Amateur Megalomania

Northwest and Delta Are Said to Be Preparing for Bankruptcy – New York Times

Unfortunately, they probably won’t actually vanish. Some politician somewhere, easily from either side of the aisle, will want to offer some government backed loans to keep the planes in the air.

Completely misguided policy, and I’ll bash either side for doing it.

Bankruptcy is a natural reaction to bad business decisions. As it stands, both Northwest and Delta are saddled with enormous operation expenses in labor, fuel, and materials. They aren’t getting enough passengers to support the operation.

Ergo – we have too much air capacity in a declining market. How to boost passenger counts? Usually through lower fees, but you can’t do that when you are carrying the high costs of union labor.

So let them go out of business. The gates and aircraft aren’t going to evaporate. Someone else will come along and buy them at low rates and try to put them back in service when the time is right. That’s what Americans do. The labor contracts will vanish and those workers will have to find something else to do. Likely some will go to work for whomever buys those planes, albeit at more sensible market rates.

Creative destruction is part of the process of capitalism. The worst thing you can try to do is stand in the way of market forces.

Filed under: Politics