[HN Gopher] Airlines want to cancel rule requiring them to refun...
___________________________________________________________________
Airlines want to cancel rule requiring them to refund fares for
canceled flights
Author : hhs
Score : 136 points
Date : 2020-04-07 20:44 UTC (2 hours ago)
(HTM) web link (www.npr.org)
(TXT) w3m dump (www.npr.org)
| United857 wrote:
| If the airlines really need the money to survive then they should
| treat it as a loan and when it's over refund the customers plus
| interest.
| ck2 wrote:
| This sounds a lot like all the gym memberships that suddenly
| became impossible to cancel (seriously).
|
| Since when is keeping money for doing absolutely nothing as
| promised the American way?
| rafiki6 wrote:
| Is it really that bad if some airlines fail? That whole industry
| really needs to be restarted IMO. Their assets would be purchased
| at a major discount by others who would likely create new
| airlines, or you might potentially see the healthiest ones
| consolidate the market (which wouldn't be the best outcome).
| Also, why isn't there consideration for nationalization of one of
| these failed airlines rather than giving them tax payer money
| even as a loan?
| mr_toad wrote:
| > Also, why isn't there consideration for nationalization of
| one of these failed airlines rather than giving them tax payer
| money even as a loan?
|
| Once you have a national carrier they want bailout after
| bailout. Politically it looks bad to let your national airline
| fail, and they know it.
| the_reformation wrote:
| This essentially happened after 9/11. We saw broad
| consolidation into the Big Three. The argument was that the
| restructuring meant we'd finally have an air industry with
| structurally bigger margins. This was sorta true- during a bull
| market.
|
| Ultimately, I think large scale personal air travel (or mass
| transit in general) isn't feasible in all economic climates. By
| definition, it's high upfront costs and low margins. The only
| airlines who seem to always make it work are regional and
| shuttles between high-income cities (Alaska, JetBlue.) As for
| why don't we just nationalize them, I'd say we de facto have
| already. Airlines know bankruptcy-level downside is covered by
| the government.
|
| It's not all bad though; there's an argument to be made that
| this system is pareto efficient. During bull times, you want
| private operators pushing for network expansions and price
| efficiencies, even if that means levering up. But these are a
| de facto utility, so having the government pinch their nose and
| cover the downside in a bear market is an efficient use of
| dollars. You could try and put in regulation to force them to
| reserve X months (years isn't realistic) of operation costs,
| but you can't get around the basic unit economics of the
| problem: planes are expensive, even if they're grounded and
| don't make money if they can't fly.
| rafiki6 wrote:
| I like that you mentioned they're a de facto utility.
| Utilities tend to also be natural monopolies. They usually
| tend to be government owned and operate at arms length. They
| also tend to be heavily heavily regulated.
| WalterBright wrote:
| > As for why don't we just nationalize them
|
| Washington State nationalized the ferries, and they now run
| at massive losses a system that used to run at a profit.
| vkou wrote:
| The public roads in Washington State run at massive losses,
| yet we don't blink an eye at it - why should we treat
| ferries any differently? For anyone living on an island,
| they are the only 'road' in or out.
| WalterBright wrote:
| > why should we treat ferries any differently?
|
| Because history shows they can be run at a profit with
| the same fare, at no cost to the taxpayers.
|
| > For anyone living on an island, they are the only
| 'road' in or out.
|
| Evidently this wasn't a problem when the system was a
| "mosquito fleet" of private ferries.
| colejohnson66 wrote:
| > Because history shows they can be run at a profit with
| the same fare, at no cost to the taxpayers.
|
| So can highways; Private toll roads are a thing. Doesn't
| mean the National Highway System is bad.
| selimthegrim wrote:
| The ferries in New Orleans would like a word with you.
| HarryHirsch wrote:
| If you believe the free market should operate everywhere
| in medicine because it will somehow lead to an equitable
| outcome you also believe that it will deliver good
| outcomes in infrastructure.
| malandrew wrote:
| Since when is equitable outcome a goal? Brand new
| treatments like all technological innovations take money
| to develop and will always be expensive for first
| adopters.
|
| Care that becomes faster, cheaper and better is a goal.
