Airline Distress Causes Layoffs

Article, The Economist, October 7, 2004
http://www.economist.com/business/businessthisweek/displayStory.cfm?Story_id=3278461

Airlines around the world are continuing to face economic hardship. Last week, U.S. airways made the news as it tried to prop itself up through labor negotiations. In September, the airline filed for chapter eleven bankruptcy protection, promising to come up with a plan to reorganize the ailing company.

The part of the plan announced last week will hopefully ease some tension between airline management and airline labor unions. The plan includes a ten percent managerial staff reduction, which means the loss of approximately 3,700 jobs, and pay cuts equaling approximately forty-five million dollars.

U.S Airway management is hoping that these reductions encourage their unionized employees to accept a one billion dollar labor reduction. The airline is also claiming that these proposed cuts are essential to emerge out of bankruptcy, and that a judge may impose them if they are not readily accepted.

U.S. airlines are not the only ones in trouble these days. Alitalia recently made news when it reached an agreement with its own unions over settlement packages for a fifteen percent workforce reduction resulting in the loss of approximately 3,700 jobs. As a reward for closing the deal, the government has unlocked a loan for over four hundred million euros ($472 million) to help the airline keep running while it goes through this restructuring process.

The government will also be heavily involved with Alitalia's re-emergence, as it will bear much of the burden associated with ensuring the well-being of any many laid-off workers.