America's bailed-out airlines are not 'playing fair' with customers • Hacker News Board

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

#131

Post by jdsully » Sat, Mar 28, 2020, 8:20 PM UTC

Retric wrote: post #110

jdsully wrote: post #84

Earlier quoted context omitted.

The government took equity stakes during the 2008 bailouts, it was widely regarded as a successful program among economists. The government got repaid and jobs were saved.

The government got shafted by vastly below market returns. Economists are looking at the big picture but tend to ignore people picking your pockets as insignificant. Loss aversion means people actually care about these things, it’s just the simplified economic models that are ignoring them.

The government wasn't looking to maximize their return, if they were they wouldn't have included such huge protections for GM union workers. I don't think return maximization in a micro sense was the right approach anyways. The government got its pound of flesh through the increased tax revenue it generated by not having the economy implode.

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

#132

Post by SomeHacker44 » Sat, Mar 28, 2020, 8:20 PM UTC

lonelappde wrote: post #23

llampx wrote: post #3

Serious question: does anyone actually expect the government (at least the current administration, of the US) to do what's right for the little guy?

Lucky for you, this crisis is going to last until the next administration (which might be the same as this one, depending on election results). So far we've got $1200 checks going to all the little guys and $500 to their little children.

Which hardly seems like much. Maybe if you are unemployed, but if you are earning $75,000 a year how exactly does this help? There is not much to spend it on now anyway.

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

#133

Post by tracer4201 » Sat, Mar 28, 2020, 8:20 PM UTC

ceejayoz wrote: post #94

Scoundreller wrote: post #58

Earlier quoted context omitted.

If you made a 3.5% profit (total, not per annum) on your incredibly risky investments between early 2009 and 2014, that's a fail.

For you or I, yes. We aren’t big enough to put “saved the economy” in the pros column.

I’m not sure that saved the economy. If GM failed, someone else can and would take their previous share of the market. In the short term there’s pain for GM employees, suppliers, etc. but in the long term, corporate america realizes their losses won’t be socialized.

It blows my mind this country of anti socialism whose media was comparing my native country (Denmark) to Venezuela is so much against the common man but when it comes to the wealthy elites, it’s like your poor people have been taught to voluntarily empty out their pockets.

Socialism == bad somehow until it’s time to bail out corporate America, and even then, your people are against nationalizing these companies. So what lesson do their corporate boards learn? Nothing other than the American population whose already been robbed will foot the bill.

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

#134

Post by Der_Einzige » Sat, Mar 28, 2020, 8:25 PM UTC

dvtrn wrote: post #6

macintux wrote: post #5

Earlier quoted context omitted.

As much as I'd love to pile on to this question, HN isn't a place for general political arguments, and this isn't a productive discussion for this site.

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

Yeah that rule is extremely stupid. Please do what you can to make the mods and admins realize that this rule should be removed. Politics is fascinating. HN is absolutely a good forum for it and it already is basically unenforced.

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

#135

Post by [deleted] » Sat, Mar 28, 2020, 8:25 PM UTC

sfkdjf9j3j wrote: post #85

hkmurakami wrote: post #35

Earlier quoted context omitted.

They often result in solid financial returns for the government holder of equity.

Is that actually true? TARP cost $426 billion in 2008 and when the assets were finally sold off in 2014, they summed $442 billion. So that's a 3.7% return during a time when the s&p 500 more than doubled in value. Do you have some examples where the government made these returns?

[deleted]

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

#136

Post by dlp211 » Sat, Mar 28, 2020, 8:25 PM UTC

glass_of_water wrote: post #119

dlp211 wrote: post #108

Earlier quoted context omitted.

Holding cash does not mean that it isn't allocated to investment. The airlines wouldn't be putting it under their mattress. They would be depositing it with a financial institution that would then be able to use the increased reserves to provide more capital to various actors, ie: investment.

But if a rare, global event like this happens and companies' emergency funds are mostly investments, isn't everyone going to try to liquidate their investments, crashing prices to a level where those investments aren't worth enough to keep them funded through the event?

If everything stopped, that would be an issue, but in reality there is still a ton of economic activity happening. As far a big businesses go, there are a handful of industries that are being impacted by this pandemic and if they were slowly drawing down on cash reserves over the next 6 months or so that probably isn't terribly harmful.

Also, this is why Central Banks exist.

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

#137

Post by deminature » Sat, Mar 28, 2020, 8:31 PM UTC

sfkdjf9j3j wrote: post #85

hkmurakami wrote: post #35

Earlier quoted context omitted.

They often result in solid financial returns for the government holder of equity.

Is that actually true? TARP cost $426 billion in 2008 and when the assets were finally sold off in 2014, they summed $442 billion. So that's a 3.7% return during a time when the s&p 500 more than doubled in value. Do you have some examples where the government made these returns?

The TARP is still projected to net a $121bn profit for the taxpayer. Only a portion of loans have been returned to the government currently.

https://projects.propublica.org/bailout/

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

#138

Post by AmericanChopper » Sat, Mar 28, 2020, 8:35 PM UTC

esturk wrote: post #105

jdsully wrote: post #86

Earlier quoted context omitted.

Dividends and buybacks don't change net profit, so it has no effect on the analysis that the industry as a whole is not very profitable over long time periods.

I think you misunderstood what our parent post meant. They are not questioning that airlines are not very profitable but that because of the low profit margins, the airlines should've saved those money and not spend it on stock buyback.

The outrage around stock buybacks is silly. It’s pretty much the same outcome as paying a dividend, just achieved in a slightly different way. The real problem is the current incentive structure. If your industry knows it will be bailed out, then the incentive is to not have enough cash on hand. Because anybody who saved for a rainy day will end up in a worse position than those who didn’t, and then just got a bailout. I’d say the solution is to either be more willing to let companies fail, or to structure bailouts in a way that represents a massive failure for shareholders, by significantly diluting their equity for instance.

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

#139

Post by dopamean » Sat, Mar 28, 2020, 8:37 PM UTC

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.

Except some of them spent that money not on investments or hiring but on stock buy backs. So maybe that was a bad use of capital?

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

#140

Post by golergka » Sat, Mar 28, 2020, 8:46 PM UTC

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…

> It's time the citizens started getting a return on their tax dollars if they're being used for private investment.

US citizens have already seen massive return on their 2008 bailout. These bailouts aren't free money, they're just loans that get paid back, with interest.