| With the exception of some pharmaceutical regulatory
| capture shenanigans and administrative bloat due to
| growing regulations, the healthcare system actually does
| a really good job at achieving at least two of those
| goals. Pretty much every treatment available 20 to 30
| years ago is faster and better today. Some are cheaper,
| and some are more expensive.
| a3n wrote:
| > But these are a de facto utility, so having the government
| pinch their nose and cover the downside in a bear market is
| an efficient use of dollars.
|
| _If_ that 's the case, then it wold be more efficient to
| remove the "de facto" and operate as the reality.
| SilasX wrote:
| I think there's a middle ground: allow them to compete as
| private businesses but require that they contribute some
| fraction of revenues into a common pool that pays out
| refunds and wages for a few months if a major travel-
| halting emergency happens.
|
| That is, make it so they can't compete on "whether they
| anticipated a global catastrophe".
| outlace wrote:
| I think its still better to have some competition between a
| few private airlines (even if de facto subsidized by gov't)
| as opposed to one behemoth national airline that faces no
| competition and therefore has no incentive to innovate.
| jessaustin wrote:
| You haven't flown on any of the Asian national carriers,
| have you? They are all better than any American carrier.
| They are all better value than any American carriers
| other than the "discount" brands like Southwest. USA
| domestic air travel would improve dramatically if they
| were allowed to compete here.
|
| https://www.singaporeair.com/
| https://www.qatarairways.com/ https://www.koreanair.com/
| https://www.jal.com/ https://www.malaysiaairlines.com/
| Ericson2314 wrote:
| I don't care if airlines innovate. I want rail to
| innovate. Airlines should be obsoleted. Build a train
| across the Bering straight and through Greenland.
| hosteur wrote:
| Agere. And also remove the part where the profits are
| sucked out to other parties when things go well.
| projektfu wrote:
| I'd hate to see what the market looks like after that level of
| consolidation.
| unstatusthequo wrote:
| Maybe the only thing worse than consolidation is
| nationalization. Welcome to GovAir. It would be worse than
| Spirit Airlines. Ugh
| jdkee wrote:
| No bailouts for the airlines.
| ar_lan wrote:
| I'm STILL waiting for United (or Expedia) to send me a refund
| after 2 weeks. I had a cancelled international flight and neither
| is sending me my refund.
|
| I don't think many of us have just thousands of dollars to just
| not get back.
| selimthegrim wrote:
| The world's smallest violin is playing for Spirit Airlines right
| now.
| cultus wrote:
| Flew them once. If I never do it again it'll be too soon.
| HarryHirsch wrote:
| They've got an all-Airbus fleet. They will be an excellent
| choice to avoid flying 737-MAX.
| reaperducer wrote:
| Spirit puts the "bus" in Airbus.
|
| Not really related, but it turns out that calling your
| American Airlines pilot neighbor a "sky bus driver" is a
| good way to get kicked out of his Christmas party, even if
| you were mildly drunk and maybe half kidding.
| HashThis wrote:
| We paid for that product. If they can't deliver the service, we
| are owed our money back. This would be fraud. Congress sells out
| the american people to corporations on these things. If
| revolution happens in the USA, it will be because congress and
| corporations pull this kind of corruption.
| tomp wrote:
| It's a painful situation. There will be pain, suffering and A
| LOT OF economic loss. Somebody will have to pay for that loss.
| Guess who? The people! There's literally noone else to do it...
| how to distribute the burden? "fairly" (each person has a
| different idea what that means) ... at least people who afford
| air travel probably have a bit of money they can lose without
| suffering too much.
| whelming_wave wrote:
| I'm sure the company will be able to suffer through the
| losses - and if it can't, was it a viable business in the
| first place?
| [deleted]
| ksk wrote:
| I don't think any business plan accounts for half of the
| worlds population suddenly not participating in the world
| economy.
| jessaustin wrote:
| Businesses with bad plans fail every day.
| nostromo wrote:
| They can and will deliver the service, on another flight, which
| is why they're giving you a flight voucher.
|
| Why is this controversial? Seems fair enough to me.
|
| I get the feeling people enjoy beating up on airlines because
| so many people pay the smallest amount possible, and then are
| _shocked_ when they 're not treated like first class
| passengers. People pay for McDonalds but expect fine dining.
