A sure sign that a discussion on a particular subject has deteriorated to an unrecoverable level is a participant’s allegation that the other side’s position defends Nazism in some respect. With regard to discussions about business, it’s quickly becoming evident that such discussions have degenerated into uselessness when one participant accuses the other side’s position of defending Enron.
This NY Times article reports on a Congressional hearing yesterday in which Delta Air Lines Chief Executive Gerald Grinstein, Northwest Airlines President and Chief Executive Officer Douglas Steenland, and UAL Chairman, President and CEO Glenn Tilton testified in favor of proposed legislation that would allow airlines to freeze pension plans and extend their current obligations over 25 years. Last month, United Airlines obtained Bankruptcy Court approval to shift its employee-pension plans — including their nearly $10 billion shortfall — on to the federal government’s Pension Benefit Guaranty Corp.
In response to the airline executives’ rather reasonable comments in support of common-sense legislation, Senator Charles Grassley (Rep. Iowa) called United Airlines a “catastrophe” and compared United Airlines to Enron Corp., saying the carrier used “illusory investment gains” to “hide and disguise” the true financial condition of its pension plans. “Unlike Enron, however,” concluded Sen. Grassley. “Everything United did was perfectly legal.”
Well, playing the Enron card may make for a good sound bite, but it’s a sure sign that Mr. Grassley wants to avoid addressing what’s really troubling the airline industry — i.e., Big Labor supported by compliant politicians. Let’s take United as a case in point. At a time when unions owned over 50% of the company, controlled three board seats, and effectively hired and fired the company’s CEO, the unions decided to increase their retirement compensation by approving unfundable pension obligations while, at the same time, extracting maximum current wage benefits that made United uncompetitive from an operations standpoint. Thus, United’s owner-employees effectively looted the company with high current compensation benefits while, at the same time, effectively insuring that they would also ultimately loot the federal government’s Pension Benefit Guaranty Corporation, which they knew would be the guarantor of at least a substantial portion of United’s unfundable pension obligations.
Frankly, even the Enron sharpies didn’t think of such a scheme.