Tag Archives: industry

“a 45-percent decline”: U.S. industrial/mining/logistics layoffs, August 2018

Incomplete list of U.S. Mining/Industrial/Logistics job loss/shutdown announcements made in August 2018.

WARN=Worker Adjustment & Retraining Notification

Forbes: What Does The Future Hold For Shipping And Logistics?

South China Morning Post: Walmart  & JD.com invest US$500 million in Chinese logistics service

MarketWatch: Manufacturing jobs growing at fastest rate in 23 years

USA TODAY: There’s a fierce battle over your bed: Industry goes to the mattresses

ALABAMA: Car parts maker Federal-Mogul eliminating an additional 47 jobs at its factory in Jacksonville, in September.  Since December 2017,  Federal-Mogul has killed at least 121 jobs in Alabama.

ALASKA: Vigor Alaska eliminating 80 shipyard jobs by Xmas, due to lack of contracts.

CALIFORNIA: Taxpayer funded General Dynamics eliminating 1-thousand-493 NASSCO jobs (according to official WARN) in San Diego, by the end of September, supposedly due to an accident involving a USN ship and a new floating dry dock!  Automotive industry company MIDA Industries issued a layoff WARN for its ops in Fremont, 55 jobs gone by September.  Jacobson Warehouse Company issued a shutdown WARN for its Tracy location, 74 jobs gone by mid-October. Golden State Overnight Delivery Service eliminating 158 jobs in Santa Fe and Ontario, by the end of September!

The Bakersfield Californian: Central Valley officials join push to end California oil production

IndustryWeek: Fire at Tesla factory in Fremont

Markets Insider: auto industry suppliers are worried about Tesla going bankrupt

COLORADO:  Wood pellet maker Confluence Energy now chapter 11 bankrupt busted due to having more debts than assets, the owner says wood pellet sales started dropping after petroleum prices started going down in 2010.

CONNECTICUT: France based pen/lighter maker Bic began laying off people at its Milford lighter refill factory, so far 25 people have been let go due to a sudden 11% crash in lighter sales.

FLORIDA: Taxsucker Lockheed Martin-Sikorsky eliminating 5-hundred jobs, near Jupiter, due to the U.S. government buying fewer Black Hawk helicopters!

GEORGIA: What economic recovery? Anchor Glass eliminating 150 jobs (half its Georgia employees) and shutting down a production line in Warner Robins, due to crashing sales of its products!  Industry ‘solutions’ company Alorica laid off 635 people!  Pillow maker Hollander Sleep Products eliminating 225 jobs!

HAWAII: Island Energy Services halts oil refinery ops, 85 jobs gone.

ILLINOIS:  Stack-On-Products moving 150 Chicago area jobs to Mexico, supposedly to avoid Chinese tariffs! Japan based rail car maker Nippon Sharyo shutting down its failed six years old Rochelle factory, hundreds of U.S. jobs lost due to crashing sales, and its prototype double-decker passenger car failing safety tests.  Rail support company Auto Releasing issued a WARN, 68 jobs gone as a result of losing a contract with Fiat-Chrysler.  Home light fixture maker Acuity Brands Lighting issued a WARN, 298 jobs in Des Plain gone due to “reorganization”!  Urethane product maker Armacell issued a WARN, 87 jobs in South Holland gone mid-October.   Tobacco wholesaler Follett Higher Ed Group-Aurora Service Center issued a WARN, 81 jobs gone by February 2019.

IOWA:  It was discovered that RV maker Winnebago quietly laid off 35 people, in Forest City, at the end of July.

KENTUCKY:  Ladder maker Werner shutting down its Louisville factory, 119 jobs gone by March 2019!

MINNESOTA: Mattress maker Tempur-Sealy shutting down its Saint Paul factory, eliminating 99 jobs in September due to “the closure of a large customer’s nearby distribution center”.  First Transit issued a WARN, 90 jobs in Roseville gone by October.

NEW YORK: General Electric (GE) continues job killing, this time 225 jobs in Schenectady being eliminated due to “ongoing challenges facing the power industry and a 45-percent decline in volume”!

NORTH CAROLINA:  Bankrupt furniture maker Heritage Home Group shutting down Broyhill factories in Caldwell County, 712 jobs gone due to failed attempts to sell-off Broyhill!  A bankruptcy judge set an auction date of 18OCT2018 for Heritage Home Group brands Broyhill and Thomasville.  Paper-packaging maker WestRock shutting down its factory in Charlotte, 170 jobs gone due to consolidation ops, starting in October!