| mrep wrote:
| The travel vouchers are essentially 0% interest loans that
| expire worthless if not used in 9 months. That is by far
| worse than cash. I don't even know why this is controversial.
| I paid for a service, they cancelled it and now I should get
| my money back and if they want that money, than they can get
| it in the future when the offer some other flight I want. I
| didn't pay them for a gift card that expires worthless in 9
| months. Even gifts cards cannot pull that expiring shit
| anymore because it is so anti-consumer.
| colejohnson66 wrote:
| Because even though I probably agreed to a trade in the terms
| of purchase, a rescheduled flight isn't a great solution;
| sometimes a rescheduled flight can mean the difference
| between a vacation and nothing. If I spend $5000 on a
| vacation (hotel and air) and I can't fly there, I'm out $5000
| for no fault of my own.
| pedrorijo91 wrote:
| not fair. it's not a normal service. it's a transportation
| service. If I can't travel on date X, traveling on date Y may
| be useless.
|
| One could argue it would be useful for another trip to a
| different location. Sure. But because airflights prices are
| so shady (prices changing every day, prices that are
| different if you have a VPN connected, etc etc), the voucher
| could make you choose for the worst price.
|
| That doesn't seem fair to me tbh
| chrisseaton wrote:
| > This would be fraud.
|
| I think 'fraud' has a specific technical definition - it
| requires 'intentional deception' or 'misrepresentation' or
| something similar depending where in the world you are.
|
| If they decide to cancel your flight for business reasons and
| genuinely weren't planning to when they sold you your ticket
| you can argue that you should get your money back under
| consumer rights about paying for services provided and maybe
| contracts I don't know, but it doesn't really make any sense to
| claim it's 'fraud' - there isn't the deception or
| misrepresentation required.
| lagadu wrote:
| Yep, this isn't fraud; it's just breach of contract.
| a3n wrote:
| No, if revolution happens in the USA it will be because
| politicians went too far in dividing us.
| ta999999171 wrote:
| Why wouldn't it be both?
| jacquesm wrote:
| Not as long as there is sports on tv and McDonalds is open.
| Oh, wait.
| nostromo wrote:
| Pot, liquor stores, and vape shops were all deemed
| essential businesses in Washington State.
|
| Turns out the true opiate of the people are... well,
| opiates and other drugs.
| Analemma_ wrote:
| This is an ignorant comment; there are entirely
| legitimate reasons why those stores are still open.
| Alcohol withdrawal can actually kill you, or at least put
| you in the hospital, and having to hospitalize a bunch of
| alcoholics is the last thing the system needs right now.
| People also use cannabis as a safer alternative to pain
| relief than actual opiates.
| reaperducer wrote:
| You missed one. What is the entirely legitimate reason
| why vape stores should be open?
| a3n wrote:
| Bread and circus.
| usaar333 wrote:
| There's all sorts of Force Majeure rules in life and contracts.
| e.g. I still have to pay for my kid's preschool she can't use.
| (Edit: Prepaid, not getting a refund)
|
| I'm not sympathetic to the airlines at all and think they
| should refund, but I don't think it is universally true that
| "can't deliver service = owed money back" in this pandemic.
| tantalor wrote:
| Well, no, Force Majeure would give you an option to back out
| of your agreement with the preschool, including tuition.
|
| My understanding is Force Majeure rescinds the contract for
| Act of God (natural disaster) or Government (human-caused
| disaster). No contract means deposits and pre-payments would
| also revert.
|
| /ianal
| eloff wrote:
| Unless you prepaid. I got forced into taking an apartment
| rental I wanted to back out of when I got laid off because
| I made the mistake of paying promptly. I might have had a
| chance to fight it otherwise.
| tantalor wrote:
| Not necessarily...
|
| _the common law concept of restitution requires that the
| parties be returned to their original, pre-contracting
| positions. In reality, this means that the parties must
| return any prepaid monies or deposits_
|
| https://www.agg.com/news-insights/publications/your-
| event-is...
| CPLX wrote:
| That's not really now Force Majeure works, there's a lot
| more nuance to it than that.
| mihaaly wrote:
| You accept this behavior, almost argue for it.
|
| That is wrong!
| hedora wrote:
| Issue a chargeback.
