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

finance.yahoo.com

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

#121

Post by gumby »

hkmurakami wrote: post #35
iso1210 wrote: post #31

Privatize the profits, Socialize the losses, that's the American Dream.

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

Citation needed. AFAIK they sometimes result in a profit (as with GM in 2008) which unsurprisingly gets attention. But the long history of postwar nationalization’s in Europe and the US are not promising by this metric.

There are other reasons, some good, for doing so. Amtrak, for example, might better have been formed as a nationally operated part of the transit network rather than as a quasi-private-sector corporation that is neither fish nor fowl and suffers for it. Municipal utilities often work quite well at least here in Northern California, though at the national level I only know of the TVA and the western dam systems.

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

#122

Post by gumby »

uncletammy wrote: post #118
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.

In practice this is both hard to do (denominator issue) and leaves control in the hands of a small number.

The latter problem is also the argument against index funds (which I’m in favor if, but I appreciate the argument)

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

#123

Post by dageshi »

mnm1 wrote: post #90
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 airline companies are the major spreaders of c19. While unintentional, this is a fact as is their ability to have put in some safeguards to slow down prevention like forcing sick people to wear masks and gloves (and ideally to fly on separate planes when possible) and disinfecting their planes after each flight. In this case, they directly caused a huge part of this crisis, much more so than in 2008. Also, airlin…

Well when you put it like that, WE that is to say the public are really directly responsible for the spread of the virus, by travelling when sick.

People are not responsible, the government who could've mandated such measures aren't responsible but the airlines are?

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

#124

Post by tracer4201 »

mrgordon wrote: post #82
nickff wrote: post #63

Earlier quoted context omitted.

The airline industry is famously unprofitable; they make a bit of money for a few years, then lose all that money, and repeat the cycle. From what I understand, it has been this way for at least 40 years. https://www.mcgill.ca/iasl/files/iasl/ASPL614-Five-Reasons-A...

While I generally agree and would avoid airline investments personally, the airlines did just spend their profits for years on dividends and stock buybacks. If you don’t save for a rainy day, then it’s not too surprising you run out during bad times...

So if a business model struggles over the long term, should they or should they not be saving a rainy day fund? Are you saying it’s the tax payer’s responsibility? I’m really struggling to understand what point you’re trying to make.

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

#125

Post by Apocryphon »

coredog64 wrote: post #42
soperj wrote: post #33

Earlier quoted context omitted.

Maybe by not doing billions worth of stock buybacks over the last 10 years? They've literally been shut down for what... a month??

If AAL had saved their entire 2019 free cash flow (literally impossible), they would still be $6B short of their projected expenses. There is very little of their cost structure that declines when the planes are parked: Employees need paychecks. Lease payments are due on the engines and airframes. Rent needs to be paid on facilities. The fuel savings from not flying are offset by the need to mothball aircraft.

At least then we’d have to pay a much smaller bailout.

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

#126

Post by ahelwer »

aczerepinski wrote: post #120

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?

What you're missing is that both political parties in the states are beholden to capital interests, and so the reason "we" can't let them go bankrupt is it would work against those interests. This isn't a conspiracy theory, there don't even need to be conspirators for it to work this way. With very few exceptions you are only capable of getting elected if you believe in the supremacy of the needs of capital. The only thing that can really stand against this is a strong organized worker's movement, which has been systematically dismantled over the past 70 years.

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

#127

Post by wpietri »

xkvd wrote: post #92
iso1210 wrote: post #31

Privatize the profits, Socialize the losses, that's the American Dream.

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…

What you say is reasonable in theory, but grossly ignores the actual history. E.g., the 2017 tax cut was an enormous giveway to corporations and the rich: https://qz.com/1769421/trumps-tax-cuts-and-jobs-act-shows-po...

And a lot of that money is being borrowed, so it's even worse than it seems at first blush. Not only are the rich getting richer, but we'll all have to pay for it eventually. So recent history is the government doing the opposite: they were giving away money during the boom, making it harder to do countercyclical interventions in a crisis. And this from the supposedly fiscal conservative party.

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

#128

Post by tehjoker »

hkmurakami wrote: post #35
iso1210 wrote: post #31

Privatize the profits, Socialize the losses, that's the American Dream.

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

Awesome, every poor person I know owns tons of those.

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

#129

Post by tracer4201 »

chki wrote: post #22
tehwebguy wrote: post #16

Earlier quoted context omitted.

This is a bad faith question. The real question is, “Why were the airlines so poorly equipped to handle a cataclysmic event when the last one was only 19 years ago?” The answer is short term profitability. And the follow up question is, “Why would ANYONE bail any for-profit company out to the benefit of the shareholders only, ever?”

How could an airline company possibly be equipped to handle this kind of situation? If you want to be competitive on the market you need to lower costs and cut down on margins. You can't just have a big pile of money lying around "in case all flight is halted for a few weeks/months"

> You can't just have a big pile of money lying around "in case all flight is halted for a few weeks/months"

You can. Keep it in some liquid investment vehicle so you can withdraw it at anytime. If you don’t want to do that, then go under and shut your business. Don’t ask tax payers to bail you out. I’m not sure why this notion of responsibility is so difficult.

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

#130

Post by wpietri »

tracer4201 wrote: post #124
mrgordon wrote: post #82

Earlier quoted context omitted.

While I generally agree and would avoid airline investments personally, the airlines did just spend their profits for years on dividends and stock buybacks. If you don’t save for a rainy day, then it’s not too surprising you run out during bad times...

So if a business model struggles over the long term, should they or should they not be saving a rainy day fund? Are you saying it’s the tax payer’s responsibility? I’m really struggling to understand what point you’re trying to make.

We should probably look at why the business model is struggling over the long term. If nobody can make money in a business, that's a sign that too much has been invested in the sector.
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