OKLAHOMA: Oil company Phillips-Conoco suddenly laid off 1-hundred people in Oklahoma and Texas, as part of plans to layoff thousands of people over the next few years!

PENNSYLVANIA: Battery maker Axion Power now chapter 7 bankrupt and liquidating. Korea based Hyundai shutting down its now failed rail car factory in Philadelphia, 3-hundred jobs gone due to faulty welding on many rebuilt taxpayer funded SEPTA rail cars!  Dedicated Logistics issued a shutdown WARN for its ops in Langhorn, 120 jobs gone by the end of October!  Steel maker ArcelorMittal Plate laying off 47 people by November.

TENNESSEE: Construction vehicle maker Caterpillar shutting down its Dyersburg factory, 85 jobs gone by October.

Knoxville News Sentinel: EPA, NRC killed nuclear power industry

TEXAS: The maker of Dickies work clothes, Williamson-Dickie, shutting down its factory in Uvalde, 150 U.S. jobs being moved to Mexico by Xmas!

ConocoPhillips plans ‘modest’ job cuts

VIRGINIA: Bristol Compressors shutting down its factory, 470 jobs gone by Xmas, because “business has been struggling for years”!

Washington DC: Trump Signals Drawdown Of The Strategic Petroleum Reserve

CNBC: Auto industry caught in the trade war crosshairs

WISCONSIN: Office products maker ACCO shutting down its factory in Pleasant Prairie, 54 jobs gone by Xmas.  Trailer hitch maker CURT Manufacturing moving its Eau Claire electrical ops to Mexico, but claims that business is so good they’ll find new jobs for the affected U.S. workers.

U.S. INDUSTRIAL/MINING/LOGISTICS SHUTDOWNS, JULY 2018:  “GET YOUR STUFF IT’S TIME TO LEAVE.”

Taxdollars @ work: Entangled Sea Turtles rescued by U.S. Coast Guard

During May 2018, U.S. Coast Guard rescued several Sea Turtles found entangled in abandoned fishing nets, in the eastern Pacific Ocean.

The Coast Guard Cutter Campbell, from Kittery, Maine, was in the Pacific Ocean on anti-drugs operations when the crew spotted the struggling Sea Turtles.

Video of one of the rescues:

MARIA: FREE SHOTS FOR PUERTO RICO PETS!

HARVEY: WHAT HAPPENS TO YOUR PETS?

‘TAXPAYERS’ RESCUE PREGNANT DEER TRAPPED IN COASTAL ROCKS!

HARVEY: TEXAS MILITIA RESCUES NEW MASCOT, NAMED HARVEY!

HARVEY: VET=VETERINARY EMERGENCY TEAM, HELPING ANIMALS IS GOOD FOR YOU!

GEORGIA MILITIA RESCUES KITTENS & PUPPIES!

LOUISIANA MILITIA RESCUES FLOOD VICTIMS & THEIR PETS!

“historic changes”: U.S. industrial/mining/logistics layoffs, April 2018

Incomplete list of U.S. Mining/Industrial/Logistics job loss/shutdown announcements made in April 2018.

More U.S. jobs being killed by European Union and China.

WARN=Worker Adjustment & Retraining Notification

 California: Diversified Silicone Products issued a shutdown WARN for its operations in Santa Fe, 68 jobs gone by July.  Germany based shipping company DHL issued a shutdown WARN for its ops in Moreno Valley, 136 jobs gone by June!  France based aerospace company C and D Zodiac issued a multiple shutdown WARNs for its Garden Grove ops, at least 79 jobs gone by mid-July.  Washington based aerospace company Leach International suddenly eliminated 46 jobs at its Esterline Power Systems ops in Buena Park. Hecny Transportation shutting down its Brisbane location mid-June.   Workrite Uniform Company issued a shutdown WARN for its factory in Oxnard, 101 jobs gone by June!  What automotive industry recovery?  Floor mat maker Kraco Enterprises issued a layoff WARN for its factory in Compton, 83 jobs gone by June.

Illinois: Washington based industrial valve maker DeZURIK eliminating 61 jobs in Schaumburg due to “relocation”, taking place in 1st quarter 2019.   In Collinsville, energy company Dynergy eliminating 53 jobs by June.

