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I want to say just let them fail, but that would make competition even lower in already low-competition industries. If there are bailouts, it should be in a for
by jb775 7y ago
I want to say just let them fail, but that would make competition even lower in already low-competition industries. If there are bailouts, it should be in a form that spreads out the losses over time, so these companies can still operate short-term but still get punished for the mis-management.
- 0xffff2 7y agoFailing doesn't mean that the airline disappears. All of the planes and personnel don't just evaporate. Failing should mean replacing the current equity holders with the current bondholders and continuing to operate.
- copenja 7y agoHonest question here. How would they continue to operate post-bankruptcy if they cannot pay their employees? Or why would they?
- 0xffff2 7y agoTo start with, they don't pay a lot of their (former) employees. Global travel demand is going to take a long time to recover and a lot of furloughs are going to happen across the industry in any case. Second, the new company probably takes on some amount of new debt. If they can't find it in the private market then there's nothing wrong with the government stepping in. The two keys are that the government steps in after the current equity holders are wiped out completely, and that the government support comes in the form of loans, not grants.