3 Links I Love: Shut ’em Down, Give ’em Money

American, Links I Love

This week’s featured link

The Case for Shutting Down U.S. Airlines NowSkift
It should be shut down, but it’s not just the threat of spreading the disease. It’s also the economic carnage of continuing to operate nearly-empty airplanes. I say bring back the CAB, divvy up the routes the government deems essential, and stick with that plan until things start to recover. But that won’t happen now that government support is out there. Empty planes will keep flying… at least to some extent.

Image of the Week: Who wants a depressing chart? I figure this chart with data vis TSA is about as depressing as it gets. This is a look at TSA checkpoint numbers this year versus last.

Two for the road

Inside American Airlines’ Scramble as Virus Grounds Jets by HundredsThe New York Times
An inside look at that carnage. Six people on AA1? Yikes.

Former American Airlines exec: $50B government infusion to the airline industry isn’t the answerDallas Morning News
Here’s a different point of view. He’s not saying the airlines don’t need money, as you’d expect since he was a former American Airlines employee. Instead, he’s saying they need it structured differently.

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15 comments on “3 Links I Love: Shut ’em Down, Give ’em Money

  1. The article about American was fascinating and informative. It is probably the best article I’ve read about the complexity of dealing with the COVID-19 rapidly-evolving situation. As I read it, I wondered if the average Joe would now understand what American (and every other U.S. carrier) is experiencing. But, alas, I don’t think that’s the case, based on the ignorant and hate-filled comments I read.

    1. I think you are underestimating some peoples intelligence and understanding. In a broad, abstract sense, the majority of people understand the “greater good” concept. I don’t think that’s where the vitriol you are seeing comes from.

      The real issue, which some people have noted is that “essential” does not equate to “no strings attached bailouts”.

      CEO’s, shareholders, etc should not be the first in line. They should not be allowed to hold everyone else hostage by saying things along the lines of “gimme ten billion in cash (which I’m gonna put into my pocket) or else I’m going to throw twenty-thousand of your constituents out to the street”.

      It isn’t that we don’t want to see the airlines saved. Far from it. But there has to be a way to shield and protect the front line workers while making sure aid doesn’t end up in the pockets of executive management and shareholders.

      What I read, the terms of the bailouts address this to some degree. But I don’t think it goes far enough. For example, I would’ve extended the “no layoffs” clause at least to the end of the year. The stock buybacks should have been permanently banned. Also, a clause prohibiting mergers at least while loans are outstanding should’ve been included as well.

      1. The real issue, which some people have noted is that “essential” does not equate to “no strings attached bailouts”.

        CEO’s, shareholders, etc should not be the first in line. They should not be allowed to hold everyone else hostage by saying things along the lines of “gimme ten billion in cash (which I’m gonna put into my pocket) or else I’m going to throw twenty-thousand of your constituents out to the street”.

        It isn’t that we don’t want to see the airlines saved. Far from it. But there has to be a way to shield and protect the front line workers while making sure aid doesn’t end up in the pockets of executive management and shareholders.

        I understand what you are saying Matt, but don’t ever underestimate the sociopathic nature of these CEO’s. They could take the bailout & then screw the workers afterwards & doing it with a smile & remember many of those who hold the purse strings are also sociopaths themselves.

        When it comes to the workers, you are right.

      2. If you’re going to ban buybacks, better to apply it to every industry and not just the airlines.

        Single the airlines out and you ultimately leave them at a even greater structural disadvantage in terms of attracting private investment compared to other companies. It’s already a volatile, capital intensive, labor intensive, highly leveraged, highly regulated, low margin industry. Put some permanent screws to shareholder comp and why would anyone bother putting money in a company like UA over a Union Pacific or Caterpillar?

    2. You must not be reading comments on mainstream media sites very often. I think they are generally from a very small but “special” subset of the population. I bet you find hateful comments on Mother Teresa’s obituary. In any case, they certainly should not be confused with anything representative of the entire population.

      1. Oliver,

        These so called commenters maybe come from a small subset of the population as you note, however they have been more influential over the past decade or so & not in a positive way for the most part.

        1. No disagreement there. Other than for “scientific” purposes I tend to ignore any comments and certainly don’t engage. It just leads to hypertension, with is bad if you catch covid-13 :)

          (of course, sites like CF with intelligent discussion are excluded… I very much enjoy reading the comments here… almost all of them)

  2. At this point, it’s pretty hard to make a case for keeping passenger service* running. In my station, we are seeing pax loads of 1,2.4 on flights that are usually packed (spring break notwithstanding). Why not shut it down for a fixed period of time (14-30 days?), pay everyone to stay home, and then be ready to ramp back up?

  3. These articles were interesting, but I must add that in all of them there’s a faulty assumption & that is people will return once they get use to social distancing. I don’t think that is the case as we have been social distancing for a quarter century, but we just didn’t call it that. We just said send me an E-mail rather than talking on the phone or face to face. This is just the next level of that process.

    1. I could imagine a permanent drop of workplace and business behavior that extends to less business travel. I don’t know that personal travel will seems permanent change. Perhaps cruise lines may have a bit of a challenge getting people back aboard. But even that isn’t clear to me; people are already distracted by something else and no longer worry about the Princess pax. Or crew for that matter – where are they at the moment and what’s their state of health?

      1. If an airline such as American had to become more dependent on the leisure traveler, I cant see them ever being the huge carrier they once were. The leisure traveler is… 1. fickle & 2. will become more interested putting food on the table rather than a jaunt to Disney or Vegas as they try to stay employed.

  4. I basically agree with Brett that there should be government coordination of airlines to maintain a skeleton national network during the emergency. I’d prefer to see a relaxing of antitrust rules allowing the airlines to coordinate service, with government oversight and price controls to hold fares at pre-emergency levels with subsidies to allow the “Essential Air Network” to run at break-even after including cargo revenue.

    The bail-out money should be targeted to keeping employees paid and maintaining health insurance cover. All executive cash bonuses should be stopped, although I’d allow continued contractual stock bonuses – they don’t impact cash flow and do provide an incentive to management, but I would also require that they be extended to rank-and-file employees still working during the emergency.

    The other big change I’d make, and not just for the airline industry, is a permanent ban on the entire practice of stock buy-backs. If a company has more cash on hand than it needs, it should be reducing debt or paying cash dividends that all stockholders get without having to sell their holdings. Admittedly, this isn’t a worry right now because no one (in the airline industry, at least) aren’t exactly flush with cash right now, but right now US industry as a whole relies far too much on debt financing. Debt has to be serviced regardless of trading conditions, while dividends can be suspended in bad times. To go with this, we need to change the tax code to stop favouring debt over equity by allowing companies to deduct dividends from pre-tax earnings the same way they can deduct interest.

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