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

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

#151

Post by aznumeric » Tue, Apr 07, 2020, 7:32 PM UTC

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…

How about they invest that money in production instead of stock buybacks ?

Here's what Matt Stoller has to say about buybacks and bailouts in general:

Fundamentally, mergers, buybacks, and excessive executive compensation are about stripping out resiliency in return for cash, and the lobbying is the political machine to protect the ability to do that. So what to do? The answer is pretty simple. Stop hidden risk pooling.

Financialization and private equity is about loading up corporations with hidden risk. We cannot afford that anymore. So here are the conditions to put on large corporations who need cash from the government:

-No bailouts for shareholders. Shareholders took the risk and upside, they should get the downside too. A bailout means the stock value goes to zero.

-No more buybacks ever, and no more dividends for five years. It’s time to stop asset-stripping, and restore the cushion inside corporations so they can invest in production.

-Strict executive compensation limits. No more get rich quick schemes and golden parachutes. We need long-term leaders focused on building institutional strength.

-No more lobbying, as well as limit public relations spending. The Housing and Economic Recovery Act of 2008 killed the ability of Fannie Mae and Freddie Mac to lobby, and that killed their political power. By contrast, Wall Street got bailouts with no strings attached, so they largely wrote the Dodd-Frank bill. (I was there, I saw it). Don’t repeat this.

-No more mergers and acquisitions for five years. If you get bailouts, you have to run your business as a business, not as an acquisition target. I can imagine an exception if the business fails as a stand-alone, but exceptions need to be very narrow.

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

#152

Post by pseudalopex » Tue, Apr 07, 2020, 7:37 PM UTC

sanderjd wrote: post #120

peterbraden wrote: post #11

Earlier quoted context omitted.

Traditionally you also have dividends as well. Stock buybacks are basically tax avoidance.

Yeah what I keep not being sure of with this whole debate is: are people mad about companies using buybacks instead of dividends because of the tax avoidance angle, or are they mad at the entire idea of companies giving back money to shareholders either way? It seems like buybacks are the boogeyman, but that an argument like "if they had kept their $45B over the past few years, they wouldn't need $50B now" applies ju…

People can be mad about or rationally opposed to more than one thing at a time.

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

#153

Post by tathougies » Tue, Apr 07, 2020, 8:41 PM UTC

anthonypasq wrote: post #135

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 government is the public. Am i missing something?

NO the government is the government. A company issuing shares to the public means that any individual can choose to buy them or not. Issuing them to the government means the government buys them. The government is representative of the people but is not simply just the people in aggregate.

It's like your parents buying stock for you and promising it to you in your inheritance versus buying a stock yourself. Sure, you can say that you own the stock if your parents promise it to you(In the sense that you will benefit from it eventually), but you don't own the stock simply because mom and dad do. They can change their mind, or decide to give all the money to your awkward brother.

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

#154

Post by viklove » Tue, Apr 07, 2020, 8:55 PM UTC

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.

A Chinese airline cannot run domestic routes in the US. You seem to know very little about travel regulations.

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

#155

Post by viklove » Tue, Apr 07, 2020, 8:56 PM UTC

brockwhittaker wrote: post #8

dominotw wrote: post #3

is there an explanation for stock buybacks that isn't ' evil stockholders'? edit: this was an actual question not a rhetorical one. curious why the downvotes?

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…

> 3. Buy back your own stock, which gives back to shareholders.

You mean props up the share price so board members can hoard more wealth?

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

#156

Post by paulgpetty » Tue, Apr 07, 2020, 10:04 PM UTC

I think there is a lot to weigh on many different levels about whether a bailout juxtaposed against buybacks is a good or bad thing. But I’m surprised by how little talk there is of individual investor opportunity. This seems like the bottom of airline stock prices. Here’s a list of their tickers: https://topforeignstocks.com/stock-lists/the-complete-list-o... … which stocks would you buy? JetBlue, American & United seem like bargains & no one can guarantee returns financially but lots of people will fly again.

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

#157

Post by tssva » Wed, Apr 08, 2020, 12:14 AM UTC

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…

Of all industries the airlines should have been acutely aware that they could be suddenly and without warning significantly effected by outside incidents and planned accordingly. This is an industry that has gone through this before following 9/11.

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

#158

Post by magduf » Wed, Apr 08, 2020, 3:14 AM UTC

viklove wrote: post #154

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.

A Chinese airline cannot run domestic routes in the US. You seem to know very little about travel regulations.

Well then maybe that law needs to be rescinded.

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

#159

Post by sanderjd » Wed, Apr 08, 2020, 4:06 AM UTC

adjkant wrote: post #128

sanderjd wrote: post #118

Earlier quoted context omitted.

Option 4 is clearly a good one, more companies should pay dividends to employees in addition to (or instead of) shareholders. Employees have a stake in the company and the usual way of doing this (by giving employees stock so that they get the same benefits as shareholders do) doesn't align risks well. These are called bonuses, and yeah, big companies should pay more bonuses when they are performing well. I'm all for…

> I'm sure the airlines did keep enough cash for an emergency fund, but every emergency fund comes with a model of what an emergency looks like, and for airlines what makes sense to cover is things like oil price increases or a recession that impacts demand for travel by a few percent, not an event like this that results in a 95% decline in demand due to government mandates; we don't want every large corporation hoar…

I was using "philanthropy" in a broad sense. A large portion of what the government does is akin to philanthropy. So I just meant taxation.

And yes, I think it just boils down to option 4: more money to individuals through employee bonuses. I trust the individuals more to support good causes than a corporation with its own agenda.

But note that I also think dividends are a good thing too, for the same reason I think bonuses are a good thing. I think it is generally better for most corporations to pass their cash onto other stakeholders. I wish it was more balanced toward employees rather than shareholders, but I think both are usually better than the corporation holding onto it themselves.

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

#160

Post by sanderjd » Wed, Apr 08, 2020, 4:07 AM UTC

pseudalopex wrote: post #152

sanderjd wrote: post #120

Earlier quoted context omitted.

Yeah what I keep not being sure of with this whole debate is: are people mad about companies using buybacks instead of dividends because of the tax avoidance angle, or are they mad at the entire idea of companies giving back money to shareholders either way? It seems like buybacks are the boogeyman, but that an argument like "if they had kept their $45B over the past few years, they wouldn't need $50B now" applies ju…

People can be mad about or rationally opposed to more than one thing at a time.

Sure, maybe it's both. What I'm saying is that it seems muddled to me in these articles, I can't quite tell which thing is actually the problem, or whether it is both.