Iowa: Germany based Siemens shutting down its recently acquired steam turbine factory in Burlington, 125 jobs gone, however a federal mandated WARN has yet to be issued! What automotive industry recovery? Germany based engine parts maker MAHLE shutting down its ops in Winterset, 33 jobs gone by mid-July.

Louisiana: What automotive industry recovery? Monster Moto laying off 30 assembly line workers, in May, and transferring those jobs to China despite the company’s motto being Made in America!  Local news reports say just a year ago Monster Moto promised to hire 3-hundred people (even the state gov’na attended the announcement) but actually hired only 1-hundred!

Michigan: What automotive industry recovery?  Belgium based exhaust system maker Bosal eliminating 40 jobs at its factory in Ypsilati, in June, apparently on-top of the 77 jobs eliminated in April.

Mississippi: What automotive industry recovery?  Advance Auto Parts shutting down and selling off its distribution center in Gallman, 284 jobs gone by Xmas as part of a plan to consolidate 54 distribution centers!

New Jersey: What automotive industry recovery?  Germany based Mercedes-Benz shutting down its U.S. HQ in Montvale, 115 jobs lost due to relocation to Atlanta, Georgia! About 1-thousand jobs transferring to Georgia, so the net loss to New Jersey is about 1-thousand-115 jobs! 

New York: Ireland based electrical parts maker Eaton Corporation eliminating 29 jobs at its Horseheads ops.  It should be noted that Eaton got U.S. taxpayer funded incentives for its operations in Horseheads. Bankrupt (due to $1.5-billion in debts) clothier Nine West Holdings (Nine West, Anne Klein, Bandolino, etc) shutting down its wholesale shoe and handbag distribution ops in NYC, 203 jobs gone by July!

North Carolina: Saudi Arabia based SABIC (Saudi Basic Industries Corporation) issued a shutdown WARN for its Huntersville Innovative Plastics operations, 83 jobs gone by the end of July.

Oklahoma: Petroleum company Devon Energy eliminating 3-hundred additional jobs due to never ending debt!   Between 2016 and January 2018 the natural gas company killed 1-thousand-4-hundred jobs!

Ohio: What automotive industry recovery? Comprehensive Logistics-Source Providers eliminating 150 Austintown jobs due to production cutbacks at the GM-Chevy Cruze factory in Lordstown!  Lordstown Seating killing 83 jobs by mid-June.  And of course the GM-Chevy Cruze production cutbacks will result in 1-thousand-5-hundred GM-Chevy employees becoming unemployed!  GM administrators blame low sales in the U.S.: “…the market continued to undergo historic changes, it required us to reduce production rates and take numerous down weeks to match production with lower customer demand…”

Pennsylvania: In New Kensington, years of down prices for metals and then a $209-thousand USD theft forced Quality Machined Products to layoff employees for the first time in its history.  British empire United Kingdom based chemical company Johnson Matthey issued a shutdown WARN for its Conshohocken location, 119 jobs gone by August!  Dicom Transportation Group issued a shutdown WARN for its Philadelphia location, 51 jobs gone by June.   Pittsburgh Glass Works shutting down its factory in East Deer, at least 160 jobs affected by June, layoffs starting in May!  Worldwide Flight Services eliminating 161 air-freight jobs at Philadelphia International Airport, due to losing a contract!

South Carolina:  Textile maker Alice Manufacturing shutting down its 50 years old factory in Ellison, 175 jobs gone in June due to competition from overseas!

Texas: Salon products maker/supplier Sally Beauty warned of an undisclosed number of layoffs at its Denton HQ, in an effort to save $15-million USD!  Fort Worth based Bell Helicopter suddenly eliminated 120 jobs across the United States!  Houston based Erin Energy (Camac Energy) now chapter 11 bankrupt busted due to the collapse of the African oil industry.  Petroleum company EV Energy Partners now chapter 11 bankrupt busted due to as much as $1-billion USD of debt.

Washington: Jorgensen Forge issued a shutdown WARN for its Tukwila ops, 101 jobs gone by mid-June!  Hot water heater maker A.O. Smith issued a shutdown WARN for its factory in Renton, 57 jobs gone by mid-June.

Wisconsin: Mattel-American Girl shutting down its call center/distribution center in Wilmot, 185 jobs gone by the end of June!

