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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

#141

Post by andysandwich »

t0mas88 wrote: post #80
tathougies wrote: post #45

Earlier quoted context omitted.

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.

The public currently wouldn't buy the stock due to bankruptcy risk. If the government commits to buying what's left at the same terms the public would start buying as well reducing the burden on taxpayers. Historically this kind of deal has been profitable for governments in the cases that I know of (in banking), while at the same time keeping more jobs and thus reducing economic impact of unemployment.

Delta and United were each able to raise over $2B in credit. They have plenty of airplanes and facilities to use as collateral. Coming out of 2019 United had about $29B equity (assets - liabilities).

They don't really need a bailout to stay in business. The grant money for employees is contingent upon them keeping open flight routes that they'd otherwise close. Sec. of Transportation wants low traffic (small) cities to have access to medical supplies and whatnot (at least that's what she says, of course she's pro-business as well).

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

#142

Post by whatok »

toomuchtodo wrote: post #137
whatok wrote: post #133

Earlier quoted context omitted.

That's incorrect. PIF's stake was as of 3/26 while CCL did the equity deal on 4/1. I don't know if they participated in that equity deal but they would have to disclose if they increased ownership. The equity deal was only $500mm vs $5.75bn in converts and 1st lien bonds. Non-insiders did not know PIF invested in the company when they raised this recent $ so it's not like that was some sort of anchor. Also, given the…

I'll have to go through the disclosures before I speak more confidently about the recent equity activity in CCL, but PIF did very recently disclose they acquired 43.5 million shares, a 8.2% stake in CCL. This makes PIF their second-largest investor. This surely contributed in CCLs ability to do a rapid raise right after. I corrected my terminology faux pax above.

I'm telling you as a market participant that PIF's stake was not known at the time.

Here's a link to CCL on EDGAR:

https://www.sec.gov/cgi-bin/browse-edgar?company=carnival+cr...

The filing date for the 13G was yesterday. Link to said 13G:

https://www.sec.gov/Archives/edgar/data/815097/0001011438200...

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

#143

Post by AnimalMuppet »

nieve wrote: post #139
AnimalMuppet wrote: post #122

Earlier quoted context omitted.

I seem to recall that total profits for the (US) airline industry from 1960 to 2010 was $0 (dates may be incorrect, but the general timeframes are correct). It's all just bankruptcy, merger, restructuring, and repeat.

You should always be suspicious of claims by or about a company that they made no profit when they were able to throw billions at propping up their stock price. If it's true it's financial malpractice, but it's no more believable than the shenanigans of highly profitable megacorporations that somehow end up paying no federal taxes.

What I said was that total profits for 50 or 60 years, for all airline companies put together, were $0. But any one company, for a period of several years, certainly could be doing well enough to reasonably buy back stock. It doesn't have to be financial malpractice. (It may be, but my statement doesn't mean that it is.)

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

#144

Post by secstate »

magduf wrote: post #111
czbond wrote: post #56

Earlier quoted context omitted.

They won't "go under". Force them into bankruptcy, someone buys them and assets out of bankruptcy. Management learns that there are huge ramifications for poor management decisions prioritizing investors short term wants vs business long term needs.

Sounds good to me. I'll bet there's some Chinese airlines that would like to expand their operations and have the cash to do some buyouts.

Not sure if you meant this sarcastically, but if that happens, fuck it. This is the world we made. To pretend we have free-market capitalism while propping up shitty business practices with tax-payer sponsored bailouts is not free-market capitalism. Institute laws about foreign governments buying up bankrupt assets or something. But for the love of god don't just bail them out.

This is the same as scolding a child hitting their sibling and then giving them a fucking cookie. Then when they keep hitting people, at least have the sense not to be confused why they don't learn.

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

#145

Post by toomuchtodo »

whatok wrote: post #142
toomuchtodo wrote: post #137

Earlier quoted context omitted.

I'll have to go through the disclosures before I speak more confidently about the recent equity activity in CCL, but PIF did very recently disclose they acquired 43.5 million shares, a 8.2% stake in CCL. This makes PIF their second-largest investor. This surely contributed in CCLs ability to do a rapid raise right after. I corrected my terminology faux pax above.

I'm telling you as a market participant that PIF's stake was not known at the time. Here's a link to CCL on EDGAR: https://www.sec.gov/cgi-bin/browse-edgar?company=carnival+cr... The filing date for the 13G was yesterday. Link to said 13G: https://www.sec.gov/Archives/edgar/data/815097/0001011438200...

You're right, I stand corrected. Thanks for the links.

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

#146

Post by whatok »

andysandwich wrote: post #141
t0mas88 wrote: post #80

Earlier quoted context omitted.

The public currently wouldn't buy the stock due to bankruptcy risk. If the government commits to buying what's left at the same terms the public would start buying as well reducing the burden on taxpayers. Historically this kind of deal has been profitable for governments in the cases that I know of (in banking), while at the same time keeping more jobs and thus reducing economic impact of unemployment.

Delta and United were each able to raise over $2B in credit. They have plenty of airplanes and facilities to use as collateral. Coming out of 2019 United had about $29B equity (assets - liabilities). They don't really need a bailout to stay in business. The grant money for employees is contingent upon them keeping open flight routes that they'd otherwise close. Sec. of Transportation wants low traffic (small) cities…

Capital markets are open right now. There's a price but they are open.

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

#147

Post by happytoexplain »

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…

I'm frankly amazed that you are really arguing that it is "absurd" for companies to be prepared for events of this magnitude. Many businesses absolutely prepare for them. This isn't a mile-wide asteroid, it's a pandemic. Also, $50B is not the amount an airline has to buffer to weather this, that's a ridiculous exaggeration.

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

#148

Post by magduf »

secstate wrote: post #144
magduf wrote: post #111

Earlier quoted context omitted.

Sounds good to me. I'll bet there's some Chinese airlines that would like to expand their operations and have the cash to do some buyouts.

Not sure if you meant this sarcastically, but if that happens, fuck it. This is the world we made. To pretend we have free-market capitalism while propping up shitty business practices with tax-payer sponsored bailouts is not free-market capitalism. Institute laws about foreign governments buying up bankrupt assets or something. But for the love of god don't just bail them out. This is the same as scolding a child hi…

After seeing how Boeing and American-run airlines operate, I'd have a lot more trust in Chinese-run airlines and airplanes than anything run by American managers.

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

#149

Post by wavepruner »

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…

Terrible things happen to people all the time that are difficult to predict. Yet the legal system holds them accountable for the contracts they are involved in.

This needs to be equally true with large corporations, otherwise contracts lose meaning.

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

#150

Post by ryeights »

adjkant wrote: post #136
ryeights wrote: post #108

Earlier quoted context omitted.

>they didn’t really choose to hold cash. I'm not sure what you mean by this, but if companies are going to hold large amounts of cash, it would be fiscally irresponsible not to seek the best possible tax treatment for it within the law. If people think it's inappropriate for companies to hold cash overseas, those concerns should be addressed towards lawmakers.

When the companies are the main lobbyists of corporate tax law, they effectively become judge/jury/executioner. You can say "Boycott Apple" but that's not really viable either for an injustice that is not seen by most as severe enough to give up something so centrally important to them. That importance should not give Apple a free pass to do any minor things they care to though, regardless of morality. These are not…

Good point.
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