Romney’s Bain behind airline plan to slash jobs and pensions

pilots

American Airlines announced yesterday that it will take the advice of Mitt Romney's firm, Bain Capital, and lay off 13,000 workers, end the pension plans for its retirees and for all those remaining and take away the health insurance of its retirees.

The announcement came only seven days after American Airlines hired Bain Capital to guide it through a bankruptcy procedure for which the airline had filed last November.

Bain Capital recommended job cuts and pension cuts even as Romney, in his quest for the Republican presidential nomination, continues to claim he has unique business experience as a job creator.

"He's talking about creating jobs," declared Transport Workers Union President James Little, but "he's not a job creator. He's a job cremator." Little's union represents 24,000 workers whose jobs and benefits are threatened in the bankruptcy process underway at American.

Only three days ago it surfaced that American had contributed less than $7 million to its pension fund, out of a normally required $100 million for the month of January.

"I have a hard time sitting back," said Little, "when American Airlines is taking hard-earned money to pay $525,000 a month to have Bain come in and tell them how to cut heads."

No one in the public relations office at American Airlines was willing to comment and the airline did not return calls.

Pension plans have, for many years, been standard on U.S. airlines but American claimed yesterday on a new website it has set up that it can no longer afford to pay for them.

The unions have long claimed that American is hiding assets, including substantial ones it has overseas.

In a move seen as validation of that claim, the Obama administration yesterday clamped liens of $91 million on the airline's property. Joshua Gotbaum, Obama's appointee to the directorship of the U.S. Pension Benefit Guaranty Corp., said that "before American takes such a drastic action as killing the pension plans of 130,000 employees and retirees, it needs to show there is no better alternative."

The airline's announcement yesterday said that it must cut labor costs by 20 percent. CEO Thomas Horton said the company lost $884 million in the first nine months of 2011, and $904 million for December alone. He said it lost $11 billion since 2001. Gotbaum argued, however, that the company has failed to provide even basic financial details to back up these claims.

"This is an absolute outrage," said Laura Glading, president of the Association of Professional Flight Attendants. "There's nothing here that is even remotely acceptable."

Little vowed his union would fight. The TWU represents mechanics and bag handlers, 40 percent of whom would be laid off. TWU members and pickets followed Romney around the state of Florida this week while he was campaigning and they plan to be at many of his future events across the country.

The company is counting on protecting itself under bankruptcy law, however, which allows it to ask a bankruptcy judge to throw out existing labor contracts and to impose company demands on the workers.

Unions point out that if the disaster facing the company were as severe as American says it is, the airline would not be going ahead with orders it has placed for hundreds of new aircraft. Although the bankruptcy judge has not yet approved those orders American has been allowed to take delivery of some new jets.

Photo: Back in 2007, American Airlines pilots marched in protest outside AMR headquarters in Fort Worth, Texas. The three unions representing American's employees wanted to make up for double-digit wage and benefit cuts back in 2003. In 2007 they argued that their sacrifices saved the nation's largest airline from bankruptcy. LM Otero, File/AP

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  • This article is a little hard to follow.

    1. Romney left Bain Capt. over a decade ago and would have no role in anything that would be going on today at any company.

    2. I was an employee benefits manager for a major us corporation and it sounds like what is going on here is normal relative to the Federal laws covering pension plans.

    3. The PBGC (a kind of pension insurance like the FDIC for savings accounts) will be on the hook to pay some of the pension benefits will naturally be concerned about any assets that should have been made to the pension plan.

    A company that declares themselves bankrupt normally hurts many people, but trying to hold Mitt Romney responsible for this seems way out of bounds.

    Posted by Fred Allbright, 06/24/2012 2:29pm (2 years ago)

  • 1990s
    Facing financial duress, Bain Capital partner Mitt Romney was asked to rejoin and lead Bain & Co. as interim CEO. Bringing along two lieutenants from Bain Capital, Romney began a traveling campaign to rally employees at all Bain offices globally. Romney also negotiated a complex settlement between the Bain partnership and the firm's lenders, including a $10 million reduction in the $38 million Bain owed the Bank of New England,[10] which by that time had been seized by the FDIC and placed in Chapter 7 liquidation.
    The Boston Globe pointed out that:
    "Over several weeks, Romney managed negotiations with the banks and among the partners... The moment came when negotiations produced a package in which Bill Bain and the founding partners would give up control of the firm, turning back $30 million they had taken from the ESOP and $100 million in notes they held against the firm."
    Romney’s plan involved "a complicated restructuring of the firm's stock-ownership plan, real-estate holdings, bank loans, and money still owed to partners".[11] To avoid the financial crisis that a buyout would have triggered, the group of founding partners agreed to return about $100M cash and forgive outstanding debt.[6]
    Although in the role for just one year before returning to Bain Capital, Romney's work had three profound impacts on the firm. First, ownership was officially shifted from the owners to the firm's 70 general partners. Second, transparency in the firm's finances increased dramatically (e.g. partners were able to know each other's salaries[11]). Third, Bill Bain relinquished ownership in the firm that carried his name.

    Sorry, looks like your attempt to steer this away from Romney is not true.......

    Posted by The truth, 05/17/2012 10:56am (2 years ago)

  • Your article is factually wrong. Bain Capital does not provide consulting services to companies. It buys public and private institutions and has no connection to American Airlines whatsoever. There is a consulting firm called Bain & Company that may have been engaged by American Airlines but that firm has no connection to Bain Capital. In addition, attempting to link this decision to Mitt Romney is disingenuous at best. If you really want to be taken seriously you need to either remove this article in its entirety or go back and fix your errors.

    Posted by Concerned Reader, 02/07/2012 1:17pm (2 years ago)

  • I am an American Airlines Employee and have been only for a short time. My 2nd day on the job the company filed bankrupcy. I came here with the promise that I had a long term secure job and moved my family with me. Even after the bankrupcy the company assured me there was no reason to be concerned. I will be in the first round of lay-offs and will have to move 1400 miles back to where I came from all on my own expense. I do not understand where a company about to file bankrupcy would allow a department it was about to cut by 4600 people to hire people and have them move at their own expense to a job that would be gone in 3 months. It is a sad day when corperations are allowed to destroy peoples lives and kick them to the curb.

    Posted by Mark Schrode, 02/05/2012 8:27pm (2 years ago)

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