WARN=Worker Adjustment & Retraining Notification

Mining/Industrial/Logistics layoffs, March 2018: “THIS IS A SAD DAY…”

“industry plunged…we weren’t needed anymore” : U.S. Mining/Industrial/Logistics layoffs, January 2017

Incomplete list of U.S. Mining/Industrial/Logistics job loss announcements and shutdowns for January 2017.

Greek owned shipping giant Toisa, and 23 affiliates, filed for U.S. bankruptcy protection blaming low volume of petroleum shipments.

Alabama: Beaulieu America shutting down its 30 years old carpet fibers factory, 375 jobs lost by the end of March!

California: In Petaluma, Enphase Energy eliminating 60 jobs by the end of March.  National Distribution Centers issued a shutdown WARN for their Chino operations, 102 jobs gone by the end of February!  Armor All/STP shutting down their Pleasanton ops by the end of March.  Boeing issued yet more layoff WARNs, at least a dozen jobs gone by the end of March.  In San Diego, tax-sucking General Dynamics owned National Steel & Shipbuilding suddenly laid off 844 people, blaming the U.S. Navy!  In Santa Ana, GKN Aerospace ChemTronics laying off 15 employees by the end of February, despite getting a state taxpayer funded $10-million USD tax-break for being energy efficient!

Florida: Mundy Maintenance eliminating 123 jobs at its Ascend Facility at Pensacola, by the end of March!  At Orlando International Airport, Aircraft Service International eliminating 125 jobs by the end of March!  General Electric (GE) Aviation laid off 33 people in Clearwater.  In Miramar, Swiss Watch suddenly eliminated 129 jobs!

Georgia: HVAC company Carrier shutting down their Smyrna factory, 64 jobs lost to consolidation and outsourcing!

Illinois:  Japan (Nippon) based rail-car maker Nippon Sharyo eliminating 1-hundred jobs in Rochelle!  Local news media implied it was due to repeated failures of Nippon Sharyo rail-cars to meet OSHA standards, which is interesting because Nipponese trains are considered the best in the world. Honeywell eliminating 69 jobs in Metropolis due to “…significant challenges of the nuclear industry globally and the oversupply of uranium…”

Iowa: Cedar Rapids based industrial products maker Apache restructuring and warning of layoffs due to “an unfortunate situation”.

Kansas: British empire Canada owned Bombardier eliminated 45 Learjet jobs in Wichita as part of their 2016 announced plan to kill 7-thousand jobs in North America!  In Salina, Philips Lighting laid off 32 factory employees, in an effort to increase efficiency.

Kentucky:  What automotive industry recovery? Despite being called the “Most American made car” by Nipponese (Japanese) news media, and despite threats by Donald Trump, Toyota announced it will go forward will plans to eliminate 648 jobs at its U.S. HQ in Erlanger!  Supposedly the positions are being moved to Texas as were planned for back in 2014.

Michigan: General Electric (GE) Aviation laid off 74 people in Grand Rapids.  Delta Industrial Valves shutting down their factory in Niles, 56 jobs lost by June.  What automotive industry recovery? Luxembourg based farm vehicle maker SAF-Holland shutting down two Michigan factories, hundreds of jobs lost over the year as work is consolidated to other factories!  The world’s largest supplier of automotive interiors, China owned Yanfeng Automotive Interiors, laying off 321 Michiganders in April!   To show you how ignorant your local politicians are congressman Dave Trott stated “Today’s announcement by Yanfeng Automotive Interiors further underscores the continued resurgence of our domestic automotive industry.”  Detroit based General Motors (GM) eliminating 625 Canadian jobs! Canadian labor unions blame NAFTA saying those jobs are being moved to Mexico: “The CAMI announcement is a shining example of everything wrong with NAFTA, it must be re-negotiated!”-Jerry Dias, Unifor National

Missouri: Manac Trailers USA shutdown its factory in Kennett without warning, 92 jobs lost “immediately”!  Local news media reported that many employees are single parents.  To add insult to injury Manac Trailers admin told a local city mayor that the shutdown was due to “lack of workforce in the area”!  Can you say “Bullshit”?

New Jersey: Comcast Cable issued a shutdown WARN for its West Deptford logistics center, 88 jobs gone by June.

New Mexico: Eclipse Aerospace suddenly laid off employees at its aircraft factory, but refused to say how many, blaming: “…current and anticipated orders over the coming months and to prepare for the future Project Canada development and launch.”