| draw_down wrote:
| Yeah, chargeback time. I once had a car rental agency refuse to
| give me the car I had reserved and paid for, then refuse to
| give me a refund for the money I had paid ahead of time. Just
| charge them back when they pull this crap.
| colejohnson66 wrote:
| Unfortunately, that's a good way to get banned from a service
| Rafuino wrote:
| I have three flights booked through July with United, and I'm
| likely going to have to cancel all three of them without a
| refund. Another rub is that they've changed the flight schedules
| on all my flights 4x now since February, and there is no option
| to view the original schedule of my flights. I believe a few of
| my trips have been ruined by these schedule changes (e.g. won't
| be able to make it for dinner with friends, or now can't get back
| before an ungodly hour in the early AM), but I can't confirm the
| original schedules...
| ping_pong wrote:
| That's a great way to put themselves out of business. If they
| don't want to play a fair game, you can well be assured that
| people will stop using their products as much as they could be.
| jariel wrote:
| "If they don't want to play a fair game,"
|
| The government interfering existentially to shut down their
| business isn't quite 'fair game'.
|
| Put another way, the government could ban travel, in which
| case, the airlines could theoretically offer the flight, but
| the consumer would have to then cancel their ticket and pay a
| charge, or not get anything back. Point being the government
| interference could run both ways.
|
| So it's going to be a big problem clearing all of this up.
| reaperducer wrote:
| _That 's a great way to put themselves out of business. If they
| don't want to play a fair game, you can well be assured that
| people will stop using their products as much as they could
| be._
|
| If there was real airline competition, sure. But there aren't a
| half dozen airlines flying between most cities. There are two,
| if you're lucky. Or one for the majority of city pairs in the
| United States.
| moate wrote:
| If only that were the case.
|
| Airlines and Broadband companies are constantly getting
| terrible reviews because they offer such terrible quality
| customer service. But what the fuck are you gonna do, rig up
| your own ISP or charter a boat across the Atlantic? No, you're
| going to get reamed in the ass and keep living in the 21st
| century.
|
| These industries "fail" because they're designed to fail!
| Nobody wants to admit it, but you need a public option on this
| shit or else people will just keep being forced to publicly
| subsidize a select group of private enterprises over and over
| when shit goes tits up.
| a3n wrote:
| > But what the fuck are you gonna do, rig up your own ISP or
| charter a boat across the Atlantic? No, you're going to get
| reamed in the ass and keep living in the 21st century.
|
| Or we can globally live within our means. It is apparently
| _barely_ sustainable for people to be able to fly anywhere on
| a whim and a salary. If the globe being able to do this means
| that airlines must operate at constant arm 's reach of
| bankruptcy and bailout, then we're living beyond our global
| means and society is ill-structured.
| olliej wrote:
| Why don't they have savings to get them through unexpected
| financial problems? Oh right:
| https://www.bloomberg.com/news/articles/2020-03-16/u-s-airli...
|
| We can't be held responsible for their own financial
| mismanagement - likewise they should not be eligible for any
| bailout funds - or they can sell their stock on the market to
| raise funds.
| cultus wrote:
| We've decided as a society that it is acceptable to have
| massive oligopolistic too-big-to-fail corporations in control
| of critical sectors. We have no choice but to bail them out.
| olliej wrote:
| we can ensure they don't fail by taking ownership - if
| they're unwilling to raise funds by selling an equity stake,
| on the market or otherwise, they can declare bankruptcy and
| be bought then.
|
| Many many years ago Air New Zealand essentially went bankrupt
| (after it had been privatized) so the NZ gov bought it out.
| Then a few decades later privatized it again at a profit.
|
| Which is the evidence that this can be done.
| cultus wrote:
| Sure, but there's no political will to do that, since the
| elites in charge are the ones who benefit from these
| policies.
| monksy wrote:
| We should make them refund above how much they charged as a fee
| to them.
|
| It's kind of funny when the shoe is on the other foot. They're
| upset when they're required to follow the law. They want to sell
| nothing but refundable tickets which they can oversell, but the
| minute they can't meet their obligation they're crying to the
| government.
| wdb wrote:
| I don't agree with bailouts or rule changes for airlines. Why
| should they get rule changes, while I am a simple citizen can't
| get jobseekers allowance (too much savings) or break on paying
| rent during this time?
