The Airline Fiasco - Part 1

Stories like the one today about United Airlines dumping their pension plan are enough to get me steaming before I've even had my morning coffee. Unlike most people though, I'm not angry at United for breaking their promise, I'm angry that I am going to have to foot the bill for these pensions, as the government assumes responsibility for them.

The demise of the "old" Airline industry is a long story, so I'm going to focus on the one of the core issue here. Why is United unable to fund this pension program? Poor managements? Maybe. High gas prices? Certainly doesn't help. Stiff competition? Get used to it. Business model? Other "new" airlines are able to be profitable. All of these factors play a role, and all of them should in a free market economy. So what's the problem? Why can't the airlines keep up? One big factor - Unions. Welcome to the semi-artificial element of this market equation (outside of the government involvement, which has both hurt and helped with billions of bailout money). The unions involved in the old airline industry are strong, established players that can provide artificially high pay, benefits, etc, to the workers in the industry. So guess what, now there isn't any money left to pay for your retirement. Money spent to make sure that your doctor visits were only $15, and hourly wages that were well above what the market could support have prevented capital expenditures and other investments that could have helped the airlines future profitability. Now this money isn't around for your retirement fund. Big freaking surprise. I hope you are happy about standing in the picket lines, demanding that the business serve your needs as an employee. Twenty years later, you find yourself trying to get money from a business that has nothing left to give. Sucked dry. Bankrupt.

For those who wish to screw with the free market, be forewarned, results may not be as expected. Example - United Airlines Pension plan.

I really want to feel sorry for these retirees and employees, and do feel sorry for the ones that resisted union control of their work life. For the others, you got what you asked for.* Artificially high wages and benefits. I hope you saved some of that extra money. Don't worry too much though. We are all here to help pitch in for your retirement, whether we like it or not.

* I really do feel sorry for these individuals as well, because economics is not taught as a standard course in either primary or secondary education. If we want to have a well-educated public, it would serve us well to involve some level of macroeconomics in basic curriculums across the country. Of course, this would not be good for many public officials holding office today, so don't hold your breath.