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

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

stamfordadvocate.com

Post reply on HN
Print view View original

21–30 of 164 posts

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

#21

Post by AndrewBissell »

ComputerGuru wrote: post #2

Just remember that the Federal government ended up making money on the automaker and bailouts (quite apart from all the jobs that were saved).

This is a canard for a lot of reasons, first and foremost because the government has not charged one penny for the enormous subsidy it provides in the form of a now-explicit backstop which allows these companies to borrow at much lower interest rates. Those lower interest rates translate directly into less income for pension funds and savers.

Every large investment bank owes its continued existence to the government. Would you say the taxpayers have been sufficiently reimbursed for that? https://www.nakedcapitalism.com/2014/11/aig-bailout-trial-re...

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

#22

Post by kcorbitt »

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?

The reason most people invest money in public companies is because they expect to get money back at some point. Otherwise, why invest at all?

There are two primary ways that companies can return money to shareholders: dividends and stock buybacks. Financially, the two are exactly equivalent. Tax-wise, they're mostly equivalent (there are a few exceptions around the edges). When a company issues a dividend, all the stockholders end up with a bit less equity and a bit more cash. Many stockholders would rather decide whether they value the cash or the equity more, which is why buybacks are attractive. In a buyback, you get to decide whether you value equity, in which case you keep your stock, or cash, in which case you can sell it back.

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

#23

Post by liquidise »

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?

At a meta level i am shocked this is getting downvotes. It is a legitimate question that pokes around what could be considered generally accepted wisdom. It concerns me that HN is starting to frown upon this sort of thing.

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

#24

Post by ghaff »

peterbraden wrote: post #11
brockwhittaker wrote: post #8

Earlier quoted context omitted.

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…

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

Many companies still pay dividends as well. But, yes, functionally both dividends and stock buybacks return money to shareholders, i.e. the owners of the company. However, as you say, in the US the tax code tends to favor capital gains over dividends.

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

#25

Post by ComputerGuru »

AndrewBissell wrote: post #21
ComputerGuru wrote: post #2

Just remember that the Federal government ended up making money on the automaker and bailouts (quite apart from all the jobs that were saved).

This is a canard for a lot of reasons, first and foremost because the government has not charged one penny for the enormous subsidy it provides in the form of a now-explicit backstop which allows these companies to borrow at much lower interest rates. Those lower interest rates translate directly into less income for pension funds and savers. Every large investment bank owes its continued existence to the government.…

But it never was about making a return on profit. The solvency and economic growth enabled by these overnight loans (assuming it doesn’t cause bigger problems down the line) is absolutely worth it.

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

#26

Post by starlust2 »

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…

How about being prepared so that you don't need to be bailed out by the federal government?

How about spending that money to provide better service?

It's not a revisionist history that virtually everyone complains about the declining level of service and increased fees.

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

#27

Post by t0mas88 »

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…

The right way to structure this is to issue $50B worth of stock to the government. The airlines can buy it back with future profits to prop up the price once things are back to normal, while keeping the company afloat and retain jobs now.

The shareholders would protest, and should be allowed a right of first refusal. Put in money at the same price per share to avoid dilution if you want to. Their alternative is bankruptcy, so they don't have much other options.

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

#29

Post by ryeights »

In good times, people complain about companies like Apple "hoarding cash". Now, people complain about companies redistributing profits to their shareholders--many of which are ordinary people holding shares in their 401(k)'s or otherwise. They really cannot win.

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

#30

Post by atonse »

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…

Sure they could've held it. Apple did it for a while. You could invest it and make even more, or invest a bit in not treating your passengers like f*cking cattle and constantly charging millions of fees, maybe?
Post reply on HN