| arkadiyt wrote:
| There are certain industries like airline (but also healthcare,
| telecom, etc) that just make a living out of screwing over
| consumers in any way possible.
|
| It is so exhausting to deal with - I don't have the energy to
| dispute every single time a company pulls one of these stunts to
| fight for myself to get the baseline level of not being treated
| like trash. This is exactly what consumer protection agencies and
| regulations and other laws are meant to protect against, but
| these institutions are failing us daily.
| halfdan wrote:
| These are all essential services that the government should be
| providing from taxpayer money. Instead many countries have
| chosen to privatise large parts of their infrastructure and
| essential services - the market does not regulate itself here,
| it is one that needs to be controlled or simply run by the
| government.
| malandrew wrote:
| If you're in California, what are your thoughts on how the
| California DMV is run? Would you want your air travel
| experience to be similar?
| nitwit005 wrote:
| The worst experience I've had with the DMV is having to
| wait a while.
|
| Air travel is already all about waiting, and much of it is
| already fully government run or heavily regulated. Not sure
| what you expect to get worse.
| TigeriusKirk wrote:
| I've had nothing but excellent service in every one of my
| interactions with the California DMV. If every company I
| interacted with lived up to their standard I'd be thrilled.
| ajna91 wrote:
| Why not compare it to the post office, or NASA?
| cultus wrote:
| Every DMV experience I've had has been excellent with fast
| service.
| jeltz wrote:
| No idea, but the Swedish one works really well.
| Shivetya wrote:
| Simple rule. No assistance unless they offer refunds. No
| assistance unless they stop any stock buy back programs, end all
| executive bonuses, and they must pay back and assistance before
| resuming either.
|
| Sorry airlines, but the company I work for which is quite large
| has funds to sustain interruptions because you just don't do
| business otherwise. scrap bonuses, merit increases, all
| unnecessary expenses, and they borrow, and if you cannot then you
| were not preparing yourself for much of anything except good
| times.
| bluedino wrote:
| Who's going to work for airlines without bonuses etc?
| smoyer wrote:
| I don't feel bad for them ... they used the previous bailout to
| buy back their stock and then spent their profits to buy back
| more. Maybe they should put some of those shares back on the
| market if they need money?
| nilram wrote:
| Over the last decade, airlines spent 96% of their free cash flow
| buying back stock[1]. This improves the stock value for investors
| (and executives). Rather than requesting bailouts and rule
| changes, imo they should be selling that stock to raise capital.
|
| [1] https://www.bloomberg.com/news/articles/2020-03-16/u-s-
| airli...
| jariel wrote:
| "This improves the stock value for investors"
|
| Not really. A stock buyback is essentially the same thing as
| the company parking the money in the bank. It's almost the same
| financial thing. Shareholders 'own' the $1 in the company's
| bank, or they 'own' it if it's paid back to shareholders.
|
| Stock buybacks or dividend payouts should basically have a null
| effect on the value of the company. They are kind of 'neutral'
| exercises.
|
| Edit: 'null value' obviously taking into consideration fewer
| shares, i.e. if the company buys shares from the market at
| market prices, it shouldn't directly affect the value of the
| other shares it's financially neutral.
| kdamica wrote:
| A buyback has the added effect of reducing the number of
| shares, increasing their Earnings per Share (EPS). Since EPS
| is a widely-used metric for valuing a company, it's not quite
| the same as a dividend.
| JaimeThompson wrote:
| If it was essentially the same as putting the money in the
| bank then they should be able to use that stock to keep
| themselves going instead of getting a bailout. But that will
| not work because their stocks are down so much.
| throwawayjava wrote:
| Only if you assume perfect liquidity and either 1) a constant
| or monotonically increasing stock price or else 2) a huge
| cash reserve such that selling stock at basement prices or
| taking out highly leveraged loans is never necessary.
|
| If a company parks $1 in a treasury bond during good times,
| they have that $1 + approximately inflation in bad times.
|
| If a company buys back their stock at $N and then has to sell
| a large amount of stock at $M for M << N (or take a leveraged
| loan), then the company is only getting fractions on the
| dollar of that original $1.
