I used to be a United traveler. I ran into a string of poor experiences. I changed to AA and never looked back. AA has largely replaced its fleet but for the RJ’s. I love AA even though surveys always show them near the bottom. Plus I hate terminal one at ORD.

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Hawaii (fuck) You

They wouldn’t go out of business. They would reorg under chapter 11. I want to teach these stock buyback assholes a lesson. Wipe out the equity holders and let the bondholders take over.

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Hawaii (fuck) You

Let me rephrase please...
Is there a reason to give an airline a bailout?

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"Play until it hurts, then play until it hurts to not play."
http://soundcloud.com/darkside124 HOF 2013, MM Champion 2014

Yes. I would not, but there are reasons to. They are considered critical national infrastructure. But here is how the bail out game is going to go.

1) Government provides cash or loan guarantees,
2) Some of that money gets used in ways that average Joe considers wrong, ie CEO bonuses, or employees get laid off,
3) Public gets enraged that money given to airlines is used for purposes not deemed socially responsible,
4) Three years on, airlines go back to business as usual, stock buy backs, focus on ROE’s, takes hardline on union negotiations, etc, and the public wonders why we gave them money.
5) No lessons are learned by anyone.

Or we can teach the markets a lesson. There is a price to pay for balance sheet leverage. That leverage needs to be factored into capital allocation decisions. Ford learned its lessons. I read their latest annual filing. They target minimum liquidity of $20B at all times and have over $30B right now. They did not take a bailout last time.

I am a free market capitalist. I do not support big business blindly. They need to face the market. That means bankruptcy.

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Hawaii (fuck) You

So since the housing market collapse, are we just training these publicly owned companies to go ahead with irresponsible behavior without consequences because someone will always be there to bail them out?

Also you say critical national infrastructure... can their competitors not meet demand within a reasonable time frame?

I'm not asking to be a smartass I swear I'm trying to understand.

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"Play until it hurts, then play until it hurts to not play."
http://soundcloud.com/darkside124 HOF 2013, MM Champion 2014

No I understand, good questions. We are encouraging moral hazard by bailing these guys out. Traditional financial theories always stressed the interplay between leverage and bankruptcy risk. But activists hedge funds and the general markets have encouraged recurring share by backs in a failed effort to boost share prices in the short term. In fact, these assholes are pushing companies to make very short term thinking.

Then when stuff goes bad, there is no flexibility in the system. Nothing saved up for a rainy day.

As for the airlines, there are really only four domestics with broad reach. They are critical to our infrastructure. But if they went under, they would not disappear. It would teach the reorganized companies to account for downturns.

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Hawaii (fuck) You

So you expect that an airline bailout will indeed occur, and you ultimately see that as a negative choice when looking to long term financial planning?
It feels like I'm paying (I meaning the US taxpayer) the interest on a loan to a multi billion dollar company who completely screwed up their own balance sheet because they've outgrown, with the help of us, their natural limit of growth. In other words, we complained about the terrible nature of "too big to fail" 12 years ago and learned absolutely nothing from it.

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"Play until it hurts, then play until it hurts to not play."
http://soundcloud.com/darkside124 HOF 2013, MM Champion 2014

I was thinking about this yesterday....let's say the big 4 domestic airlines folded.
How long would it take for some other gazillionaire to seize the opportunity and start up a new airline? If there's money to be made, some vulture will take advantage.

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Right... that's kind of what I'm getting at here. Where there is a demand for business that demand ultimately will be met.

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"Play until it hurts, then play until it hurts to not play."
http://soundcloud.com/darkside124 HOF 2013, MM Champion 2014

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I can absolutely see one of the airlines going under or being absorbed by the others. Boeing, on the other hand, will never be allowed to fail. The stockholders may get zeroed out, but they are literally too big to fail.

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Exactly. I already deep dove into UAL’s last financial filing. These guys deserve to go under.

I will say the banks learned their lessons partly from higher capital standards and other rules. They are much better capitalized now. They still may wobble.

