3 Links I Love: Which Airline Fails Next, Volotea Bails IAG Out, and BA Wins

British Airways, IAG, Links I Love

This week’s featured link

Coronavirus Is Pushing Some Airlines to the PrecipiceSkift
The end is near for some. If this continues, there will be a whole lot of airlines either waiting for government bailouts or failing. Outside of Norwegian, it’s hard for me to think of any huge airline that has imminent risks right now. The governments will probably bail most out.

Image of the week: Just search for “empty airport” on Twitter and you’ll see a ton of these. It’s bad. Really bad.

Two for the road

Volotea Will Open New Bases In Spain In 2021 Following An Agreement With IAGAviator
That’s an interesting attempt by IAG to get the Air Europa acquisition to go through.

‘Windfall’ for British Airways as it wins back 12 Flybe flight slotsBBC
Flybe fails, and BA gets its old slots back. Yay?

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21 comments on “3 Links I Love: Which Airline Fails Next, Volotea Bails IAG Out, and BA Wins

  1. Dear help me God there better not be any bailouts, even though I’m still adamant that Boeing is going to get one. At least not here in the US. Here we go again with this privatized profits and socialized losses bullshit. Let the markets run their course. But then again, who are we kidding in believing that we truly have free markets anyway? The very fact that so-called ‘circuit breakers’ exist in the stock market, which are at odds with what a free market is supposed to be, is proof of that.

    Especially….ESPECIALLY…the cruise lines. After all, almost every single cruise ship arriving and/or departing from the United States is registered somewhere else. Most in Liberia IIRC. And squarely and entirely only for tax and regulation evasion. So that alone, should make them ineligible for any aid or assistance of any kind. Let them pay a centuries worth of back taxes upfront first. Then we can talk.

    The airlines have also been living high on the hog for the last decade. Let them ride this out with their profits, If they squandered it, oh well. Sucks to be them. Let them shut down and liquidate. New, leaner, less bloated ones would spring up from the ashes.

      1. There is NO such thing as “the free market” as the first rule of such a thing negates it’s ability to exist. And that is the assumption that everyone is on a level playing field & we all play by the same rules, but reality shows us otherwise. Yet you often hear from those on the far right the same tired trope “government shouldn’t pick winners & losers,” but that’s exactly what keeps happening & the phrase “to big to fail” is the highest form of this problem.

        Based on this I say NO BAILOUTS of any kind! What ever blowback comes from it, will just need to be delt with as it is & that’s that.

        1. Sounds great in practice. Politically…in an election year…it’s suicide and Congress AND Trump aren’t going to commit political suicide.

          Bailouts are coming…if needed.

          1. Well then it’s either political suicide or economic suicide for the 99% who won’t have money to keep the businesses of the 1% afloat. Pick your poison.

            1. Letting an entire industry fail that’s the lifeline of the world would be suicide.

        2. “Yet you often hear from those on the far right the same tired trope “government shouldn’t pick winners & losers,” ”

          No that’s something normal people say. Maybe it’s far right to people who support Bernie but not to the average person.

          It’s also not picking winners or losers, it’s about not letting an industry and the only national was of transportation fall apart.

    1. I think this is right, especially for cruise lines. Their whole business model is built on avoiding taxes and regulation. There shouldn’t be any bailouts from the US taxpayer for them at all!

    2. Bravo. I was not a fan of the post-9/11 bailouts and also not a big fan of US Chpt. 11 BK law. The penalty for corporate malfeasance should be having your business sold off to the highest bidder and letting the strong businesses survive.

      Doing things like stock buybacks when you’re share price is at all time highs strips equity of public owners for the benefit of insiders. (Looking at you Boeing). EPS may have been multiplied with those buybacks to keep Wall Street happy but now when things go down SO ARE THE LOSSES.

    3. After 9/11, we had the ATSB (Air Transportation Stabilization Board) with low interest loans. It helped (especially America West) and it even made money for tax payers. It also let some airlines fail (ATA). While I don’t know all the details of how it worked, I think a model like the ATSB could help airlines now.

    4. If a large legacy airline were allowed to go under in the way you wrote, then the questions I have are, would that airline lose all its slots (especially at slot constrained airports) and would it need to re-apply for an Air Operators Certificate?

