Job Losses and Bankruptcy Create Smaller Airline Industry

March 17th, 2010 by Reed Allmand

According to a recent report by the Bureau of Transportation, the U.S. airline industry has lost tens of billions of dollars and over 170,000 of jobs over the past 10 years.  A combination of lost revenue and several bankruptcy filings have conspired to shrink the industry significantly. The impact of job losses and bankruptcy can be seen greatest in the major airline carriers.

United Airlines which went through Chapter 11 bankruptcy in 2002 – 2006 is now a little less than half the size it was in 1999.  At the end of 1999, the airline carrier had 100,000 employees, but after bankruptcy and several rounds of job losses, it now only employs 46,538 people.

Delta Airlines and Northwest, who merged in 2008 after going through Chapter 11 bankruptcy showed a similar pattern of job losses.  Combined, the two companies employed over 80,000 people at the end of 2009 but that was a decrease of 37 percent from 1999, well before the companies had merged.

But the shrinking of a company during bankruptcy is not necessarily a bad thing.  Many companies may experience massive expansion and growth during boom times only to find that their expansions cannot be sustained during a recession.  The airline industry is particularly vulnerable to these types of fluctuations and using bankruptcy as a tool to handle mounting debt and unsustainable worker contracts has been particularly effective in keeping major airlines viable during recessions. Airline carriers who have filed Chapter 11 bankruptcy and successfully reduced both their debt obligations and workforce stand a better chance of surviving this recession and remaining viable in the long term .