But I am sick and tired of companies, like Home Depot, that took out tens of billions in debt to buy back stock. Complete waste of precious capital. But you can also thank the Fed and idiots like Trump who think low interest rates are a good idea. Capital is supposed to be scarce, but we throw it around like it is free. And now it’s tough to get capital. Go figure.

If I expect, as I do, the average American to make smart financial decisions, then I should expect even higher responsibility from Wharton MBA’s who run these large companies. They don’t get a pass. They deserve to lose their stock options and bonuses for fucking their companies. We just had the longest expansion in U.S. history, and these companies are going to fold in one month?

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Hawaii (fuck) You

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We need Boeing if for nothing else than defense. But wipe out the equity holders in a bail out. Hell, these morons just let unsafe jets fly globally. And they knew it.

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Hawaii (fuck) You

Stock buy backs are fine. Free flow of capital requires such. BUT, they need to be with the wider context of capital allocation. When a company has excess cash, it must decide how to deploy it- capital investments, acquisitions, marketing, R&D, etc. These decisions are made on a net present value calculation where the highest return projects are selected. When there are no projects meeting the return requirements, then dividends and buy backs are appropriate after considering acceptable liquidity cushions. This is basic finance 101.

When you borrow money to buy back stock, fuck you. Terrible on every level.

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Hawaii (fuck) You

Maybe the pathological need to maximize returns to shareholders isn't such a great idea long term.

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It’s bad when done on a quarter to quarter basis. And these idiots forget how to whether downturns. This is the time when shrewd CFO’s win because they are in a strong competitive financial position.

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Hawaii (fuck) You

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This is how we exist at the moment. Do you think that is going to change as a result of what we are seeing right now?

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Why? It didnt change after the last financial crisis.

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"Play until it hurts, then play until it hurts to not play."
http://soundcloud.com/darkside124 HOF 2013, MM Champion 2014

It won’t change if we bail companies out.

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Hawaii (fuck) You

I like American Airlines a lot but Delta is by far now the best domestic airline.

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You do not talk to me like that! I work too hard to deal with this stuff! I work too hard! I'm an important member of the CSFMB! I drive a Dodge Stratus!

Boeing is a private wing of the United States military and will not fail for national security reasons. And that's not really a bad thing.

I can’t argue with you there Rick. Most people love Delta. But in Chicago, you have to choose UAL, AA or Southwest. Since I live closer to ORD, Southwest is out.

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Hawaii (fuck) You

And the issue here is the UA with their network is by far the best international airline. Its more powerful than Delta and AA's alliance's combined. Singapore is probably the best airline in the world and they fall under the Star Alliance umbrella.

Also I think Southwest is on a level all its own with its unlimited checked baggage and fees free travel. In a era where almost every carrier offers less they give the best bang for your buck.

Southwest is terrible and I used to fly them exclusively.

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You do not talk to me like that! I work too hard to deal with this stuff! I work too hard! I'm an important member of the CSFMB! I drive a Dodge Stratus!

Because they offer so little room?

Not picking your seat prior to the cattle call is terrible. They no longer price competitively for most times when it is good to travel. They are really cheap if you need to fly out at 6am on a Sunday or Wednesday at 2pm. Otherwise, you pay less flying another airline even if you have bag fees. If you aren't near one of their major airport hubs you don't get a lot of good options without connecting to one of them.

I think they were great when they were a growing airline but at this point I'd rather pay more money to fly another airline, be able to pick my seat and get extended leg room, and worry about the potential of a change fee that in probably 50 or so flights I've done in my life I've never had.

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You do not talk to me like that! I work too hard to deal with this stuff! I work too hard! I'm an important member of the CSFMB! I drive a Dodge Stratus!

They do the cattle call because it gets people to hurry up and sit down. Same reason they allow two free checked bags, its just way faster to not have people fumbling around with the bins. Operationally they are almost second to none, these little things they do are why I like them so much.

Like all airlines, they are much better for people with status. I have friends that only use Southwest, but they always get first pick of the seats and have stacks of free drink tickets.

Their point to point flying is annoying. I prefer AA especially for business. On leisure trips, Southwest is fun.

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Hawaii (fuck) You