New York: In Long Island, LogistiCare eliminating 158 non-emergency response jobs by April, due to loss of state taxpayer funded contract!  Mass produced jewelry factory Samuel Aaron issued a shutdown WARN for its Mount Vernon ops, 42 jobs lost by April due to the sale of the company.  Duane Reade issued a Shutdown WARN for its Maspeth Distribution Center, 214 jobs lost by the end of May due to lack of business!  PCX Aerostructures issued a shutdown WARN for its Ronkonkoma ops, 45 Empire State jobs lost due to the company moving to Texas.  M&G DuraVent eliminating 54 jobs in April (that’s more than half its employees) due to crashing sales.

Ohio: What automotive industry recovery? In Lordstown, the dreaded mass layoffs by Detroit based General Motors (GM) began,  more than 1-thousand-2-hundred people jobless as the third shift at the Chevy Cruz factory is eliminated supposedly due to low sales! However, local news media pointed out that GM began shipping Chevy Cruzes in from Mexico last year, claiming they couldn’t keep up with U.S. demand!   After 54 years Iddings Trucking now chapter bankrupt busted due to the oil industry fiasco:We went from five or 10 drivers to clear over 1-hundred. Then beginning in 2014, the fracking industry plunged and we weren’t needed anymore. We had one of our larger customers call and cancel business with us because we weren’t needed. I’d say we laid off 1-hundred truck drivers…..”-Nick Loeber, co-owner

Oregon:  In Portland, Commercial Aircraft Painting Services issued a shutdown WARN, 186 jobs lost by the end of February due to the contract with Boeing being canceled!  Air Products & Chemicals laid off 21 people in Hanover.  According to local news media, this is the second layoff since September 2016.  The factory is down to 83 employees, but at one time had 2-hundred!

Pennsylvania: In Williamsport, Andarko Petroleum eliminating 52 jobs by mid-April.  Schott Glass warning of layoffs due to increased competition.

South Carolina:   Boeing is begging 6-hundred employees to ‘voluntarily’ quit (buyouts)!  APEX Tool laying off 170 people in Sumter County, by the end of March!  Local news media reminded their audience that APEX Tool killed jobs in Texas and Arkansas when it consolidated operations to South Carolina in 2014.  Company admin decided to end production of its Armstrong and Allen brand of tools, supposedly due to lack of demand: “This is not manufacturing that is moving anywhere else, it is not going to another facility. We are not going to be selling these products.”

Texas: National Instruments warning of layoffs due to a 2% drop in sales last year.  Fort Worth based golf club maker Ben Hogan now chapter 11 bankrupt busted, despite a supposed rebound two years ago. Local news media reporting that the factory is now staffed with a skeleton crew of only ten employees! The golf company owes hundreds of thousands of dollars in back-rent and licensing fees!  Forbes Energy Services now chapter 11 bankrupt busted, due to the oil industry fiasco.  The value of Forbes Energy Services stocks crashed by 58%!  Swift Energy revealed it will eliminate 56 petroleum industry jobs when it emerges from bankruptcy.  San Antonio furniture maker KLN Manufacturing shutting down, 40 jobs lost by the end of February. The company focused on taxpayer funded sales to government agencies, as well as universities and hospitals.

Washington:  In Keyport, U.S. tax-sucking British empire based BAE Systems eliminating 59 jobs by the end of March.   Boeing is begging an undisclosed number of engineers to ‘voluntarily’ quit (buyouts)!

Wisconsin:  River City Distribution shutting down their Watertown operations, 107 jobs lost in March: “The closure has been promp­t­ed by the company’s decision to sell substantially all of its assets…”-official company statement

For the second, and most likely final time, EBR (Erik Buell Racing) Motorcycles ceased operations.  In 2015 the motorcycle maker employed 170 people in East Troy.  The company was sold-off in 2016 to Liquid Asset Partners, who in turn put the motorcycle maker up for sale, again.  This time nobody wanted to buy it, or sell its bikes: “This difficult decision was based primarily on EBR facing significant headwinds with signing new dealers……The combination of slow sales and industry announcements of other major OEM brands closing or cutting production only magnified the challenges faced by EBR.”

Mining/Industrial/Logistics December 2016: “WE DO NOT ANTICIPATE ANY MEANINGFUL RECOVERY”

U.S. Retail/Banking/Service sector collapse, January 2017: ” I DON’T SLEEP AT NIGHT, IT’S KILLING ME” MASSIVE MACY’S MELTDOWN AS 10,000+ JOBS KILLED?

