American Airlines – Touch and Go
Today American Airlines filed for bankruptcy. There is a huge difference between former airline bankruptcies and American because they have liquidity with $4.1 Billion in cash. How can you be bankrupt with four billion dollars in the bank? Simple. You owe more than you have. Sound familiar? The only difference is the size of the shortage.
Are the unions to blame? Or are they simply an excuse for poor financial management? Apparently American’s decision was done to reduce labor costs. The other strategy is to delay payments to suppliers, order more fuel-efficient planes and reduce the number of leased aircraft. With losses nearing $1 billion for this year and hundreds of millions the year before should this decision have been made sooner?
This latest bankruptcy should help us focus on a larger range of difficult choices. If we are not more prudent our government, both local and state, will continue to raise their debt ceilings until the value of the debt has to be inflated away. And all of us ‘little guys’ will have to pay for it. We have to pay what we owe. It is time for more austerity. We can’t continue to bail out business, banks, and governments. It all comes down to difficult choices. We can no longer remain neutral.
What happens to American will, I think, be different than most prior airline bankruptcies.
American will continue to fly, charge us for bags, meals, pillows and other services that used to be included in the price of the ticket. The reality is different and unsettling. When I was earning my private pilot’s license I had to take off and land the plane unassisted. It was called a “Touch and Go.” My instructor and I practiced “touch and go’s” every time I was in the plane. Soon “touch and go” simply meant another skill set to flying. The practice was needed to both a smooth take off and landing. Today, American, and our economy has to relearn the principles of ‘touch and go.’
If you are like me you are working harder just to stay even. Each month is a challenge and next year looks like more of the same.
If American can reduce labor costs, that means their workforce earns less. Are they cutting management compensation as well? This reorganization will push more employees into a foundering job market as the grind of the recession continues. More people earning less, spending less and owing more.
We are in the midst of national and global challenges that demand our attention. Our country is becoming more diverse as the generational poor are merged with the situational poor.
It’s time to deal with those hit hard by the recession and come up with a plan that works for housing and employment. It’s time for everyone to rethink what they sell and more importantly what they buy. We have to cut back. We have to sell off what we don’t use. We have to reinvent ourselves.
It’s not just the airlines that needs reorganization; it’s each one of us demanding that our local, state and national government stop spending. Like American our losses can’t continue if we are “touch and go.”