  2. ” Outside of Norwegian, it’s hard for me to think of any huge airline that has imminent risks right now. The governments will probably bail most out.”

    Cranky, What about your favorite “Worst Airline Ever” Alitalia?

    Since the virus is really hitting Italy (especially Northern Italy) hard, might this be the end for them?

    1. I have no reason to think Italy will let them fail. After all, things like national pride, ego, and image tend to be very potent forces that, when mixed with politics, pretty mush assures that common sense and sense of ‘what’s [economically] right’ go right out the window. And in an election year? Heaven help us.

      That’s the *REAL* reasons GM and Chrysler were bailed out, not because of the sense of imminent doom nonsense that got shoved down our throats. It’s why Boeing will eventually be ‘rescued’. And why Alitalia always has been and always will be.

    2. Keith – I doubt Alitalia will go away. The only way that happens is if the government decides it doesn’t want to support it anymore. That has never happened.

  3. Have to believe the Air Europa deal is at risk. If there’s any kind of MAC (material adverse change) clause, you’d have to believe current circumstances would qualify.

    1. More on this – the Air Europa deal (1bn Euro) was to be funded with debt. IAG needs another billion euro of debt right now like it needs a hole in its head. I have to believe they’ll be doing everything they can to wiggle off that hook – or at least re-price the deal.

  4. The US people have an interest in ensuring the survival of the airline business. We do not have an interest in ensuring the survival of airline equities. In the US, we have a system that allows us to preserve the business while still wiping out the equities – it’s called Chapter 11.

    Govt aid to US carriers should be predicated on first filing Chapter 11 – i.e. wiping out the equity. Not requiring that after 9/11 was a major mistake that simply allowed non-economic entities to continue to pay higher-than-market financing and labor rates for some period of time – until ultimately many of the carriers went into Ch 11 anyway.

    Cruise lines are something else altogether. All ships are foreign registered, almost all employees are non-US citizens. Cruise lines also perform a service that is not remotely essential. So, no aid to such companies. If every one of them goes out of business, too bad.

    However, don’t forget that the current US president has a direct interest in this – he owns/runs hotels, which will also be hit hard. Hard to make the case that any one hotel (or even any one hotel chain) requires aid. I seriously doubt there will ever be a shortage of hotel rooms.

    1. I would disagree on Ch 11 in this case. The airlines aren’t in trouble because of defects in their corporate or operating structure, which I agree are things that should be fixed under bankruptcy protection, they are in trouble due to a slow moving global catastrophe well beyond their control. In a normal climate or even normal recession our airlines are actually moderately to very well run for probably the first time since deregulation. If it were just some dropping demand then for once the airlines were in a position to handle that as they have so far by cutting routes and cancelling flights, but now we’re getting into territory of governmental travel restrictions and knock on effects as related business and leisure demand evaporates as things like cruises simply shut down.

      The scale of this traffic loss is the largest in the history of aviation, and I don’t think it’s entirely fair to say, sorry we banned travel so sucks to be you. Letting an entire industry collapse would be catastrophic. It used to be common to nationalize transportation industries and assets during time of war or crisis. I don’t think that’s anywhere on the table but it represents a form of historical assistance given during times of emergency.

    2. > So, no aid to such companies. If every one of them goes out of business, too bad.

      Agree, but you should listen to what relatively new Floridian Impetus just said at the WH press conference. A great American industry and we are the way with it.

      Let them fail. Someone else will pick up the pieces. Doesn’t have to be the taxpayer.

  5. From the other side of the coin:

    If these companies were to fail and not get any assistance, that would leave a fewer number of companies. Less companies would mean less competition which IMO would lead to higher prices in the end run. That is one reason I believe these “bailouts” should be no interest loans instead of grants. So that when they become profitable again when business returns, the money has to be paid back to the government entity instead of letting the companies (and their investors) pocket all the profits.

    1. Actually most historical bailouts, including the last airline bailouts after 9/11 are low interest loans or equity purchases from the government. Same with the wall st bailouts in 09. In fact the government almost always earns a return on investment once the loans are repaid, but that doesn’t make a sexy headline like “taxpayers foot the bill for x company”

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