Occupy America! U.S. Capitalist Airline industry is a big FAIL! History of bankruptcies and losses! Testimonies before Congress prove it! More proof that American Airlines can’t be trusted!

“The airline industry has the worst financial performance of any of our major business sectors. While the industry has enjoyed some profitable years, airline operators as a whole have lost money since deregulation in 1978.”– from Current Situation and Future Outlook of U.S. Commercial Airline Industry, September 28, 2005

In September 2005, the U.S. House of Representatives’ Committee on Transportation and Infrastructure, and the Subcommittee on Aviation, heard testimonies on the economic viability of the U.S. airline industry.  It wasn’t good.

Here’s some quotes from the report:

“Historically, airlines have failed at a much higher rate than most other types of businesses.”

“In fact the U.S. airline industry has seen 150 bankruptcy filings in the last 25 years, an average of almost six per year.”

Bankruptcies don’t work because “…history has shown that the growth of airline industry capacity [a type of competition based on supply and demand] has continued unaffected even by major liquidations.”

“Over the past four years, U.S. commercial airlines have lost over $32 billion collectively and it is estimated that the industry will experience another $10 billion in loss in 2005.”

Don’t blame the September 11, 2001 attacks, the airlines were in trouble before that: “…well over 100,000 jobs have been lost in this industry since that time [the year 2000] and just recently, in concert with their announced bankruptcies…”

Don’t blame the cost of labor, like the CEO of American Airlines is doing: “Numerous factors have contributed to the problem and Mr. Kiefer mentioned some of them. I would say that three stand out in the current environment: very high jet fuel prices, intense price competition in the domestic market; and heavy debt and pension burdens.”

So they whine about fuel prices, but haven’t they been jacking up their ticket prices to cover that? They whine about competition! Isn’t competition the American Capitalist way? I think the mantra goes ‘if you can’t handle the competition then you should get out of the business’. And they whine about being in debt! You see, we individuals have been lectured for years about the sins of debt, yet the biggest debt offenders are the Corporations of America (after the Federal government)!

However, a professor from the Northeastern University Boston, and a senior fellow from the Brookings Institution, testified that in their opinion the three biggest costs to the airline industry is fuel, competition and labor.

Speaking of labor and American Airlines, the 2005 testimonies show that labor cost for the now bankrupt airline had already been reduced: “…airline employees have been asked to take substantial pay cuts, trim their benefits and in some cases, lose their jobs. Exhibit 5 in my remarks shows broad expense categories for AMR, parent of American Airlines, in 2002 and in the second quarter of 2005. Over that period labor costs declined from 41 percent of total expenses to 32 percent.”

Again, don’t blame the cost of labor: “…airlines have undertaken significant steps to trim their losses but these have so far been insufficient to restore profitability, largely because of the fuel prices.”

The nature of the industry makes it almost impossible to make a profit, it involves a lot of guessing and optimism: “The airline industry has always been a cyclical one because the demand for air travel is sensitive to the level of economic activity and carriers must invest in capacity well before they know the level of economic activity and demand.”

Airlines have always used bankruptcy to destroy union labor contracts, in the name of competition: “Legacy carriers have been cutting costs where they can and since labor is the largest category of airline costs, it has been the target
of cost cutting and enhanced productivity through negotiation as well as in bankruptcy as the legacy carriers seek to reduce costs to compete with low cost carriers.”

Some officials blamed the consumers for not being able to pay higher ticket prices, and blamed airline executives for not having the guts to pass on the true cost of fuel to their customers, again in the name of competition: “The airline industry however suffers from the burden of having to pay high prices without the flexibility of necessarily receiving higher fares. Historically, carriers have been loathe to pass on higher fuel costs in the form of any additional tariff for fear of being undercut by competition. This has led to a vicious cycle within the industry…” In other words, ticket prices haven’t gone high enough!

According to testimony from Moody’s officials, most airlines that go bankrupt don’t really change the way they do business: “Airlines operating in bankruptcy generally continue to pay airport rates and charges and in most cases do not radically downsize their operations.”

