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There are dozens of financial instruments they could have used to hedge their position without having to save decades of cashflow. That's what those instruments
by akiselev 7y ago
There are dozens of financial instruments they could have used to hedge their position without having to save decades of cashflow. That's what those instruments are ostensibly for. At the scale of companies like airlines that have a history of bailouts, the OTC markets offer plenty of options (no pun intended) with premiums a tiny fraction of $20 billion.
- missedthecue 7y agoThey can hedge fuel and they can hedge labor costs through contract, but no industry could realistically survive an 80-90% reduction in revenue.
- Dylan16807 7y agoLots of businesses could survive an 80-90% reduction in revenue for an extended period if they shut down 80-99% of their operations. It's not like travel demand won't come back.
- missedthecue 7y agoBut they still have to pay to park those planes, continue to pay lease payments, continue to pay maintenance on those planes, continue to pay for landing and gate spots at all the airports they serve globablly... essentially the only costs that go away are labor that they've put on unpaid furlough, and fuel costs, which if they've hedged, they're essentially paying for anyway. Airlines aren't an SaaS business where you just scale down AWS and youre good.