On Wednesday, February 1st, American Airlines announced that it will take the advice of Mitt Romney’s firm, Bain Capital, and lay off 13,000 workers -15 percent of its workforce- replacing their pension plans with 401(k) plans and ending company-paid retiree healthcare.
The lay off 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.
American Airlines spokesperson told the Wall Street Journal, the cost of hiring Bain – hourly fees of up to $1,100- as “a usual and necessary part of the Chapter 11 process. We will be reviewing these costs carefully to ensure that they are monitored and managed appropriately.”
Bain Capital is a private equity firm, which was founded by a group of Bain & Co. partners including current Republican presidential frontrunner Mitt Romney. Romney formally retired from Bain Capital in 1999 but still continues to receive a portion of Bain Capital profits as Romney’s 2010 tax returns show an “obligation to continue to provide services to Bain.”
Joshua Gotbaum, director of The Pension Benefit Guaranty Corporation (PBGC) – the federal agency that helps secure failed pension plans – said “before AMR takes such a drastic action as firing 13,000 workers and killing the pension plans of 130,000 employees and retirees, it needs to show there is no better alternative. The company had failed to provide even basic financial details.”
James Little the President of Transport Workers Union (TWU), which represents 24,000 workers said “We’re going to fight this. I have a hard time sitting back 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.”
Little also mentioned Mitt Romney, “He’s talking about creating jobs. He’s not a job creator. He’s a job cremator.”
AMR plans to purchase hundreds of new aircrafts to replace them with more fuel efficient ones to cut fuel use. U.S. Bankruptcy Judge Sean Lane has not yet approved the new jet order but temporarily approved AMR’s proposal to retain Bain and 11 other firms for bankruptcy counsel, but withheld final approval.
Unions are outraged that the airline would order hundreds of new aircrafts but claim it is in severe enough financial distress to sack employees and cut pension plans.