As if the business world hasn’t had enough ups and downs in recent months, American Airlines is now circling the drain. In the shadow of Enron and the fall of Arthur Anderson, is it too much to expect American corporations to be better citizens? To be more open? To be more honest?
Perhaps, if the example set by the executives at America’s largest airline are representative. After working for weeks to cajole agreement from their various unions – mechanics, pilots, flight attendants, etc – to lower pay and benefits so that American Airlines could avoid seeking bankruptcy protection, the company has stabbed those same unions in the back. Not 24 hours had passed since the flight attendants union narrowly approved a contentious contract revision when American executives announced a massive series of bonuses and payouts to the company’s top of executives.
For persuading the hoi polloi of the corporation to take painful pay cuts, the richest of American Airlines’ bosses received the company’s thanks in the form of millions upon millions of dollars.
Not surprisingly, the union workers who agreed to pay and benefits cuts balked at the obscene payouts given to the top executives, and the flight attendants union has pitched a fiT, and vowed to revote. What is surprising is that the top brass at American Airlines thought they could get away with this.
What has happened to American businesses? How did the greed so reviled at the dusk of the 1980s come to re-infect our nation’s executive suites? It’s not just in the airline industry that top executives are cashing massive paychecks – and even bonuses – even as their companies go down the tubes. During the Internet boom of the 1990s, one could almost rationalize this hysteria. Stock prices were soaring so quickly that companies could afford to lavish wealth upon the executives who seemed to have led their corporate nations into a promised land of milk, honey and perpetual profits.
But boom has long since turned to bust, and yet, in many sectors, the payday free-for-all continues. And for some reason, the airline industry is one of them.
The airline industry of this country has never been profitable. Not once. Every year since its inception, the overall business of commercial passenger flight services has lost money. The business model just doesn’t work. If companies price competitively, they lose money, because the economics of scale don’t help lower the astronomic costs of air travel enough to make the low-cost fairs profitable. If fares are priced to cover the actual cost of the travel, customers are unwilling to pay and flights have to get cancelled, causing the companies to lose money. Fun fares are no fun for the airline companies, but people refuse to pay the true value of their ticket to ride.
It’s a fundamental problem with the airline system, and there is no obvious, or easy fix. And it’s just made worse when internecine combat like that at American further muddies the water.
But beyond the airline industry, the culture of business must change. And not giving absurd bonuses and paychecks to the executives of faltering companies that just forced their union workers to take painful pay cuts might be a good first step.
