Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Biggest U.S. airlines spent bulk of free cash flow on stock repurchases

bloomberg.com

Post reply on HN
Print view View original

101–110 of 122 posts

Re: Biggest U.S. airlines spent bulk of free cash flow on stock repurchases

#101

Post by boh »

dougweltman wrote: post #30

FCF is supposed to go to shareholders: it's what's left over after spending money running and growing the business. And this problem (and related solutions) will probably apply not just to airlines but also restaurants, retailers, etc. In normal circumstances, chewz is right and they should either call up more capital from existing shareholders or go under. But these are not normal circumstances. 1) Everyone is capit…

Buybacks are a way for companies to let the market know they are no longer capable of making efficient use of capital, and so they give the money back to shareholders instead. The recent trend of buybacks within various industries presents a difficult argument against the efficacy of capitalism in general. It would seem companies no longer need tax cuts, can sustain higher minimum wages, have limited incentives to foster innovation through research and development, since buybacks have exceeded FCF since 2014. With the effectiveness of shareholders use of capital being fairly limited (something we were able to witness following the Trump administration's tax reforms), the only other viable option is to give a greater share to the government. If we're so concerned about Main Street pensioners and 401K shareholders when it comes to buybacks, then perhaps they'd prefer a fixed UBI paid by higher corporate taxes rather than be subject to the whims of the market (now especially). If that doesn't sound like a good idea, than maybe companies should do their job and actually spend the capital. As much as people argue against public entitlements, they seem to support the private entitlements fostered by buyback culture, if one doesn't seem productive, why does the other?

Re: Biggest U.S. airlines spent bulk of free cash flow on stock repurchases

#102

Post by boh »

chewz wrote: post #3

So it would be logical if shareholders re-capitalize airlines now. Or let them fall if shareholders see no point in keeping airlines alive.

There's a whole society that exists outside of these shareholders and they need airlines to travel.

Re: Biggest U.S. airlines spent bulk of free cash flow on stock repurchases

#103

Post by makomk »

redis_mlc wrote: post #27
yingw787 wrote: post #19

I feel like even civilian airlines have some national defense / security aspect to them since they’re so critical to our infrastructure (e.g. troop transports). I don’t want to return to the days before deregulation, but I think there should be federally enforced rules around remaining operational even during times of severe economic crisis. That being said, nobody expects a 100 year event, and it would be irresponsi…

> nobody expects a 100 year event It's not. SARS was only 18 years ago. Now we have SARS-CoV in 2020. https://en.wikipedia.org/wiki/Severe_acute_respiratory_syndr... We, as a society, need to stop accepting dumb excuses.

SARS wasn't a massive global catastrophe, just like almost all flu epidemics aren't massive global catastrophes but for the opposite reason: it was too deadly, which limited its ability to spread and made it relatively easy to eradicate through contact tracing and testing. This kind of pandemic really does seem to be a 100-year event that requires a disease with a very special set of properties.

Re: Biggest U.S. airlines spent bulk of free cash flow on stock repurchases

#104

Post by boh »

roenxi wrote: post #5

Wiki says: > free cash flow to firm (FCFF) is a way of looking at a business's cash flow to see what is available for distribution among all the securities holders of a corporate entity. [0] What do people expect them to do with free cash flow? The point of free cash flow is to get the money back to shareholders. These aren't high-growth industries. [0] https://en.wikipedia.org/wiki/Free_cash_flow

From an economics perspective FCF is a company's failure to make efficient use of capital. They can just as easily pay more taxes. Individual shareholders have a limited capacity to efficiently allocate capital when compared to larger enterprises (that's pretty much the point of having corporations).

Re: Biggest U.S. airlines spent bulk of free cash flow on stock repurchases

#105

Post by aNoob7000 »

zaroth wrote: post #66
hef19898 wrote: post #32

Earlier quoted context omitted.

I read it that airlines could have simply put the cash in a bank account. Pretty mch what Apple does. becasue that amount of free cash would sure be handy right now.

Apple has a lot of cash, but they also do more stock buybacks than anyone. ~$20 billion just last quarter! https://ycharts.com/companies/AAPL/stock_buyback

And if they run into any issues because of this outbreak, they are out of luck in my book.

Re: Biggest U.S. airlines spent bulk of free cash flow on stock repurchases

#106

Post by beefield »

tomp wrote: post #39
atlasunshrugged wrote: post #9

Earlier quoted context omitted.

Why would the shareholders do that if they think the government may step in and bail them out?

that's why the government should never bail out shareholders. Bail out the company , sure - if the company is vital for "the system" (which airlines are, long-term) - but only after bankruptcy, i.e. wiping out the shareholders.

Preferably also some debt holders should be wiped out. Otherwise it becomes too cheap to leverage your company if you need to pay only risk-free rate on your debt.

Re: Biggest U.S. airlines spent bulk of free cash flow on stock repurchases

#107

Post by QuesnayJr »

zaroth wrote: post #87
QuesnayJr wrote: post #77

Earlier quoted context omitted.

Apple has gigantic amounts of free cash flow, which is why they have $100 billion of cash on their balance sheet, despite their buybacks.

Just back of the envelope, if every Fortune 100 had $100 billion in cash, that would be $10 trillion sitting in accounts as, what, a rainy day fund? Apple keeps a massive cash hoard in case they want to do a very large strategic acquisition. Airlines would be doing mergers not acquisitions. IMO it’s entirely appropriate that if a black swan even cripples an industry like air travel for a government to offer low-inter…

It's not on the sidelines. Like 0.001% of "cash" is actually cash. Apple holds like a third of its "cash" in equities. Airlines could do the same, or hold short-term debt, or pay down their own debt (which would free up capital for other uses). (They could also hold long-term debt in other companies, but I'm not sure where that shows up in the balance sheet.)

Re: Biggest U.S. airlines spent bulk of free cash flow on stock repurchases

#108

Post by chewz »

boh wrote: post #102
chewz wrote: post #3

So it would be logical if shareholders re-capitalize airlines now. Or let them fall if shareholders see no point in keeping airlines alive.

There's a whole society that exists outside of these shareholders and they need airlines to travel.

There is valid business opportunity then.

Re: Biggest U.S. airlines spent bulk of free cash flow on stock repurchases

#109

Post by boh »

chewz wrote: post #108
boh wrote: post #102

Earlier quoted context omitted.

There's a whole society that exists outside of these shareholders and they need airlines to travel.

There is valid business opportunity then.

For what? Making other airlines after the existing ones fail?

Re: Biggest U.S. airlines spent bulk of free cash flow on stock repurchases

#110

Post by gwd »

zentiggr wrote: post #16
duaoebg wrote: post #8

Earlier quoted context omitted.

That would involve selling shares at a low price after buying them at a high price. This would make management look stupid.

Hmmmm.. isn't the market about finding truth and moving accordingly?

To ideological purists. To most people it's about making money.
Post reply on HN