America's bailed-out airlines are not 'playing fair' with customers • Hacker News Board

Re: America's bailed-out airlines are not 'playing fair' with customers

#111

Post by Retric » Sat, Mar 28, 2020, 7:51 PM UTC

reilly3000 wrote: post #107

sfkdjf9j3j wrote: post #85

Earlier quoted context omitted.

Is that actually true? TARP cost $426 billion in 2008 and when the assets were finally sold off in 2014, they summed $442 billion. So that's a 3.7% return during a time when the s&p 500 more than doubled in value. Do you have some examples where the government made these returns?

Right but they maintained a whole tax producing economic center including (probably) corporate taxes and income tax on hundreds of thousands of wages from the companies themselves and their suppliers. Breaking even on a bailout is pretty phenomenal given the broader implications.

That assumes they had no leverage and no other options. Raising the rates by say 4% and companies would still have taken the money and the economy would have reacted in the same way.

Re: America's bailed-out airlines are not 'playing fair' with customers

#112

Post by hobs » Sat, Mar 28, 2020, 7:51 PM UTC

reilly3000 wrote: post #107

sfkdjf9j3j wrote: post #85

Earlier quoted context omitted.

Is that actually true? TARP cost $426 billion in 2008 and when the assets were finally sold off in 2014, they summed $442 billion. So that's a 3.7% return during a time when the s&p 500 more than doubled in value. Do you have some examples where the government made these returns?

Right but they maintained a whole tax producing economic center including (probably) corporate taxes and income tax on hundreds of thousands of wages from the companies themselves and their suppliers. Breaking even on a bailout is pretty phenomenal given the broader implications.

You're missing the opportunity cost of doing twice as well?

Re: America's bailed-out airlines are not 'playing fair' with customers

#113

Post by Invictus0 » Sat, Mar 28, 2020, 7:53 PM UTC

xnyan wrote: post #104

xkvd wrote: post #92

Earlier quoted context omitted.

What do you mean by "privatize the profits" here? Are you ignoring taxation? One way to view the government's role here is that it shifts around externalities to achieve efficiency. You can put cap-and-trade restrictions to absorb negative externalize in high-pollution industries and redistribute that to consumer/producer markets that suffer from the pollution. You can probably apply a similar piece of reasoning acro…

Airlines are a grey government agency. If they had to pay the true cost of things like air traffic control, FAA administration and safety regulation, or health costs due to pollution, to say nothing of the non-the-first-time-fat cash payment they just got on top of the huge fact that they are paying little to negative tax rates (all effectively government subsidies of their operations) then not a single airline would…

The cost of an airline ticket has fallen by around 50% since the 1980s; clearly the industry can exist and still pay for the services/infrastructure it consumes.

Re: America's bailed-out airlines are not 'playing fair' with customers

#114

Post by erjiang » Sat, Mar 28, 2020, 7:54 PM UTC

mrgordon wrote: post #91

nickff wrote: post #64

Earlier quoted context omitted.

But it was exogenous to the airlines, unlike the financial crisis, which was caused by malinvestment (by the banks themselves,) among other things.

The airlines also invested poorly this time around though. They spent all their money on dividends and buybacks instead of saving for a downtown. American Airlines, which was the worst balance sheet, famously declared they were doing so well that the airline industry wouldn’t hit a catastrophe again! “American Airlines has been rather irresponsible with its capital allocation in recent years. As shown in the tables a…

Let's say that AA didn't do any buybacks - instead they saved up all of the money that they would have spent on buy backs in the last few years. Would that have been enough to survive this pandemic?

Re: America's bailed-out airlines are not 'playing fair' with customers

#115

Post by kqvamxurcagg » Sat, Mar 28, 2020, 7:58 PM UTC

wpasc wrote: post #83

jliptzin wrote: post #50

The pandemic is not their fault, but it is their fault for not being prepared for something like it. It’s even listed as a risk factor in investor disclosures, so it’s not totally unforeseen. An electrical fire can burn your house down through no fault of your own, and that’s why you have homeowner’s insurance. How about keeping cash in reserves instead of doing huge stock buybacks the last 10 years? How about having…

Keeping large cash on hand for highly rare black swan events is a pretty inefficient allocation of capital. If all companies kept enough cash to not earn revenue for months and pay all expenses for a once in a hundred year event, then a significant portion of money in all the U.S. economy would just sit as cash and not be allocated to investment, hiring, etc. Just a counter argument.

