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Former Airline Exec Says Bankruptcy Laws Hurt Industry
WASHINGTON (Dow Jones)--Lax U.S. bankruptcy laws have led the airline industry to its current financial crisis, former AMR Corp. (AMR) Chairman and CEO Robert Crandall testifed Thursday before the Senate Commerce Committee.
Crandall is known for revolutionizing American Airlines, which in 1982 reorganized under the newly-formed holding company AMR Corp., and the airline industry, by introducing the "frequent flyer" concept.
He said Thursday that U.S. bankruptcy laws have allowed "failed ventures to continue operating until the last dollar of available cash has been spent."
Crandall said bankruptcy laws have acted as a "fail safe for imprudent managements and unions" allowing them to maintain excess capacity in the market and prevented the industry as a whole from setting prices at levels necessary to recapture costs.
He said that under tougher bankruptcy laws "failed airlines would have no choice but to liquidate their physical and operating assets, thus removing excess capacity from the market."
Crandall said labor and competition laws should also be reviewed.
He was testifying at a hearing on the effect of airline bankruptcies on the pension benefits of airline employees.
While Congress tried last year to help the airlines by easing pension contributions, Crandall said that there is no way any of them will keep their defined benefit pension plans over the long run.
Crandall said the airlines will either drop their plans as part of concessions won from employees or simply dump them onto the Pension Benefit Guaranty Corporation during one of their repeated trips to bankruptcy.
*****
Makes me wonder if he knows something not many others do . . . .
WASHINGTON (Dow Jones)--Lax U.S. bankruptcy laws have led the airline industry to its current financial crisis, former AMR Corp. (AMR) Chairman and CEO Robert Crandall testifed Thursday before the Senate Commerce Committee.
Crandall is known for revolutionizing American Airlines, which in 1982 reorganized under the newly-formed holding company AMR Corp., and the airline industry, by introducing the "frequent flyer" concept.
He said Thursday that U.S. bankruptcy laws have allowed "failed ventures to continue operating until the last dollar of available cash has been spent."
Crandall said bankruptcy laws have acted as a "fail safe for imprudent managements and unions" allowing them to maintain excess capacity in the market and prevented the industry as a whole from setting prices at levels necessary to recapture costs.
He said that under tougher bankruptcy laws "failed airlines would have no choice but to liquidate their physical and operating assets, thus removing excess capacity from the market."
Crandall said labor and competition laws should also be reviewed.
He was testifying at a hearing on the effect of airline bankruptcies on the pension benefits of airline employees.
While Congress tried last year to help the airlines by easing pension contributions, Crandall said that there is no way any of them will keep their defined benefit pension plans over the long run.
Crandall said the airlines will either drop their plans as part of concessions won from employees or simply dump them onto the Pension Benefit Guaranty Corporation during one of their repeated trips to bankruptcy.
*****
Makes me wonder if he knows something not many others do . . . .