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

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

#161

Post by lazylizard »

orthecreedence wrote: post #32
chki wrote: post #22

Earlier quoted context omitted.

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"

> If you want to be competitive on the market you need to lower costs and cut down on margins. Yes, exactly. There are certain businesses that should not be subject to market forces: essential services that have tiny margins. > You can't just have a big pile of money lying around "in case all flight is halted for a few weeks/months" Then you get nationalized ¯\_(ツ)_/¯. If you want to be privatized again, make enough…

Maybe you can... Berkshire Hathaway? Or even apple or google?

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

#162

Post by dang »

macintux wrote: post #159
dang wrote: post #152

Earlier quoted context omitted.

There's no such rule. I've written about this here: https://news.ycombinator.com/item?id=21607844 and in lots of previous places: https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que... If anyone has a question that I haven't addressed in there, let me know and I'll be happy to answer.

The guideline for comments I was leaning on to try to cut short what seemed like inevitable political ugliness: > Please don't use Hacker News for political or ideological battle. That destroys the curiosity this site exists for.

For sure, but curious conversation on political topics is possible, and is not battle. It depends on whether one is posting thoughtfully or just trying to smite enemies.

That's the zone that we hope HN threads will inhabit when addressing politicized topics. Of course it's unstable and frequently deteriorates, hence all the moderation comments we end up having to post. But I don't know of a better alternative. As I explained at the links mentioned upthread, we can't ban all politics and we can't just let such threads run raw either.

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

#163

Post by wdr1 »

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…

Why not just make it a loan?

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

#164

Post by viklove »

godzillabrennus wrote: post #80

We (the Tax payers) did earn billions bailing out the banks. https://money.usnews.com/investing/articles/2017-01-19/finan... We should still have seen banksters going to jail over their clearly crooked and irresponsible behavior.

That article does not conclusively show the taxpayer benefited from the bailout. All it shows is that the stock price went up. If the money is then used to subsidize airlines, telecom companies, etc. and ultimately used for stock buybacks, exec bonuses, etc. then the taxpayer is never seeing any of that money.

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

#165

Post by greglindahl »

Scoundreller wrote: post #109
adventured wrote: post #73

Earlier quoted context omitted.

You're only counting the dollar return. As a social institution of government, you'd want to price in the upside of not having the US auto manufacturing industry implode, with vast unemployment, lost manufacturing that would never return, and GM itself collapsing along with its jobs. It's considerably beyond your figures. Alternative, nationalize it? Now that's a real disaster, having the US Government in the auto ma…

I'm not saying the government made a bad decision, but they should have rigged the deal more in favour of the people instead of the company if things succeeded. Getting a 3.5% return over that time period didn't account for the risk that they took. They should have ended up at least doubling their money at the cost of the shareholders/equityholders that remained.

You're pretty confused if you think "the company" won if the taxpayer didn't. In the GM case, "the company" was owned by shareholders who lost 100% of their equity. The bondholders lost a lot, too.

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

#166

Post by bantunes »

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.

> a pretty inefficient allocation of capital

Why? If it would help with scenarios like this, what's the argument for it being "inefficient"? Should we only think of the happy path on our books?

The reality is that these costs are offset to the customer, in the name of increased profits. I wonder how different pricing would be for airlines (and other businesses) if they didn't rely on revenue to bail them out of market fluctuations like this, and smaller ones they're sure to experience during the year.

The economy lately is like a Formula 1 engine that is designed for acceleration and short 15,000 RPM bursts of insane speed but only lasts for a few months of use.

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

#167

Post by mnm1 »

dageshi wrote: post #123
mnm1 wrote: post #90

Earlier quoted context omitted.

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?

The government is definitely responsible. They fucked up testing. They fucked up contact tracing. They fucked up stocking for supplies. They fucked up handling travelers and quarantining them. They are still lying to people about the effectiveness of masks. They called it a hoax and pretended it wasn't happening. In fact, I can't think of a single thing the US government didn't fuck up. Most other governments were not much better. But I understand you want to blame the people, most of whom were asymptomatic, for spreading a disease they didn't know about that, at least in the US, was called a hoax, that the Chinese arrested people for talking about. Yes, it's their fault not the fault of the government that is supposed to prepare and handle such issues. Absurd.

And yes, the airlines played their part in it too, not disinfecting, not requiring masks, not caring a single bit about the safety of their passengers. Now they want a bailout because they couldn't manage their cash properly and decided to increase their stock price with stock buybacks instead of saving cash for a rainy day like this one. Absurd.

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

#168

Post by dang »

thedance wrote: post #13
dvtrn wrote: post #6

Earlier quoted context omitted.

“HN isn't a place for general political arguments” I wish we’d stop lying to ourselves about this.

"we" aren't lying about it to ourselves. It's enforced from the top down because VCs (such as the benefactors of this site) strongly prefer that their founders ignore culture and society to focus 100% on business. The lack of politics on HN is not some kind of community consensus.

HN has plenty of political, cultural, and social threads. I'm surprised you haven't noticed them. See https://news.ycombinator.com/item?id=22714705 and https://news.ycombinator.com/item?id=17014869 for more explanation.

Political topics take over everything if you let them, so we have to moderate HN to prevent it from becoming all-politics-all-flamewar-all-the-time. Do you think we should just let it burn?

Nobody's trying to "enforce" anyone to "focus 100% on business". I do worry whether users' addictions to sites like this keep them from doing better things.

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

#169

Post by mrgordon »

erjiang wrote: post #114
mrgordon wrote: post #91

Earlier quoted context omitted.

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?

Yes, likely. In 2015 and 2016 alone they paid $8.346 billion in buybacks and they seem to pay roughly a $0.40 dividend every year. Either way it would have allowed them to borrow less money at much better terms. Instead they are totally insolvent immediately and people have a more negative view of bailing them out because they appear irresponsible.

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

#170

Post by mrgordon »

AmericanChopper wrote: post #157
mcphage wrote: post #154

Earlier quoted context omitted.

You’re saying “don’t hate the player, hate the game”, but the thing is: we can hate both.

If you’re hating people for making completely rational decisions, then you’re just going to end up being pretty hateful. My first point was that doing a share buyback is essentially the same thing as paying a dividend from a profit-allocation perspective. They’re both just different ways to use profits to return value to shareholders. The outrage over using that particular instrument is mostly just based on ignorance…

In my comment I specifically cited dividends in addition to buybacks as I agree they both represent money that was returned to shareholders and could have been saved.

I don’t agree with your claim that the companies are incentivized to be insolvent so they get nice bailouts or they’ll get left behind. Looking at the auto industry in 2008, GM desperately needed a bailout and got $18 billion and the government ended up taking over the company, going bankrupt, and then the assets were sold off cheaply to make a new company. How is that advantageous for the shareholders (who lost everything!) compared to the other auto companies like Ford which did not need a bailout and were simply forced to take a smaller amount of money (~$5 billion) to boost their coffers and build investor confidence during the crisis. Ford never needed the cash (except arguably as a confidence buffer) and never went bankrupt so the shareholders made out better.

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