Jul 22, 2013
The business magazine Forbes said about the American Airlines bankruptcy, “This bankruptcy is quite unusual in that all creditors, both secured and unsecured, are slated to be paid in full.” In fact, this is not quite true. Some of the small bond holders panicked about getting money back from American in bankruptcy and so sold their bonds cheaply to wealthy hedge funds. Now these hedge funds will get 100% of the bonds’ value, while those small bond holders lost big time. But the banks did just fine.
On the other hand, the company cut the labor costs of mechanics and baggage handlers by 17.5%. Much of this came from workers thrown out of work and pushed into buyouts that will leave them impoverished.
Workers at American Eagle, the low wage subsidiary, lost a week’s vacation and had their overtime premium cut. American Airlines flight attendants and pilots suffered similar cuts.
It’s very clear: The purpose of this bankruptcy was to use the court system to make deep cuts in the workers’ standard of living, while fully protecting the wealthy creditors. Mission accomplished – for them.