|
| Unfortunately, the scenarios where huge companies _really
| need cash now_ pretty well overlap with the scenarios where
| there are huge liquidity shocks and crashing equities prices.
| Such as a financial crisis or a pandemic.
| jariel wrote:
| Of course - I'm not denying that 'stock buybacks' have a
| strategic impetus, of course they do.
|
| Every financial decision does.
|
| I'm saying that the popular notion of 'stock buybacks' as
| somehow a 'windfall' for investors is just not really true
| at all.
|
| The notions that some individual investors are literally
| selling their stock, but instead of to some other party but
| the company itself, is not a big deal.
|
| Stock buybacks are a rational and normal part of financial
| operations not some 'special win' for investors as some of
| the rhetoric implies.
| iso947 wrote:
| Aren't $1k of dividends taxed more than $1k or capital
| gains?
| jessaustin wrote:
| They aren't a "special win" in general. When they occur a
| month before a downturn that generates a bailout, they
| are.
| jschwartzi wrote:
| Maybe the companies in question should save money instead
| of expecting the American people to bail them out in these
| situations. Every single financial crisis in recent memory
| has the same core group of companies not saving money and
| needing the government's help. Yet when it comes time to
| help individuals in need the government suddenly wants
| means testing and byzantine rules around who gets the help
| and how quickly it can come. Trickle down economics don't
| work. They just coat the economy in varnish.
| clairity wrote:
| stock buybacks are rarely perfectly neutral for all
| shareholders. it's essentially a forced reinvestment in the
| same company, which is good for shareholders who believe the
| company is undervalued and already hold stock. dividends
| allow you to diversify right away, but have greater tax
| implications.
|
| the repurchased stock can also be held or destroyed on
| buyback, which affects the timing of the benefits.
|
| and lastly, buybacks are primarily useful to executives for
| their signaling value (e.g., luring less sophisticated
| investors into buying).
|
| the benefits are not uniform to every shareholder, especially
| through time.
| xyzzyz wrote:
| _it 's essentially a forced reinvestment in the same
| company, which is good for shareholders who believe the
| company is undervalued and already hold stock._
|
| How is it a "forced reinvestment"? Buyback requires two
| parties to the transaction, the company is buying shares,
| but someone has to sell them. This can be you. It would be
| forced reinvestment if the company just kept cash and never
| returned it either through buyback or dividend, which
| incidentally is what most people grinding against airline
| stock buybacks seem to be suggesting.
|
| Really, stock buybacks and dividends are mostly equivalent,
| with the exception of the tax treatment, which is the whole
| reason why companies increasingly prefer the buyback route.
| clairity wrote:
| not every shareholder participates in the decision-making
| behind a buyback, and in some cases they can't all
| participate in the buyback itself (especially with
| majority privately-held entities).
| xyzzyz wrote:
| We are talking about publicly traded companies here. You
| can always participate in the buyback: just sell your
| shares, they're publicly traded, so there should be no
| difficulty. It doesn't matter much who's on the other
| side of your trade, as the arbitrageurs will ensure that
| the buyback is priced into the spot price.
| clairity wrote:
| many companies have multiple types of stock, and only
| publicly trade a portion of their shares (i.e., not
| treasury stock) and often only certain classes of their
| stock. sometimes they trade less than half of the total
| shares, which is how you can have majority privately-held
| companies trading shares publicly.
| jessaustin wrote:
| Please tell us you're not a corporate accountant. Cash is
| an asset, and is the definition of "liquid". Shares are
| not. Excessive dividends prior to a downturn would be
| just as dumb as excessive stock buybacks.
| wtvanhest wrote:
| I think people don't really understand buybacks. The nuances of
| dividend vs share buybacks can be debated, but at the end of
| the day, each are just ways to return capital to shareholders
| like pension funds, 401ks etc. They didn't 'spend it' then
| returned it to investors which is what companies should do
| unless they have a different way to invest it for better
| returns.
| Donald wrote:
| American Airlines had negative free cash flow during the last
| decade yet did $12+ billion in share buy backs. They
| essentially borrowed money and handed it over to investors.
|
| Yet instead of liquidating their assets once their
| incompetent management hit a sand bar, US tax payers have
| been required to bail them out with loans and grants.
