Economics Thread

[nsacpi]

I'm pretty conflicted on this I'll be honest. The airlines are kind of an obvious one... the government essentially shut them down. They employee millions of people. Is a loan to them better than millions unemployed and a scrambling sector that wont be able to recover quickly when this is over?

It's an interesting debate.

I dont much care about cruise lines, etc. But then there I am picking winners and losers.

The thing about the airlines and Boeing is that these companies will always have the capacity, even through a bankruptcy restructuring. Boeing after a restructuring will still be able to do everything we need as far as national security considerations go. American Airlines will still have all the planes, pilots, landing rights after a bankruptcy restructuring. As the stock prices of those companies showed this past week, the bailout is really accruing to the shareholders, creditors and senior management. A big chunk of it. So from taxpayers to the shareholders, creditors and senior management. In principle a bailout could be structured in a way not to benefit those parties. But this particular bailout handed out a lot of candy to them.

There are lots of companies being adversely affected by this. Insurance companies for example. Why are the airlines more deserving of taxpayer dollars.

The airlines have not been good corporate citizens. They have used political muscle to eviscerate competition in their business. The result has been record profits. Customers have not been well served by the industry being so uncompetitive. The president of American Airlines boasted that the business now was basically idiot proof. Even chosen one could make money with an airline the way the industry has been allowed to set itself up. I'm not inclined to help out the shareholders and management of that kind of business. Sure the virus has hurt them disproportionately. But hey they have still been shuttling infected New Yorkers to their vacation homes in Florida to infect people there. Good for them. Let them bear the cost.

 

[sturg33]

The thing about the airlines and Boeing is that these companies will always have the capacity, even through a bankruptcy restructuring. Boeing after a restructuring will still be able to do everything we need as far as national security considerations go. American Airlines will still have all the planes, pilots, landing rights after a bankruptcy restructuring. As the stock prices of those companies showed this past week, the bailout is really accruing to the shareholders, creditors and senior management. A big chunk of it. So from taxpayers to the shareholders, creditors and senior management. In principle a bailout could be structured in a way not to benefit those parties. But this particular bailout handed out a lot of candy to them.

Yeah I dont know enough about bankruptcy to have a great opinion on it. My biggest concern is let's say airlines are ground for 3 months. They lay off all workers (Delta burning $50m cash a day). We come out of this and the airlines dont have staff to fly the planes.

Maybe that's not how it would go but I'd hate to be put of crisis but our economy still takes months to get out of hibernation.

Also, I think the share appreciation was 'ok, these companies are not.going bankrupt for.now'

 

[nsacpi]

Yeah I dont know enough about bankruptcy to have a great opinion on it. My biggest concern is let's say airlines are ground for 3 months. They lay off all workers (Delta burning $50m cash a day). We come out of this and the airlines dont have staff to fly the planes.

Maybe that's not how it would go but I'd hate to be put of crisis but our economy still takes months to get out of hibernation.

Also, I think the share appreciation was 'ok, these companies are not.going bankrupt for.now'

A lot of businesses are burning through a lot of cash right now.

 

[sturg33]

A lot of businesses are burning through a lot of cash right now.

That doesn't answer my question. But I agree.

 

[nsacpi]

That doesn't answer my question. But I agree.

The answer I would offer is airline employees have the same recourse to unemployment benefits as employees at other businesses and that the airlines can bring them back when things pick up. Like everyone else. I fail to see why the shareholders and senior management of airlines should receive a special taxpayer funded benefit. What makes them special compared to other businesses that are also undergoing great stress.

 

[sturg33]

The answer I would offer is airline employees have the same recourse to unemployment benefits as employees at other businesses and that the airlines can bring them back when things pick up. Like everyone else. I fail to see why the shareholders and senior management of airlines should receive a special taxpayer funded benefit. What makes them special compared to other businesses that are also undergoing great stress.

Because the airlines are essential to our economic recovery.

Other industries are as well... but not all restaurants will go bankrupt. All airlines will go bankrupt in our current environment thus leaving us completely immobilized to recover quickly

 

[thethe]

Easier to start a new restaurant as opposed to an airline as well. This is obvious bit another reason why more aid is directed to the airline industry

 

[nsacpi]

Because the airlines are essential to our economic recovery.

Other industries are as well... but not all restaurants will go bankrupt. All airlines will go bankrupt in our current environment thus leaving us completely immobilized to recover quickly

Airlines are important. But they would continue operating without a bailout. There are lots of cases of airlines and other businesses continuing to operate even through bankruptcy. chosen one is familiar with the process.

 

[nsacpi]

Easier to start a new restaurant as opposed to an airline as well. This is obvious bit another reason why more aid is directed to the airline industry

The planes, pilots and landing rights arent going anywhere.

 

[thethe]

The planes, pilots and landing rights arent going anywhere.

So are the debt service costs resulting from the debt that was taken out to purchase the planes.

 

[sturg33]

The planes, pilots and landing rights arent going anywhere.

If the airline cant pay the pilots, who will fly the planes?

Pilots gonna fly for free?

Or is the government gonna bail them out?

One or two airlines can do a bankruptcy but the entire sector would be catastrophic.

There's no reason to be coy about this. The government mandated the airlines cant make money for an undisclosed period of time. Literally no business is set up to do that, let alone one with enormous costs like airlines

 

[nsacpi]

So are the debt service costs resulting from the debt that was taken out to purchase the planes.

Indeed their creditors would have to take a haircut. That's my point. Better the creditors and shareholders than the taxpayers.

 

[nsacpi]

If the airline cant pay the pilots, who will fly the planes?

Pilots gonna fly for free?

Or is the government gonna bail them out?

One or two airlines can do a bankruptcy but the entire sector would be catastrophic.

There's no reason to be coy about this. The government mandated the airlines cant make money for an undisclosed period of time. Literally no business is set up to do that, let alone one with enormous costs like airlines

Believe me it will be very easy for airlines to attract new investors/capital. It happens all the time.

 

[thethe]

Indeed their creditors would have to take a haircut. That's my point. Better the creditors and shareholders than the taxpayers.

It trickles down and impacts the taxpayer.

Lower share price lowers retirement and investments

Creditors have employers like any other company

Lending tightens and restricts opportunity for small business

It's all interconnected

 

[57Brave]

" trickles down"
As a man ages, one learns the true meaning.

Literally and figuratively

 

[nsacpi]

It trickles down and impacts the taxpayer.

Lower share price lowers retirement and investments

Creditors have employers like any other company

Lending tightens and restricts opportunity for small business

It's all interconnected

I've been walking around my town lately and there are dozens of small businesses who have complied with the governor's orders and closed up. They are all burning through cash. They have rent to pay. They may have loans.

None of them have access to the capital markets the way a company like American Airlines has.

It baffles me that the airlines are receiving preferential treatment.

These small businesses have been closed now for weeks. The airlines were still flying infected New Yorkers to Miami this week.

 

[thethe]

Small businesses need cash and will be facilitated through lending that has clauses for forgiveness.

 

[nsacpi]

Small businesses need cash and will be facilitated through lending that has clauses for forgiveness.

Not on terms that would cause the kind of appreciation in valuation that we saw on Wednesday for the companies receiving bailouts. The bailout is pretty inequitable compared to what is being done for everyone else.

 

[thethe]

Not on terms that would cause an appreciation in the stock prices of those businesses, if they were traded publicly.

The appreciation is speculation based on projections. It still requires management to make the right decisions.

Small businesses are more flexible to respond to trends and there is an obvious trend that I think a lot of small businesses will engage in moving forward. Itll be harder for larger companies to convince their customers.

 

[goldfly]