The airlines have given billions back to their shareholders over the last ten years. They should now be approaching their existing shareholders for cash (rights issue) rather than approaching the government. The current share price of these companies is only being held up due to the expectation of free money from the government.

As others have said, they are privatising the profits but socialising the losses.

Re: America's bailed-out airlines are not 'playing fair' with customers

#116

Post by Anon1096 » Sat, Mar 28, 2020, 7:58 PM UTC

sfkdjf9j3j wrote: post #85

hkmurakami wrote: post #35

Earlier quoted context omitted.

They often result in solid financial returns for the government holder of equity.

Is that actually true? TARP cost $426 billion in 2008 and when the assets were finally sold off in 2014, they summed $442 billion. So that's a 3.7% return during a time when the s&p 500 more than doubled in value. Do you have some examples where the government made these returns?

You're assuming that the s&p would have done well had the government not enacted TARP. It's pretty agreed upon by economists that the bailouts of the GFC saved us from financial collapse.

Re: America's bailed-out airlines are not 'playing fair' with customers

#117

Post by SubiculumCode » Sat, Mar 28, 2020, 7:59 PM UTC

orthecreedence wrote: post #4

If we give bail outs, we should get stock/control. End of story. All bailed out companies should be nationalized to some extent, depending on the value of their stock and how much the government buys. A board/council of nationally elected representatives should manage whatever share of these companies the government owns. It's time the citizens started getting a return on their tax dollars if they're being used for p…

At the very least, demand planes give passengers 1-2 more inches to every seat.

Re: America's bailed-out airlines are not 'playing fair' with customers

#118

Post by uncletammy » Sat, Mar 28, 2020, 8:01 PM UTC

orthecreedence wrote: post #4

If we give bail outs, we should get stock/control. End of story. All bailed out companies should be nationalized to some extent, depending on the value of their stock and how much the government buys. A board/council of nationally elected representatives should manage whatever share of these companies the government owns. It's time the citizens started getting a return on their tax dollars if they're being used for p…

I wholeheartedly agree with this sentiment but I don't trust "elected representatives" to fairly represent my interests.

I want voting shares issued directly to me in an amount equal to my financial contribution (tax dollars / currency devaluation) towards their bailout.

Re: America's bailed-out airlines are not 'playing fair' with customers

#119

Post by glass_of_water » Sat, Mar 28, 2020, 8:01 PM UTC

dlp211 wrote: post #108

wpasc wrote: post #83

Earlier quoted context omitted.

Keeping large cash on hand for highly rare black swan events is a pretty inefficient allocation of capital. If all companies kept enough cash to not earn revenue for months and pay all expenses for a once in a hundred year event, then a significant portion of money in all the U.S. economy would just sit as cash and not be allocated to investment, hiring, etc. Just a counter argument.

Holding cash does not mean that it isn't allocated to investment. The airlines wouldn't be putting it under their mattress. They would be depositing it with a financial institution that would then be able to use the increased reserves to provide more capital to various actors, ie: investment.

But if a rare, global event like this happens and companies' emergency funds are mostly investments, isn't everyone going to try to liquidate their investments, crashing prices to a level where those investments aren't worth enough to keep them funded through the event?

Re: America's bailed-out airlines are not 'playing fair' with customers

#120

Post by aczerepinski » Sat, Mar 28, 2020, 8:04 PM UTC

I don't understand why we can't let them go bankrupt. Presumably at least a couple of the airlines could raise money by selling more stock or getting acquired by somebody like Berkshire. The rest would go through chapter 11 and come out of it being owned by somebody else. We could use the 2 trillion to support the employees.

What am I missing?