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

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

#151

Post by uncletammy »

gumby wrote: post #122
uncletammy wrote: post #118

Earlier quoted context omitted.

I wholeheartedly agree with this sentiment but I don't trust "elected representatives" to fairly represent my interests. I want voting shares issued directly to me in an amount equal to my financial contribution (tax dollars / currency devaluation) towards their bailout.

In practice this is both hard to do (denominator issue) and leaves control in the hands of a small number. The latter problem is also the argument against index funds (which I’m in favor if, but I appreciate the argument)

> ...leaves control in the hands of a small number.

Yes but it would still provide a considerably larger number of controllers (and with more diverse interests) than our current system.

> In practice this is both hard to do (denominator issue) ...

Excellent point here. It would be incredibly difficult.

Here's a thought though ...

Warning! I'm about to talk about cryptocurrency. Everyone might want to put on their futurism hats and keep their downvoting finger at bay, at least until I finish.

This problem wouldn't be very hard at all to solve in a world where the bailout currency has similar properties to blockchain based cryptocurrencies. Company shares could be issued as an "airdropped" token to everyone holding the currency at the block height during which the bailout is agreed upon. Those tokens could be used directly to vote on shareholder matters and in a way that is fully fair and transparent.

Yes I know. We are still many decades (and maybe centuries) out from a world in which cryptocurrency actually works how it's meant to. One day though...it's gonna be glorious.

Alright, I'm done. Downvote away.

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

#152

Post by dang »

Der_Einzige wrote: post #150
dang wrote: post #144

Earlier quoted context omitted.

What rule are you referring to?

Not to post political stuff on HN

There's no such rule. I've written about this here:

https://news.ycombinator.com/item?id=21607844

and in lots of previous places:

https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...

If anyone has a question that I haven't addressed in there, let me know and I'll be happy to answer.

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

#153

Post by pasabagi »

uncletammy wrote: post #151
gumby wrote: post #122

Earlier quoted context omitted.

In practice this is both hard to do (denominator issue) and leaves control in the hands of a small number. The latter problem is also the argument against index funds (which I’m in favor if, but I appreciate the argument)

> ...leaves control in the hands of a small number. Yes but it would still provide a considerably larger number of controllers (and with more diverse interests) than our current system. > In practice this is both hard to do (denominator issue) ... Excellent point here. It would be incredibly difficult. Here's a thought though ... Warning! I'm about to talk about cryptocurrency. Everyone might want to put on their fut…

I didn't really follow the blockchain thing - but now I'm curious - is blockchain (as tech) essentially money with built-in metadata? The whole 'proof-of-work' thing seemed a bit potlatch to me, but building publicly-accessable metadata into money seems like an interesting (although possibly scary) idea.

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

#154

Post by mcphage »

AmericanChopper wrote: post #138
esturk wrote: post #105

Earlier quoted context omitted.

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 bailou…

You’re saying “don’t hate the player, hate the game”, but the thing is: we can hate both.

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

#155

Post by tomp »

uncletammy wrote: post #118
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…

I wholeheartedly agree with this sentiment but I don't trust "elected representatives" to fairly represent my interests. I want voting shares issued directly to me in an amount equal to my financial contribution (tax dollars / currency devaluation) towards their bailout.

> I don't trust "elected representatives"

> want voting shares issued directly to me

Um... what are you going to do with your voting shares if not vote for elected representatives (the board, the CEO) that you'll have to trust to represent your interests?!

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

#156

Post by tomp »

jdsully wrote: post #86
mrgordon wrote: post #82

Earlier quoted context omitted.

While I generally agree and would avoid airline investments personally, the airlines did just spend their profits for years on dividends and stock buybacks. If you don’t save for a rainy day, then it’s not too surprising you run out during bad times...

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.

Obviously, they do. If the net profit of the company is zero, but all the actual profit is paid out to the shareholders, but all the losses are paid by the taxpayers / government, then the net profit to the shareholders is positive.

Great business plan though. I want in on it (after the crisis / losses)!

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

#157

Post by AmericanChopper »

mcphage wrote: post #154
AmericanChopper wrote: post #138

Earlier quoted context omitted.

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 bailou…

You’re saying “don’t hate the player, hate the game”, but the thing is: we can hate both.

If you’re hating people for making completely rational decisions, then you’re just going to end up being pretty hateful.

My first point was that doing a share buyback is essentially the same thing as paying a dividend from a profit-allocation perspective. They’re both just different ways to use profits to return value to shareholders. The outrage over using that particular instrument is mostly just based on ignorance.

The outrage over these companies deciding to return that value to shareholders, rather than using it to prepare for ups and downs (in a notoriously unstable industry) is mostly justified. However it is entirely misplaced. It’s not just that they can win by doing the wrong thing, but due to the nature of historical bailouts, they risk massively losing out by doing the right thing.

There is no system of economics that can survive by rewarding failure. Failure must always be a possible outcome when taking a risk. These companies are simply taking advantage of a government provided incentive to fail. You have every right to get mad at them for making the rational decision, but that is just getting mad for the sake of getting mad.

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

#158

Post by rsanek »

tomp wrote: post #155
uncletammy wrote: post #118

Earlier quoted context omitted.

I wholeheartedly agree with this sentiment but I don't trust "elected representatives" to fairly represent my interests. I want voting shares issued directly to me in an amount equal to my financial contribution (tax dollars / currency devaluation) towards their bailout.

> I don't trust "elected representatives" > want voting shares issued directly to me Um... what are you going to do with your voting shares if not vote for elected representatives (the board, the CEO) that you'll have to trust to represent your interests?!

I think the idea is, at least there's one less level of indirection if the voting shares are issued directly to taxpayers.

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

#159

Post by macintux »

dang wrote: post #152
Der_Einzige wrote: post #150

Earlier quoted context omitted.

Not to post political stuff on HN

There's no such rule. I've written about this here: https://news.ycombinator.com/item?id=21607844 and in lots of previous places: https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que... If anyone has a question that I haven't addressed in there, let me know and I'll be happy to answer.

The guideline for comments I was leaning on to try to cut short what seemed like inevitable political ugliness:

> Please don't use Hacker News for political or ideological battle. That destroys the curiosity this site exists for.

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

#160

Post by golergka »

MetalGuru wrote: post #145
golergka wrote: post #140

Earlier quoted context omitted.

> 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.

While I think the widespread negative reaction to bailouts is generally uninformed, the interest rates on bank bailouts was ridiculously low. And from what I understand, banks spent it in self-serving ways like stock buybacks and fat executive bonuses. I mean, why wouldn’t they. Without oversight, their priority is to shareholders.

It's overall $100b profit over $700b investment: https://projects.propublica.org/bailout/ and that doesn't account for the positive effect it had on overall economy by reassuring everyone. I'd say it's not so low at all. And if you lend someone money and then he returns it back with interest, does it matter what he did with it?
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