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If you aren't massively over-leveraged, your survival prospects are much higher under any circumstances. If the airlines had serviced their debt instead of accu

If you aren't massively over-leveraged, your survival prospects are much higher under any circumstances. If the airlines had serviced their debt instead of accumulating debt while rewarding shareholders, recovery would be a lot easier. Indulging in debt is the American way. Particularly when you can rely on taxpayer financed government bailouts to smooth out the bumps.

smabie 7y ago
Buying back shares is, in some ways, paying off your debt. Whenever you need money, you can just create more shares and sell them back. The problem is that you lose some diversification benefits: when you need to sell more shares is often (though not always) correlated to a drop in your own stock price. Ideally though, you're inflating the balloon so to speak so you can deflate it when need be. Or you think that your stock is undervalued right now.
- elliekelly 7y ago
  Except now the airlines need more money and no one is interested in buying those shares.
  - mrscottson 7y ago
    C level executives of these companies buyback stock to unlock stock performance bonuses early....they will borrow money to do it if interest rates are low and if they know they will get bailed out during bad times.... All this "we are doing it for shareholders" tripe is nonsense. Buying back stock at all time highs is the most idiotic thing a company can do because it says the business has no better use for said money, which imo is one of the dumbest conclusions a company can come to if growth is the goal (is your R&D department so useless that giving the money back to shareholders is the best allocation choice? Silly)....I'm including companies with a huge war chest like Apple, they are not an exception to this truth. Many companies (run by idiots) have concluded that financial engineering is more useful than R&D, these badly managed companies should be left right in front of the "market firing squad" when the market turns against them inevitably... No bailouts.
- ogre_codes 7y ago
  > Buying back shares is, in some ways, paying off your debt. So you buy back shares when they are at the 52 week high and sell more shares when they are at the 52 week low... that's brilliant. Share buybacks make sense for companies with strong balance sheets and little/ no debt load. For example: Apple. They make zero sense for companies with weak balance sheets and tons of debts (e.g. Most of the airlines).

smabie 7y ago

Buying back shares is, in some ways, paying off your debt. Whenever you need money, you can just create more shares and sell them back. The problem is that you lose some diversification benefits: when you need to sell more shares is often (though not always) correlated to a drop in your own stock price. Ideally though, you're inflating the balloon so to speak so you can deflate it when need be. Or you think that your stock is undervalued right now.

elliekelly 7y ago
Except now the airlines need more money and no one is interested in buying those shares.
- mrscottson 7y ago
  C level executives of these companies buyback stock to unlock stock performance bonuses early....they will borrow money to do it if interest rates are low and if they know they will get bailed out during bad times.... All this "we are doing it for shareholders" tripe is nonsense. Buying back stock at all time highs is the most idiotic thing a company can do because it says the business has no better use for said money, which imo is one of the dumbest conclusions a company can come to if growth is the goal (is your R&D department so useless that giving the money back to shareholders is the best allocation choice? Silly)....I'm including companies with a huge war chest like Apple, they are not an exception to this truth. Many companies (run by idiots) have concluded that financial engineering is more useful than R&D, these badly managed companies should be left right in front of the "market firing squad" when the market turns against them inevitably... No bailouts.
ogre_codes 7y ago
> Buying back shares is, in some ways, paying off your debt. So you buy back shares when they are at the 52 week high and sell more shares when they are at the 52 week low... that's brilliant. Share buybacks make sense for companies with strong balance sheets and little/ no debt load. For example: Apple. They make zero sense for companies with weak balance sheets and tons of debts (e.g. Most of the airlines).