the Voice of
The Communist League of Revolutionary Workers–Internationalist
“The emancipation of the working class will only be achieved by the working class itself.”
— Karl Marx
Nov 27, 2006
U.S. Airways, which has gone into bankruptcy twice in the last four years, has made a bid to buy Delta. Delta, a much larger airline, is itself in bankruptcy.
What was the reaction in the financial world – disbelief? Shock, at the absurdity of such a thing? Demands to lock U.S. Airways executives in the loony bin?
No – the reaction in financial centers was positive! U.S. Airways stock rose 17% in the first day after the announcement. Delta bonds went up as well.
This kind of deal is perfectly ordinary in today’s economy. Just the past couple weeks have seen numerous buyouts, mergers and offers: U.S. Trust and Bank of America merged; the Blackstone Group bought out Equity Office Partners, another commercial real estate company, for 36 billion dollars. The mining company Freeport-McMoRan bought much larger Phelps Dodge for almost 26 billion. Even the NASDAQ stock exchange tried to get in on the scene, offering five billion dollars for the London Stock Exchange.
All this has nothing to do with what is needed to produce goods and services for the population. It has everything to do with enriching financial interests. This tiny proportion of the population makes a quick buck in such “mergers” while leaving the combined companies loaded with debt.
The REAL absurdity is that companies can buy out much larger companies. The only way they can do it is by floating loans. But once the buyout goes through, the financial interests engineering the buyout are not responsible for these loans – the new, combined company is! Those who put together the deal dump their debt onto the company they bought, and often turn around soon after, selling their holding interest for a tidy profit. They even have a name for this filthy scam: it’s called a leveraged buyout.
It’s the same thing with the U.S. Airways offer for Delta. Just last year, U.S. Airways came out of bankruptcy after it was bought by another company, America West, a much smaller company. This combined company already starts out billions of dollars in debt. If the latest deal goes through, the new Delta Airlines that emerges from it will have billions more in debt added on to it.
That debt becomes yet another excuse to come back and demand even more concessions from the workers. In its two bankruptcies, U.S. Airways defaulted on all its pension funds. In its current bankruptcy, Delta has so far defaulted on its pilots’ pensions; a recent law lets it “save” its other pensions by slowing its payments to them to a trickle. So Delta does not put enough money into them to actually pay the pensions! In addition, Delta froze those pensions at the end of 2005 – so workers stopped earning additional benefits after that time.
All the debt taken on would pave the way for yet another bankruptcy further down the road, or at least the threat of a bankruptcy. And you can bet that the company’s workers will again be asked to pay for it with still more concessions.
Mergers and buyouts that produce nothing but debt seem completely absurd to anyone with an ounce of sense. But to these financial folks, it’s another great deal.
These buyouts mark just how deeply our hopes are being sunk by an out-of-control, fictional financial system.