May 12, 2005
United and the Railway Labor Act
On May 10, 2005 a Chicago bankruptcy court sanctioned the largest pension plan default in American corporate history. UAL Corporation will shift United Airlines’ $6.6 billion pension liability to a federal agency, the Pension Benefit Guaranty Corporation. The default may led to similar defaults by other struggling airlines, American, Continental, Delta and Northwest, which now must compete on fares with a United that is not encumbered with old pension plan obligations.
The hidden issue in the financial struggles of the airlines, and the country’s railroads too for that matter, is the role of the Railway Labor Act. The RLA provides significantly more protections to organized unions than does the more general National Labor Relations Act. The difference is historical; the bloody railway worker strikes at the turn of the century convinced Congress that railway unions deserved special, elevated protections. The special protections, applied in current economic conditions, have forced railroads and airlines to overpay and under-employ workers and disabled these companies from engaging in normal restructurings (both at the firm and industry level) in response to changing economic conditions.
Since most the the companies covered by the RLA are struggling to operate in the black, perhaps it is time to revisit the RLA.
May 12, 2005 | Permalink
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