The idea is, It was an insulated market, barriers to entry were high, prices were high and wages were high. Deregulation happens, new players come in paying lower wages, and undercutting the established players. They need to cut wages, but it's whether the union lets them. If they don't, the airline goes bust, and the staff have to take lower paying jobs at the upstart airlines anyway. Ofcourse the unions point of view could be that stock holder/corporate compensation is too high, and that should be trimmed instead of/ in addition to cutting staff wages.

From the unions perspective, a bankruptcy isnt welcome, nevertheless it could easily bring one about.

Market capitalism doesn't care about individual's workers livelihood though. It makes the assumption that their labor can be allocated more efficiently. That is the reason why companies going out of business can be healthy.

In practice, that isn't necessarily true, at least in the short run. If an airline goes out of business, that doesn't mean all these workers will just be absorbed into other airlines, especially not at the prices they just failed to bargain for. They may need to switch industries and start from close to zero.

Unions are supposed to prevent that from happening, but when they overplay their hand, both sides lose.

Talking about GM, the labor cost for building cars in the US is so high, it barely makes sense. Either foreign labor needs to get more expensive (perhaps through tariffs), or domestic labor needs to get cheaper. Otherwise, these jobs will disappear and the unions will become obsolete. It's not a good bargaining position.