Counterparties: The misery of flying

October 1, 2012

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On some level, complaints about modern air travel are absurd. Think about that famous Louis CK bit: “You’re flying! It’s amazing!…You’re sitting in a chair, in the sky!” But Gary Shteyngart’s awesomely scathing rant about American Airlines relays an experience bad enough to go beyond Tyler Brûlé’s the walk-to-my-gate-was-too-long-and-I-had-to-interact-with-plebes shtick:

You, American Airlines, should no longer be flying across the Atlantic. You do not have the know-how. You do not have the equipment. And your employees have clearly lost interest in the endeavor. Like the country whose name graces the hulls of your flying ships, you are exhausted and shorn of purpose. You need to stop … Flight 121 from Paris to New York began on a clear autumn afternoon. It ended over 30 hours later.

Shteyngart’s experience is unfortunately an extreme example of a larger pattern. Since mid-September, half of all American Airlines’ flights have been delayed, while competitors’ on-time rates are 90%. The underlying reason for that abysmal record, Matthew Yglesias writes, is how the airline’s parent company has treated its labor force since filing for bankruptcy last year. One of the company’s aims (along with cutting its debt load) was to cut labor costs: It pays around $600 million more a year in employee salaries and has $200 million a year more in pension costs than its competitors. It also does spectacularly silly things like own a $30 million London townhouse. And looking back at the company’s 2010 financial statement, labor costs, while relatively high, are not rising that quickly.

Last month, a judge allowed the company to shred its contract with pilots. At that point, Yglesias writes, American lost the “active cooperation of skilled pilots who are capable of judging when it does and doesn’t make sense to request new parts and who conduct themselves in the spirit of wanting the airline to succeed” (translation: American pilots may be intentionally delaying flights). Ground crew and flight attendants agreed to new, more “flexible” contracts. Shortly thereafter, the company notified 11,000 workers they were at risk of being laid off. Owners of $450 million in bonds of American’s parent company aren’t happy either — they’re suing, claiming that the company’s planes, used as collateral for the bonds, are falling in value and no longer sufficiently secure the debt.

American Airlines is not alone in facing the ire of prominent writers. TechCrunch’s Michael Arrington has savaged Delta in the past for poor service. The fact is that when you have a miserable experience on US airlines, that’s probably because the employees are being treated miserably themselves. — Ben Walsh

On to today’s links:

Billionaire Whimsy
Billionaires “feel that they have become the new, vilified underclass” – Chrystia Freeland
“The sense of victimization is one part narcissism, one part greed, and one part tactical” – Felix

Apple controls the world’s largest hedge fund you’ve never heard of – Zerohedge

Tax Arcana
Regardless of who wins the election, you can kiss the payroll tax cut goodbye – NYT

Primary Sources
Ben Bernanke’s best speech in a very long time – Federal Reserve

Obamanomics, a study in massively underestimating the severity of the downturn – NYT

Financial Arcana
“One of the more ridiculous concepts that’s ever been invented in accounting” may be rolled back soon – WSJ
Big win for the bank lobby: Judge kills Dodd-Frank derivatives position limits – Bloomberg

IKEA vanishes women from catalog in Saudi Arabia – WSJ

EU Mess
Greece is entering its sixth year of a “vicious spiral of austerity and recession” – Reuters

Data Points
$20 billion in costs, just $200 million in revenue: Spam’s “externality ratio” is 100 to 1 – Tim Harford

The Marxian analysis of Police Academy you’ve been waiting for – The New Inquiry

Annals of journalistic innumeracy, cod edition – BBC

Take This Job
William Faulkner’s “I quit” letter to his boss at the Post Office – Open Culture

Dubious Milestones
Something called “The Oogieloves in the BIG Balloon Adventure” had the worst opening weekend of all time – Inside Movies

New Normal
I am a job creator: a manifesto for the entitled – WaPo

Haldane: What have economists ever done for us? – Vox EU

Principal reductions were included in 10% of all modifications in the 2nd quarter – Credit Slips

New Normal
On the multi-decade rise of corporate welfare – James Surowieki


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