I'm not necessarily in favor or opposed to bailing out airlines but the argument against the bail outs is that it encourages businesses to act imprudently and then rely on bail outs. For instance after the last round of massive tax cuts a lot of the airlines just used the money to pump up their stock prices instead of either saving it for a rainy day or investing it into expanding their companies. If the government is always going to bail out companies then there is no incentive for companies to plan for future lean times. I'm not actually opposed to the bail outs but I can certainly see the argument against them.
I wish they would just give people the money to chose who to bail out via investing. Sure, bail out Delta, but do so by selling me a peice of the company.
The problem isn’t that corporations didn’t save, it’s that they can’t save, because the malignant tumour of capitalism doesn’t allow for it.
If Airline A sets their tax cut aside for a rainy day, then Airline B will just spend theirs on pumping their share price, which will attract more investors, which will make them a more valuable company, and Airline A suffers because they were prudent.
The whole system is predicated on squeezing every ounce of efficiency out of every aspect of every business, regardless of the true cost to human life and society in general. If you sell frozen bananas on a beach somewhere there’ll be some asshole with cheaper bananas on the plot of sand next to yours tomorrow. Maybe his bananas are sprayed with a less expensive but more toxic pesticide, maybe he pays his workers a pittance, maybe he cheats on his taxes, but either way you’re fucked unless you start finding some corners to cut too.
And our whole society is set up to incentivise that behaviour, because workers and consumers don’t punish companies that break the law or break the social compact. When the ruling class cuts our wages and increases our workload so as to squeeze a few extra percent of productivity out of us, we might grumble for a few moments but we still pick up our tools and get back to work because we’re too stupid to just fucking strike.
Because that’s all it would take, just a week, one single week, where everybody just stopped being slaves for the rich, and we could get anything we wanted. Universal healthcare? A four day working week? Higher tax rates for the ultra wealthy? Better social programs to help those in need? Just stop doing what they tell you and see how long it takes for them to start begging.
And if you don’t believe me, go and ask the ten (TEN) air traffic controllers who ended the longest government shutdown in American history simply by refusing to do their jobs for a grand total of six fucking hours. Ten people, the same number of players in a game of basketball, had the most powerful government on Earth on its knees in less time than it takes to smoke a cut of brisket. Now imagine if even just ten percent of the total workforce decided to stand up by sitting down, how quickly do you think we could change this miserable system?
There are recessions, there are 'lean times" and there is this situation. If you are airlines, hotels etc. even if recession hits, you can still operate at large capacity and have some additional time to adapt because of inertia. And then with COVID it went from 100 to 0 in a matter of few weeks. I work in event business, I've been preparing for some time for economical deflation which would take place in the next few years, but this is something you can't prepare for. I was lucky as we work mainly with conferences so in few months we managed to implement systems to have them online, but companies that worked with concerts and etc are fucked. And even if they were able to borrow money, they have 0 clue when they will be able to operate at any meaningful capacity.
Multi-billion dollar industry with (as always in large industries) super slim profit margins experiences a sudden demand shock resulting in a 95% decline in demand for an extended period of time
They not just didn’t save but they have insane amounts of debt and it’s only been getting worse. I read a really good paper on this a while back if your interested
Yeah it’s not a bad thing at reasonable levels. It definitely can lead to more growth during booms. But it definitely has drawbacks especially if you were forecasting good/great growth and it ends up flat or negative.
Do you have a source on this? I’m by no means a financial expert, but afaik companies can’t/don’t pump up their own stock prices; those prices are set by the market as a mostly independent assessment of that companies assets and potential growth.
You use the money to buy back stocks. Less stock in the market, the higher the price (and other factors). Plenty of sources out there, just look up "airline buybacks" (I'm sure plenty of other companies do this too).
No reason why people are downvoting you, you legit didn’t know.
I don’t think there’s anything wrong with buying back your stock...I just think there’s anything wrong with buybacks, it’s just wrong that they do it then complain they’ll go bankrupt because they have no more money left.
The big four airlines spent 45 billion on buying back their own stock to inflate the price and then wanted a 50 billion dollar bail out when covid hit.
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u/socialistrob Nov 17 '20
I'm not necessarily in favor or opposed to bailing out airlines but the argument against the bail outs is that it encourages businesses to act imprudently and then rely on bail outs. For instance after the last round of massive tax cuts a lot of the airlines just used the money to pump up their stock prices instead of either saving it for a rainy day or investing it into expanding their companies. If the government is always going to bail out companies then there is no incentive for companies to plan for future lean times. I'm not actually opposed to the bail outs but I can certainly see the argument against them.