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These companies were shut down under extraordinary circumstances, and the economy also shut down in a very uneven way and for an indefinite time, with another p
by threatofrain 7y ago
These companies were shut down under extraordinary circumstances, and the economy also shut down in a very uneven way and for an indefinite time, with another potential shutdown to counter a winter resurgence. About half of Americans are still not under lockdown.
The picture to me is that the country does not consider itself as in the same boat.
- jacobolus 7y agoThese companies have made incredible profits for many years by nickel-and-diming customers, squeezing employees, and ignoring large-scale environmental costs, and then diverted the proceeds into the pockets of a small number of extremely wealthy people instead of using it to prepare for possible shocks. If the people are going to bail them out, the people should get an ownership stake.
- nickff 7y agoThe airline industry is famously unprofitable; they make a bit of money for a few years, then lose all that money, and repeat the cycle. From what I understand, it has been this way for at least 40 years. https://www.mcgill.ca/iasl/files/iasl/ASPL614-Five-Reasons-Airline-Never-Profitable.pdf https://www.mcgill.ca/iasl/files/iasl/ASPL614-Five-Reasons-A...
- MrBuddyCasino 7y agoIt used to be that way. Recently airlines have been profitable enough to have no better idea what to do with their money than buying back stock for billions of dollars.
- oh_sigh 7y agoWhy does anyone put their money into airlines then?
- TrinaryWorksToo 7y agoMaybe that's telling us something.
- greedo 7y agoCoincidentally, this occurred as the airline industry became deregulated.
- mrgordon 7y agoWhile 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...
- jdsully 7y agoDividends 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.
- esturk 7y agoI 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.
- AmericanChopper 7y agoThe 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.
- mcphage 7y agoYou’re saying “don’t hate the player, hate the game”, but the thing is: we can hate both.
- 7y ago
- esturk 7y agoif this is true then it was even more prudent for them to keep savings for the future and not do stock buyback.