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Checks and Bankruptcies
Charles Leocha · April 25, 2003

Don Carty, CEO of American Airlines, just got sacked. Finally, a major airline CEO has been forced out of the executive suite. With year after year of miserable earnings and a never-ending litany of excuses, one would think that the owners and business partners of the major airlines would have been demanding the head of every money-losing CEO. Why haven't they?

This disconnect between the major airlines and money-making reality portends a far larger economic crisis than the bankruptcy of an airline or two. We must have a structural problem within the regulatory, political and banking industries that allows major airline executives to loot their companies with no controls or consequences.

There are supposed to be checks and balances, especially where money, lots of money, is involved. Check and balances, rules and regulations and policies and contracts have failed miserably.

We have been blaming the airline executives, but where are the boards of directors? Where are the shareholders? Where are bankers? Where are the lenders? Where are the regulators?

What we have here is a monumental, systematic screw-up. There is plenty of blame to go around. The executives are not the only ones who should be called on the carpet.

Executives at American, United, Delta, Northwest, Continental and US Airways as well as many others are proving themselves to be disgusting, duplicitous and deceptive.

Don Carty, chief muck-muck at American Airlines, got caught with his hand in the cookie jar while he was forcing his minions to start a no-cookie diet. Leo Mullin kept paying himself more and more millions as he lost more and more for Delta Airlines. Gordon Bethune bellowed that Continental would be making profits by last year's second quarter but is still reporting hundreds of millions of dollars in losses and raking in by some reports more than $11 million. Glen Tilton lives like Saddam Hussein and garnered $12 million for coming to United while he slashed the rank-and-file's pay and pensions and declared bankruptcy. Northwest justifies bonuses to executives while the stock prices are dropping to next to nothing. At US Airways, Wolf and his gang ran away with about $30-something million just before they declared bankruptcy.

These men and their cohorts are simple thieves looting their own companies.

Pundits have long claimed that the major airline model was flawed. But the management has bullheadedly continued on their money-losing ways.

Fares are just as convoluted as they have ever been. Leisure travelers are being bribed to take trips now, but nothing is being developed for the future. Business travelers are getting lots of lip service, but few fare breaks. The airlines still are pouring millions of dollars into Orbitz while claiming that travel agents are too expensive. After every "airline-within-an-airline" has failed executives continue to beat that dead horse and spend more good money after bad.

My questions are basic. Where were the watchdogs? Who is supposed to be watching these culprits? What system is supposed to be in place to regulate these excesses?

In airline bankruptcy, lots of people lose money, but not the executives. They seem to not be losing a thing other than the possible exercise of their now worthless stock options. They have paid themselves bonuses at the expense of the company. They have fluffed up and guaranteed their personal pension plans at the expense of the corporation. They still maintain all their flight privileges.

Where are the legions of shareholder lawsuits that should be packing the courts?

Where are the bankers and their auditors who approved loan after loan to companies that had steadily declining worth?

Where are the boards of directors who are supposed to be independent?

Where are the Boeing and Airbus managers who have been selling more and more planes to clients with less-than-stellar credit histories?

Where are the airport managers who are signing off on bigger and better terminals?

Where are the municipal bond regulators who seem to have failed to notice that the airlines have been spending themselves into bankruptcy and may never be able to fulfill their agreements?

Where are the people who are supposed to be making money from the airline industry?

We as passengers and observers have been appalled by airline performance. The responsibility for this massive failure of our major airlines falls also with corporations, auditors, bond traders, municipalities, regulators, directors and shareholders who have turned a blind eye to obvious epidemic problems within the airline industry.

It will take more than a few bankruptcies before this problem is fixed.

Charlie Leocha is the Boston-based author of Travel Rights: Know the Rules of the Road and the Air Before You Go. Cheap Charlie appears every Monday on this site. E-mail him at leocha@aol.com or access his Web site.