Release #10.014
May 25, 2010
Bankruptcy Reform Needed Now
Congress Must Stop Airlines from Exploiting Workers
WASHINGTON – In testimony [oral testimony | written submission] before a U.S. House Subcommittee today, the president of the Air Line Pilots Association, Int’l (ALPA), called on Congress to comprehensively reform the U.S. Bankruptcy Code to better protect workers and stop companies from manipulating the bankruptcy process to garner huge bonuses for executives while stripping workers of their collective bargaining rights.
“Despite the original intent of Congress, Section 1113 of the U.S. Bankruptcy Code today fails to protect workers or serve as the mechanism of last resort to save a failing business,” said Capt. John Prater, ALPA’s president, to members of the Commercial and Administrative Law Subcommittee of the U.S. House Committee on the Judiciary. “Instead, it has been exploited as a business model of first resort for companies to gain long-term economic concessions by gutting the wages and working conditions of airline and other employees.”
Prater explained that the current bankruptcy process enables employers to impose contract changes through the court and outside of the normal collective bargaining process. Recent bankruptcy court decisions have greatly loosened the standards for employers to force economic concessions from workers. As a result, employers have been able to breach their employees’ contracts with impunity, and workers have lost critical leverage in the process, with grossly unfair results. Management representatives testifying at today’s hearing acknowledged during questioning that the system is in need of some reform.
Between 2000 and 2010, more than two dozen U.S. airlines declared bankruptcy, with workers at nearly all of them taking severe wage cuts, said Prater. [View a slideshow presentation on the results of airline bankruptcies on ALPA]. He underscored that pilots have given up nearly $30 billion in wage concessions and that pilot wages decreased nearly 50 percent at airlines that filed under Chapter 11. At the same time, many airline CEOs received exorbitant compensation packages and lavish bonuses.
“This miscarriage of justice is bad for the pilots at these individual airlines, and it is also bad for the U.S. airline industry and the U.S. economy,” said Prater. “After 9/11, many airline managements not only used the 1113 process to eviscerate employee contracts, they also misused it to cut staff to the bone, with deteriorating customer service as just one of the outcomes.”
The Protecting Employees and Retirees in Business Bankruptcies Act of 2010 (S. 3033 and H.R. 4677) clarifies the standards that bankruptcy courts must use to determine the outcome of a case. It directs courts to weigh in their deliberations the ramifications that a reorganization plan will have for workers, including effects on wages, job security, health-care benefits, pensions and other retirement plans, and the legal requirement for adequate notice of job termination. In addition, the legislation reestablishes collective bargaining as the primary means to make any changes to a labor contract and clarifies that a union may seek damages from the employer, or strike, if the bankruptcy process results in forced changes to a collectively bargained agreement.
“These critical reforms will promote bargaining, help restore battered employee morale and trust, and make labor a more effective partner in rebuilding the long-term financial health of airlines,” said Prater. “If passed, this bill will also make certain that working families are not forced to deeply sacrifice while CEOs reward themselves and will level the playing field and share the pain of bankruptcy, rather than leaving workers to unfairly shoulder the burden. ALPA urges Congress to act quickly to pass this legislation.”
Founded in 1931, ALPA is the world’s largest pilot union, representing nearly 53,000 pilots at 38 airlines in the United States and Canada. Visit the ALPA website at www.alpa.org.
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CONTACT: Linda Shotwell, 703/481-4440 or media@alpa.org
