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U.S. airlines want a $50B bailout. They spent $45B buying back their stock

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Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#41

Post by fullshark »

starlust2 wrote: post #26
brockwhittaker wrote: post #8

Earlier quoted context omitted.

Sure — what are your other options if you have lots of cash? 1. Keep it in cash and get sub-inflationary levels on it, and perform poorly due to your lack of leverage. 2. Invest it in other market securities, effectively running some hedge fund. Not a great idea, distracting from your core biz, and shareholders may not appreciate the exposure to outside risk. 3. Buy back your own stock, which gives back to shareholde…

How about being prepared so that you don't need to be bailed out by the federal government? How about spending that money to provide better service? It's not a revisionist history that virtually everyone complains about the declining level of service and increased fees.

Both the declining level of service and increased fees are a byproduct of consumer preference: namely they choose flights based on sticker price.

Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#42

Post by opo »

ComputerGuru wrote: post #2

Just remember that the Federal government ended up making money on the automaker and bailouts (quite apart from all the jobs that were saved).

>Just remember that the Federal government ended up making money on the automaker ...

The estimates I've read are that the federal government lost between 9 and 10 billion on the automaker bailouts.

For example:

>...In the end, taxpayers lost $10.2 billion.

https://www.thebalance.com/auto-industry-bailout-gm-ford-chr...

>...the U.S. recovered all but about $9 billion of the auto bailout money.

https://www.marketplace.org/2018/11/13/what-did-america-buy-...

>...(quite apart from all the jobs that were saved).

Yea without the bailout, there would likely have been more job losses as consolidation occurred in the industry.

Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#44

Post by ebg13 »

jm20 wrote: post #12

I really hate that this argument keeps popping up. There's plenty of reasons to hate bailouts or airlines or anything else, but who the hell could have predicted the world was going to shut down like this in 2015-2019? We were in one of the biggest bull markets in the history of the United States, business was good, and the companies used some of that money to buy back stock. People make it sound like they were buyin…

> People make it sound like they were buying back their stock as they were cutting flights and laying off employees.

No. People make it sound like they were buying back their stock as they were not using that money to increase worker salaries and benefits. Nobody would complain about necessary bailouts if the organization shared profits with its laborers instead of lining executive pockets.

Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#45

Post by tathougies »

t0mas88 wrote: post #27
jm20 wrote: post #12

I really hate that this argument keeps popping up. There's plenty of reasons to hate bailouts or airlines or anything else, but who the hell could have predicted the world was going to shut down like this in 2015-2019? We were in one of the biggest bull markets in the history of the United States, business was good, and the companies used some of that money to buy back stock. People make it sound like they were buyin…

The right way to structure this is to issue $50B worth of stock to the government. The airlines can buy it back with future profits to prop up the price once things are back to normal, while keeping the company afloat and retain jobs now. The shareholders would protest, and should be allowed a right of first refusal. Put in money at the same price per share to avoid dilution if you want to. Their alternative is bankr…

No. The right way is to issue 50B of stock back to the public. The shareholders who received 50B and are holding it in their personal emergency funds can buy it back, or new investors can. There's more than enough private capital available without requiring the government to step in.

Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#46

Post by jsj999 »

jm20 wrote: post #12

I really hate that this argument keeps popping up. There's plenty of reasons to hate bailouts or airlines or anything else, but who the hell could have predicted the world was going to shut down like this in 2015-2019? We were in one of the biggest bull markets in the history of the United States, business was good, and the companies used some of that money to buy back stock. People make it sound like they were buyin…

If they fail what happens to the planes, the staff, the pilots, and anything else that makes the airline? Nothing.

The best thing we can do is let them and their bad debts die. We have private bailouts they're called acquisitions.

Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#47

Post by AndrewBissell »

t0mas88 wrote: post #27
jm20 wrote: post #12

I really hate that this argument keeps popping up. There's plenty of reasons to hate bailouts or airlines or anything else, but who the hell could have predicted the world was going to shut down like this in 2015-2019? We were in one of the biggest bull markets in the history of the United States, business was good, and the companies used some of that money to buy back stock. People make it sound like they were buyin…

The right way to structure this is to issue $50B worth of stock to the government. The airlines can buy it back with future profits to prop up the price once things are back to normal, while keeping the company afloat and retain jobs now. The shareholders would protest, and should be allowed a right of first refusal. Put in money at the same price per share to avoid dilution if you want to. Their alternative is bankr…

Thank you, it is endlessly frustrating that this debate is always framed as "extraordinarily generous no-strings-attached bailout" vs "allow them to perish in flames," when there is always the alternative of a "bail-in" which requires executives and shareholders to take some of the pain, secures a much more concrete and measurable benefit to taxpayers, and thus helps avoid worsening the moral hazard problem we are drowning in.

Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#48

Post by brockwhittaker »

ceejayoz wrote: post #10
brockwhittaker wrote: post #8

Earlier quoted context omitted.

Sure — what are your other options if you have lots of cash? 1. Keep it in cash and get sub-inflationary levels on it, and perform poorly due to your lack of leverage. 2. Invest it in other market securities, effectively running some hedge fund. Not a great idea, distracting from your core biz, and shareholders may not appreciate the exposure to outside risk. 3. Buy back your own stock, which gives back to shareholde…

"Keep it in cash" isn't looking like such a bad idea right now.

Sure, but that still wasn't the best option.

1. We had the sharpest market drop in history. Models could predict this, but while this drop is say a 1 in 30 year event across all industries, this drop for certain sectors (like airlines) is more of a 1 in 100 year event. If companies all planned all the time for once in a century events, global growth would be much slower.

2. Most companies in most industries are still better for having done share buybacks. We're only back at 2017 stock levels. They've been buying back since 2010. The best return most companies got for their cash was doing this, and I'm not sure that's changed with this downturn. Most companies will be back to normal pricing in a year's time from now anyway, and their share buybacks will still have been as brilliant of a decision as ever.

Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#49

Post by ComputerGuru »

dlp211 wrote: post #28
ComputerGuru wrote: post #2

Just remember that the Federal government ended up making money on the automaker and bailouts (quite apart from all the jobs that were saved).

In nominal dollars, not real dollars.

There’s really no such thing when you’re talking about a modern economy. Sure, compare in 2020 dollars (or 2019 dollars, to bypass all this recent volatility) if you must but the real value of a nominal dollar amount is directly affected by the strength of the economy and that is contingent on the bailouts and short-term loans. It’s very circular.

Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#50

Post by chasing »

jm20 wrote: post #12

I really hate that this argument keeps popping up. There's plenty of reasons to hate bailouts or airlines or anything else, but who the hell could have predicted the world was going to shut down like this in 2015-2019? We were in one of the biggest bull markets in the history of the United States, business was good, and the companies used some of that money to buy back stock. People make it sound like they were buyin…

> No business is going to hoard 50 billion dollars in an emergency fund for a pandemic that cuts 90% of revenue, that's just absurd.

Maybe a smart airline should. Because people have been issuing warnings about a possible pandemic for many years.

A business that operates as if it's always going to be sunshine and rainbows is not a properly run business.

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