3/31/2005

Bankrupt Airlines Undermining Free Market?

In an article entitled "Airline Workers Face More Pain as Crisis Worsens", it mentions the "enviable flexibility in terminating contracts and pensions" the airlines in Chapter 11 bankruptcy have. If they have the ability to terminate contracts and cut costs due to bankruptcy, then it seems to me they have an unfair advantage and ability to manipulate the market in ways that increase the damage incurred by the airlines who have managed to avoid bankruptcy.

I hate to see good people lose jobs, but unprofitable businesses are a drain on our resources and it seems that bankruptcy laws are enabling them to stay afloat long enough to drag their competitors down with them. It's very much like how a drowning person will drag down another in attempt to save their own life, and in doing so, drowns them both.

3 comments:

kenny said...

In my opinion bankruptcy is legalized stealing. The hypercritical government that created it did not allow it to apply to themselves. If you declare bankruptcy you may legally not fulfill legal obligations and debts you have made except obligations and debts to the government. You will have to pay your taxes and back taxes plus interest or you will go to prison but you may steal from anybody else and not go to jail or even have to say you are sorry as long as you declare bankruptcy.

BOB said...

It is perplexing to think that so many large companies are on the edge of bankruptcy. It hurts our economy and our lives. The results are devastating and must be controlled. Why does the airline industry suffer so much?

Dr. Tufte said...

Jane's analysis is near perfect on this one. They even have a name for this in the airline industry: zombie airlines. This is a useful description if you think about the horror movie image of a zombie that is capable of turning the living into zombies too.

The airline industry is a clasic example of how the too-big-to-fail argument ends up goofing up industries.