Northwest: Financially and Socially Bankrupt

As Northwest Airlines tries to wring every dollar of savings out of its unionized workers, its customers, and now even its executives (who now are going to have their pensions converted to 401(k) funds, the better to impose on them the market discipline which the rest of us have to endure), it's worth retracing, as University of St. Thomas professor Fred Zimmerman does, NWA's dismal path to bankruptcy court:

The recent bankruptcy of Northwest Airlines should cause us to reassess the unfortunate hostile takeover the airline experienced in 1989. True, the takeover did not produce the higher fuel prices or intensified competition of recent years, but it did turn the most solvent airline in the country into one of the least solvent. The takeover made Northwest more vulnerable to all future events -- even including normal business hazards.
The debt load incurred by the leveraged buyout made survival difficult even in good times. In tough times, high debt almost always proves lethal.
Think how much better equipped the airline would have been to face the recent higher fuel prices and intensified competition if all of its planes were paid for, if there was no debt, and if it was operating just one make of airplane and one kind of engine today...
Not that the hostile investors did badly for themselves. According to public records, from Sept. 16, 2003, until Aug. 22, 2005, Al Checchi sold $29 million worth of NWAC stock, Fred Malek sold $ 1 million, and Gary Wilson sold $34 million...
At the time of the leveraged buyout in 1989, Northwest Airlines had the largest private payroll in Minnesota. Some adjustments would have had to be made under the old corporate structure to meet today's challenging conditions. But the resources were there.
Now they are gone. Checchi, Wilson, Malek and the others have their proceeds from the sales of their stock. But what do the creditors, the employees, the government and the community have?

Not much, and unless bankruptcy turns out very well, we Minnesotans are going to have even less. We'll lose a tool with which to compete internationally, a way to get to the rest of the country and for the country to get to us, and a symbol of our being something more than a cold Omaha. Where is the social justice of this bankruptcy? The justice for employees, who enriched the owners and now stand to lose their jobs? The justice for Minnesota taxpayers, who have subsidized these crooks for years? The justice for Minnesotans in general, who may lose one of the state's marquee businesses? This isn't just a bankruptcy, it's a fraud.