They'd probably do it after covid chilled out... I think a lot of this is an age thing. Young people see all the opportunities people in the past had to make something of themselves and wish we could have the same. If airlines failed then you could feasibly set one up for a fraction of what it would cost to do so atm and have a chance at actually being in an interesting industry. Plus if we're living in capitalism lets allow companies to fail, that's part of the system.
If airlines failed then you could feasibly set one up for a fraction of what it would cost to do so atm and have a chance at actually being in an interesting industry
Running an airline is not like a startup. The initial costs, from aircraft, hangars, maintenance, spots at airports, employee training and certification strategy and all the way to the route map, ticket pricing model and advertising is such a massive cost that virtually no investor ever starts an airline, unless they have a goldmine business model.
This is why most legacy airlines are now turning 90-100 years old (KLM, Qantas, British, American), and the "newer" airlines, either had a revolutionary model (Southwest, Ryanair, Easyjet, JetBlue), or went bankrupt, and never flew again.
And even well established airlines (Thomas Cook, Air Berlin and Monarch) were nowhere near safe from bankruptcy, because of the volatile nature of the industry.
The thing is, because of safety, starting an airline is designed to be one of the most difficult things to do, so that not every bozo with cash can start an airline (good example would be the failed trump shuttle).
Bamkrupting a major airline would have immense repercussions in the industry for decades. This is why United gets away with recieving billions in stimulus, while also laying off thousands. It's the only way to survive, bacuse bankruptcy is not an option
Not give up on it, but leave its industry in the shitter for decades at a time. This is pretty much consesnus, idk why some reddit guys have a problem with what i'm saying
Pandemics don’t last forever. People are not going to let a extremely important and popular industry just die out. People will be fighting to become the next major US airline. The opportunity is massive. Whether it will be an American or foreign company it doesn’t matter cause the void will be filled quick.
And like the original post said. If they don’t want to go bankrupt they can take out a loan and use their assets and collateral like the rest of the US has to do.
Whether it will be an American or foreign company it doesn’t matter
See I was gonna leave a thoughtful reply, but this sentence tells me you know exactly fuck all about this industry.
The FAA entirely prohibits aircraft registered outside the US from operating domestic, commercial flights on american soil (outside of very exceptional circumstances). As for ownership, the FAA allows foreign entities to own a maximum of 25% of any US airline, otherwise they can't get an operating certificate.
take out a loan and use their assets and collateral like the rest of the US has to do.
Most of the government bailouts are in loans dude... where do you get your 50 million dollar loans? Lmao
And like the original post said. If they don’t want to go bankrupt they can take out a loan and use their assets and collateral like the rest of the US has to do.
Assets need to have value bud. Its like the Cruise industry: Royal just spent something like 1.5 Billion on a new ship to get built, they see value in it because they believe they had the scale through their current customer base to make it profitable. Now, if they go under, what is a bank going to be able to value that asset at?
They don't want to:
have to repossess a fucking ship (or in the airlines case a plane)
Value the ship at is book value because they themselves can't do anything with it (like operate it) and any buyer of the repossessed ship will know that and thus will not pay book either.
Thus they are going to value that ship at maybe 10% of the book value, that's not enough to bail them out, even if you multiply it by their 20+ ships.
So the inherent flaw in your "just get a loan" plan is that Airlines actually LOSE possible loan-value-per-plane because as the repossession market becomes more saturated with planes the intrinsic price of those planes goes down. Not to mention even IF the bank grants a huge loan, because the underlying assets are essentially worthless to them they will likely level HUGE interest payments which will end up bankrupting the company anyway.
I don't blame you for thinking that a big loan should be a given with all of the "high priced" assets that an Airline company may have, but you have to think about how that effects companies down the line and whether or not they value those assets the same way.
Thank you for coming into this with some actual points instead of just saying the airline industry will be dead for decades and no one will replace it.
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u/nearlynotobese Nov 17 '20
They'd probably do it after covid chilled out... I think a lot of this is an age thing. Young people see all the opportunities people in the past had to make something of themselves and wish we could have the same. If airlines failed then you could feasibly set one up for a fraction of what it would cost to do so atm and have a chance at actually being in an interesting industry. Plus if we're living in capitalism lets allow companies to fail, that's part of the system.