Testimony at the 2005 hearings foretold of American Airlines’ bankruptcy filing on November 29, 2011. The testimony was about what else American Airlines could do to further reduce their costs, and how to do it: Mr. MICA. “Again, pensions would still be sort of the big enchilada in obligations and fuel?”
Mr. BAGGALEY. “Actually, the largest portion of American and other airlines’ obligations are secured debt and leases. Pension deficits are significant but they are a minority of the total.”
Mr. MICA. “The only way you can restructure those would be through bankruptcy or negotiation?”
Mr. BAGGALEY. “Yes.”

Philip Baggaley, of Standard & Poor’s, also testified that many financial problems for the airline industry are “inherent” and go back before the 1990s.

Baggaley also explained that a major reason for legacy (airlines created before the 1978 deregulation) airlines filing bankruptcy was to destroy the pension (retirement) programs for their employees.  He admitted that financial institutions like to see companies destroy their employees’ retirement plans, and rewarded the companies with better credit ratings!

Baggaley also explained that wages and benefits are always the target of corporations, because it is the easiest to control.  Airline executives target labor as a way to offset the uncontrollable fuel costs. However, he showed that fuel costs have gone up so much that drastic labor cuts, without declaring bankruptcy, are no longer enough.  From 2002 to 2005 American Airlines gained, or saved, $1.8 billion in labor concessions, but they still lost $3.2 billion to fuel costs.

Baggaley also explained that while company mergers normally work for other industries, in reducing overall costs, history shows that mergers actually increase operating costs for legacy airlines.  He called it a “zero sum game”, and added that the only potential benefit for airlines filing for bankruptcy, and even merging, is that it’s a way of reducing competition: “…bankruptcy restructuring and mergers have the potential to improve the industry’s financial health, but only if accompanied by reduced capacity [a way of reducing competition] and, most important, by lowering operating costs.” Remember, competition is one of the three main reasons the airline industry is failing.

Mark Kiefer, of CRA International (economic and management consulting firm), testified that the problems with the airline industry go all the way back to the 1978 deregulation. He explained that the only time the airlines were really “profitable” was when they were being regulated by the Federal government!

Kiefer said government regulation kept ticket prices up, and limited the number of airlines allowed to operate (thus killing competition).  Since deregulation ticket prices dropped, and smaller more competitive airlines were born. Even after more than 30 years, the bigger, older (legacy) airlines just can not compete with the smaller younger Low Cost Carrier (LCC) airlines.  Under the traditional concept of capitalism, doesn’t that mean the legacy airlines should be allowed to die?

Kiefer also explained that the legacy airlines are still operating pre-deregulation when it came to wages and benefits for employees.  They tend to pay more than the LCC airlines, and offer company health and retirement benefits.  Kiefer says no LCC airline offers such benefits.  LCCs do offer “…defined contribution and profit sharing plans that have a much lower overall cost to the airline.”

Steven Morrison, Northeastern University Boston, and Clifford Winston from the Brookings Institution, say that, amazingly even after 30 years, the legacy airlines “…still needs time to adjust to its deregulatory freedoms by ridding itself of remaining cost inefficiencies…” In other words, the last hurdle to fully deregulating the legacy airlines is unionized labor.

But while the highly edjumacated college officials blamed labor for the airlines’ problems, U.S. Representative James Oberstar put the blame squarely on the legacy airlines: “Since deregulation, the legacy airlines’ revenue model has depended on extracting premium fares from a small percentage of passengers. That revenue model began to unravel in the year 2000…”

Of interest is the testimony from the executive director of the Air Carrier Association of America, Edward Faberman. Who better to explain to woes of the airline industry, and guess what, he did not blame labor!  He blamed, in order, fuel costs, homeland security costs, airport expenses, air traffic control expenses, Customs & Border Control service expenses, and finally cancelled flights.

Very interestingly, Faberman actually countered the claims of many of the experts mentioned above. Even though the airline industry was deregulated back in 1978, the legacy airlines are still getting subsidized by the government!  He basically said that in the name of competitive capitalism the big old legacy airlines should be allowed to die off, and that the LCCs should take over.

Finally, here’s what the airline officials in the United Kingdom think of the U.S. airline industry: “But America, land of the free, is turning itself into the land of the free ride. In the last four years, the airlines have soaked up $15 to $20 billion of public subsidy and loan guarantees. They’re operating in protected markets, they’re hoovering up public funds and they still can’t make a profit. They are dumping capacity on the North Atlantic, distorting competition and pricing for cash. They struggle to compete and, at some, the workforce has been demoralized. The more the government has tried to help, the worse things have become.”-Rod Eddington, CEO British Airways, September 22, 2005