Biggest U.S. airlines spent bulk of free cash flow on stock repurchases • Hacker News Board

Re: Biggest U.S. airlines spent bulk of free cash flow on stock repurchases

#11

Post by asplake » Tue, Mar 17, 2020, 11:46 AM UTC

roenxi wrote: post #5

Wiki says: > free cash flow to firm (FCFF) is a way of looking at a business's cash flow to see what is available for distribution among all the securities holders of a corporate entity. [0] What do people expect them to do with free cash flow? The point of free cash flow is to get the money back to shareholders. These aren't high-growth industries. [0] https://en.wikipedia.org/wiki/Free_cash_flow

Save it as a buffer against changes in conditions?

Re: Biggest U.S. airlines spent bulk of free cash flow on stock repurchases

#12

Post by swarnie_ » Tue, Mar 17, 2020, 11:46 AM UTC

duaoebg wrote: post #8

chewz wrote: post #3

So it would be logical if shareholders re-capitalize airlines now. Or let them fall if shareholders see no point in keeping airlines alive.

That would involve selling shares at a low price after buying them at a high price. This would make management look stupid.

Maybe management is stupid?

Re: Biggest U.S. airlines spent bulk of free cash flow on stock repurchases

#13

Post by swarnie_ » Tue, Mar 17, 2020, 11:46 AM UTC

lordnacho wrote: post #10

roenxi wrote: post #5

Wiki says: > free cash flow to firm (FCFF) is a way of looking at a business's cash flow to see what is available for distribution among all the securities holders of a corporate entity. [0] What do people expect them to do with free cash flow? The point of free cash flow is to get the money back to shareholders. These aren't high-growth industries. [0] https://en.wikipedia.org/wiki/Free_cash_flow

They could hold on to some, just in case there was a disturbance that caused cashflow to stop for a while.

This would result in the board being sacked for sitting on spare cash and not maximising shareholder return.

Re: Biggest U.S. airlines spent bulk of free cash flow on stock repurchases

#14

Post by dforrestwilson » Tue, Mar 17, 2020, 11:47 AM UTC

lordnacho wrote: post #10

roenxi wrote: post #5

Wiki says: > free cash flow to firm (FCFF) is a way of looking at a business's cash flow to see what is available for distribution among all the securities holders of a corporate entity. [0] What do people expect them to do with free cash flow? The point of free cash flow is to get the money back to shareholders. These aren't high-growth industries. [0] https://en.wikipedia.org/wiki/Free_cash_flow

They could hold on to some, just in case there was a disturbance that caused cashflow to stop for a while.

For example paying down debt instead of loading up like American Airlines did.

Re: Biggest U.S. airlines spent bulk of free cash flow on stock repurchases

#15

Post by roenxi » Tue, Mar 17, 2020, 11:47 AM UTC

lordnacho wrote: post #10

roenxi wrote: post #5

Wiki says: > free cash flow to firm (FCFF) is a way of looking at a business's cash flow to see what is available for distribution among all the securities holders of a corporate entity. [0] What do people expect them to do with free cash flow? The point of free cash flow is to get the money back to shareholders. These aren't high-growth industries. [0] https://en.wikipedia.org/wiki/Free_cash_flow

They could hold on to some, just in case there was a disturbance that caused cashflow to stop for a while.

Then the money would probably not be free cash. It would be held under some sort of actuarial title for dealing with risk. Maybe amortization? I'm not an accountant.

If the business needs it to sustain operations then it probably isn't free cash flow.

Re: Biggest U.S. airlines spent bulk of free cash flow on stock repurchases

#16

Post by zentiggr » Tue, Mar 17, 2020, 11:48 AM UTC

duaoebg wrote: post #8

chewz wrote: post #3

So it would be logical if shareholders re-capitalize airlines now. Or let them fall if shareholders see no point in keeping airlines alive.

That would involve selling shares at a low price after buying them at a high price. This would make management look stupid.

Hmmmm.. isn't the market about finding truth and moving accordingly?

Re: Biggest U.S. airlines spent bulk of free cash flow on stock repurchases

#17

Post by dforrestwilson » Tue, Mar 17, 2020, 11:48 AM UTC

Worth noting that this will be the 3rd industry which Warren Buffett has been both invested in and bailed out of during a crisis.

Re: Biggest U.S. airlines spent bulk of free cash flow on stock repurchases

#18

Post by chewz » Tue, Mar 17, 2020, 11:48 AM UTC

swarnie_ wrote: post #13

lordnacho wrote: post #10

Earlier quoted context omitted.

They could hold on to some, just in case there was a disturbance that caused cashflow to stop for a while.

This would result in the board being sacked for sitting on spare cash and not maximising shareholder return.

Did Apple board got sacked?

Re: Biggest U.S. airlines spent bulk of free cash flow on stock repurchases

#19

Post by yingw787 » Tue, Mar 17, 2020, 11:48 AM UTC

I feel like even civilian airlines have some national defense / security aspect to them since they’re so critical to our infrastructure (e.g. troop transports). I don’t want to return to the days before deregulation, but I think there should be federally enforced rules around remaining operational even during times of severe economic crisis.

That being said, nobody expects a 100 year event, and it would be irresponsible to ask shareholders to offer $100 plane tickets that don’t likely don’t even cover the cost of a seat while also maintaining an emergency budget. I’ve heard airlines have razor thin margins for at least economy class seats, and I’d rather support a one time bailout than have to pay business fare going forward.

Re: Biggest U.S. airlines spent bulk of free cash flow on stock repurchases

#20

Post by Donald » Tue, Mar 17, 2020, 11:48 AM UTC

roenxi wrote: post #5

Wiki says: > free cash flow to firm (FCFF) is a way of looking at a business's cash flow to see what is available for distribution among all the securities holders of a corporate entity. [0] What do people expect them to do with free cash flow? The point of free cash flow is to get the money back to shareholders. These aren't high-growth industries. [0] https://en.wikipedia.org/wiki/Free_cash_flow

These companies have gutted their research and development costs to increase free cash flow. For example, Boeing’s share repurchase program also accelerated as BA reached all time highs and became an extremely risky asset after the second MAX crash and endless FAA investigations. That’s a senseless use of capital yet they’re asking tax payers for bailouts.