An airline that isn't bankrupt

By George Will

Printer Friendly Version
Email this article

http://www.JewishWorldReview.com | DALLAS — "If capitalists had been present at Kitty Hawk when the Wright brothers' plane first took off, they should have shot it down." — Warren Buffett

Recently, as an airliner taxied up to a gate, a flight attendant made the usual announcement — thank you for flying with us — but with an unusual coda: "We know you have your choice of bankrupt airlines." Which raises a question: What is wrong with American Airlines?

American is the only one of the six "legacy" carriers (the others are United, Delta, Northwest, Continental and US Airways) that has never been in bankruptcy. Is it irresponsible for American not to use bankruptcy to lighten legacy costs — shredding labor contracts and reducing obligations to retired employees?

Gerard Arpey, American's chief executive, replies with a laconic "no." He considers it unseemly and shortsighted — and unnecessary — to seize short-term competitive advantages by reneging on labor contracts freely consented to, and to escape commitments to investors who lent you money in good faith. Furthermore, the damage to employee relations makes bankruptcy more costly than some companies realize when they use it as a routine management tool.

While some of American's competitors use bankruptcy to end medical payments for retirees, Arpey says American continues to pay $250 million a year "for people who are not here." His reward has been helpfulness from American's unions.

JetBlue, a low-cost carrier, will outsource 80 percent of the maintenance of its aircraft to El Salvador and Canada. But because American's unions revised inefficient work rules ("I'm working on this plane in this hangar, and when I finish I won't go to the next hangar"), American still does its maintenance in Tulsa, Kansas City and Fort Worth. Other airlines have used bankruptcy to bludgeon unions into givebacks; American's unions, says Arpey, "accepted pay cuts in 2003, and we have asked them to keep changing to drive more productivity — and they are answering the call." Still, Arpey says that if American, which has about 9,000 active pilots, had the work rules Continental has after two bankruptcies, "I could run American Airlines with 1,000 fewer pilots."


Every weekday JewishWorldReview.com publishes what many in in the media and Washington consider "must-reading". HUNDREDS of columnists and cartoonists regularly appear. Sign up for the daily JWR update. It's free. Just click here.

The U.S. airline industry, in the red since Kitty Hawk, today has three daunting problems. First, fuel costs are beyond any airline's control. However, good (if risky) business practices can help. Southwest has made hugely successful hedges against increased fuel costs, betting on an increase, and has been paying about half as much for fuel as most other airlines. But the hedge advantage is expiring, and Southwest, now 35 years old, is acquiring legacy costs.

Second, with large fixed costs — aircraft — and an intensely competitive environment, no carrier could survive being grounded by a protracted strike, which limits management's leverage when bargaining with unions. But, then, unions understand that a strike could kill their employer.

Third, the nation now has a two-tier airline industry — the legacy carriers and the younger low-cost carriers, the most successful being Southwest, which invented the second tier and leads the industry in daily departures. The second tier, composed of newer airlines that never put in place huge legacy costs before deregulation unleashed price competition, limits the top tier's ability to pass along costs to customers. Hence the top tier's temptation to bankruptcy.

Two considerations, Arpey says, determine the choices of most air travelers — schedule and price. The Internet has simplified comparing prices over every route, and, he says, a price difference of even $3 will drive people elsewhere, "no matter how strong your brand, or how good your product." As American competes with airlines that got substantial cost relief from bankruptcy, Arpey says, "I hope the companies that do that will have consequences."

He adds, "Our results don't look that different than United's, which was three years in bankruptcy." This, even though post-bankruptcy United has a $1 billion annual labor cost advantage.

Having had an unhappy experience as an airline investor (with US Airways, which has been in bankruptcy twice), Warren Buffett says: "I have an 800-number now that I call if I get the urge to buy an airline stock. I call at 2 in the morning and I say: 'My name is Warren, and I'm an aeroholic.' And then they talk me down."

Still, in 2003 American's stock fell to less than $2 a share, and the company's market capitalization was under $500 million. As of this writing, the stock is over $37 and shareholders have $8 billion in equity, and in 2006 American had its first annual profit in six years. The Wright brothers' machine might work out after all.

Every weekday JewishWorldReview.com publishes what many in in the media and Washington consider "must-reading". Sign up for the daily JWR update. It's free. Just click here.

George Will's latest book is "With a Happy Eye but: America and the World, 1997-2002" to purchase a copy, click here. Comment on this column by clicking here.


© 2006 WPWG