In 2001, American Airlines, along with the rest of the airline industry, was bailed out by the federal government in response to the huge revenue losses that occurred after 9/11. This prevented the entire industry from imploding for a while, but over the last decade, airline prices have skyrocketed, ridiculous fees have been incorporated into the price of travel, airline service has significantly declined, and several major airlines have once again declared bankruptcy. So this proposes another issue other than job loss. It is apparent that there is a vicious cycle of bankruptcy and bailout that is occurring in the airline industry, but is it worth it? Since they were bailed out in 2001, American Airlines, U.S. Airways, and United have all suffered sever economic losses and have had to declare bankruptcy again. That kind of track record makes it easy for me to believe that government bailouts are ineffective. They interfere with our free market and create a state of dependency nationwide by deterring competition, a key component to a productive free market. In capitalism, businesses that makes good decisions are rewarded with success, while those that make poor decisions fail and are replaced by others. Why should a failing business be allowed to continue making poor decisions at the taxpayers' expense?
Wednesday, February 1, 2012
13,000 Jobs to Be Lost at American Airlines
Recently, American Airlines has filed for bankruptcy after having huge losses in revenue over the last decade. In order to save the company, American Airlines proposes to eliminate 13,000 jobs--about 15 percent of its workforce--and reduce its employment costs by 20 percent by ending its current pension plans and ceasing to pay for retiree health benefits. Affiliated unions and American Airlines workers are outraged and are currently attempting to fight the airline company by refusing to agree to change.
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7 comments:
Agreed! Government bailouts are not effective and are stealing from the American taxpayer! I believe we need to ask ourselves why government is picking "winners"? Who really benefits from bailouts....the politicians who agree to them?
I most definitely agree with everyone else, it is not fair that the government bailed them out the first time because of poor decisions and now that it is happening again shows how ineffective helping them really was. I mean wouldn't you think that they would try to be more careful with their decision making now so history doesn't repeat itself? They should not rely on the government to always be there for them to bail them out, it's completely unfair for the taxpayers and no one benefits from it what so ever.
I totally agree with you Ashley. They are taking more and more money from the taxpayers. The fact that we are loosing more jobs and loosing money is not a good sign. Government bailouts are ineffective and they need to be able to fix the problem. But instead they are making all those who are working for the airlines loose their job which would lead to people unhappy and unsatisfied. It seems unfair that those who actually worked hard for their job has it taken from them.
I personally believe that the first bailout in 2001 was necessary because after 9/11, many people did not want to fly and it was a hard time for the airlines as a whole. The airlines need to change and adapt because now that the airline industry is not as regulated there is more competition. United is a good example of that they had their bankruptcy and now a merger and are going strong. I think in dire circumstances, it is necessary for government intervention but not always.
I agree with Rebecca, just recently, Obama bailed out Chrysler and another auto company in order to keep our economy going. Although unfair, the motivation, as I see it, is to save the companies from going out of business and consequently all the companies affiliated with the airlines and the people who work with them from going out of business.
I understand where Crystal and Rebecca are coming from, but I still have to disagree. In our economy, there are infinite business opportunities. If the government had not bailed out the airline industry in 2001, the failing airlines would have shut down completely. This would have allowed the other airline companies that were on the verge of suffering a similar fate to absorb the consumer bases of the failed airlines, bringing in more revenue and probably helping them stay afloat. Travelers could have potentially benefited from this as well because with the increase in customers, the surviving airline companies may have been more inclined to lower ticket prices in order to attract the loyal flyers of the failed airlines. By refusing to bail out the airline industry, the government would have created more competition between the surviving airlines, who would have been fighting for these customers, giving us better airline services for better prices as a result of their rivalries. Also, someone would have undoubtedly pounced on the opportunity to create a new, more efficient airline company to replace the ones which had fallen. After all, that's what capitalism is all about, right? For these reasons, I am cynical about how much "good" the airline bailout did.
The argument of the effectiveness of bailouts may be debatable, but using the airline industry is a tricky example for both sides of the argument. Airlines declare for bankruptcy not merely because of inefficiency, but rather the extreme costs it requires to run such a business. Jet fuel is incredibly expensive, and if a particular flight is not booked to a certain capacity, which frequently occurs, the airline company will lose money. It is generally difficult to break even in the airline business, which is why the government chose to provide subsidies to the airlines. The airline business used to be ran on a free market system but it proved inefficient and costly. Since travel through air is such an important asset to the population as a whole, it is unlikely that the government will stop bailing out the airlines in the future. Sure there are always areas of improvement in business, but it is particularly difficult for the airline industry to avoid losses.
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