| jessaustin wrote:
| Haha maybe they were trying to avoid a leveraged buyout by
| private equity... by running a leveraged buyout on
| themselves!
| somethoughts wrote:
| I think the idea is that stock buybacks can be the same as
| dividends for an investor who want cashflow from their shares
| if the investor sells a probationally equivalent amount of
| shares that were bought back by the company during the stock
| buyback period.
|
| The challenge is that most investors don't bother to do such
| tracking. And thus most investors are buying stock at prices
| much higher than they would have originally bought it at.
| aqme28 wrote:
| I think what the OP is arguing is that executives and
| investors have profited off of this arrangement. If they want
| to keep that airline afloat, they should have to put money
| back in.
|
| Or here's a simpler mechanism-- the airline should sell stock
| to the public markets to raise capital. It's the natural
| response to running out of money because you spent it buying
| stock. The fact that this is a market downturn is something
| they'll have to deal with.
| supercanuck wrote:
| Pedantic, the argument is essentially dilute those same
| shareholders by issuing equity shares.
| jlarocco wrote:
| Maybe they should ask the investors for the money... Or give
| the ticket holders stock in the company.
|
| I'm tired of corporations doing this, and people making
| excuses for them. It's all about the free market when they're
| raking in money and paying off investors, but the second they
| run into any problem that costs them money they want another
| bail out or for the government to change the rules in their
| favor.
| stefan_ wrote:
| You make it sound like this was excess money. In fact it was
| cash flow freed up by leveraging the entire company and
| loading it up with debt, a ponzi game they were playing with
| the feds where the feds made the low interest loans happen
| and the airlines bought back stocks to bring about the
| desired market bull run. And the executives got paid, seeing
| how stock (and stock performance) is a big part of their
| renumeration.
| [deleted]
| MR4D wrote:
| I disagree on one very key fundamental point:
|
| Buybacks increase the share price, which is a typical metric
| for executives. This leads to a situation where it is in the
| interest of the exec to increase buybacks in order to drive
| the price up, _even if the company performance is not that
| good_.
|
| Personally, I'm neutral except for this one thing.
| majormajor wrote:
| There's a third option: building up cash reserves for the
| inevitable down times. This is one of those "privatized
| profits, socialized risk" situations. It's not attractive to
| save money when you know you can get bailed out or go through
| bankruptcy without too much pain.
| SpicyLemonZest wrote:
| What amount of cash reserves would have allowed them to
| survive their business becoming illegal?
| ogre_codes wrote:
| If you aren't massively over-leveraged, your survival
| prospects are much higher under any circumstances. If the
| airlines had serviced their debt instead of accumulating
| debt while rewarding shareholders, recovery would be a
| lot easier.
|
| Indulging in debt is the American way. Particularly when
| you can rely on taxpayer financed government bailouts to
| smooth out the bumps.
| varjag wrote:
| Hard to pin down exact figure, but a quarter worth of
| their normal turnover could probably go a long way. Given
| that their fleet is grounded, airports rents are
| suspended and there are no fuel expenses.
| reaperducer wrote:
| The airlines have more accountants than airplanes. I
| trust they'd figure it out.
| MAGZine wrote:
| ? surely 12 billion dollars that american spent would
| have extended their runway a day or two.
| chewbacha wrote:
| About 50 billion which is what American was asking for.
| Considering they have posted between $3-15 billion [0] in
| quarterly profits over the past 10 years, it seems
| reasonable that they could have saved a rainy day fund
| _and_ bought back stocks.
|
| [0]
| https://www.macrotrends.net/stocks/charts/AAL/american-
| airli...
| soared wrote:
| You want them to save half their money? That makes no
| sense
| whatok wrote:
| That data looks wildly inaccurate and does not pass a
| sanity check at all. Take a look at anything from AAL's
| investor relations' page and it does not reconcile to
| anything like 3-15bn quarterly profit ever.
|
| https://americanairlines.gcs-web.com/sec-filings
|
| Here's their latest quarterly filing:
|
| https://americanairlines.gcs-web.com/node/37821/html
| spease wrote:
| Perhaps what's needed for "too big to fail" businesses is
| to require them to either have a certain amount of cash
| reserves on hand, or split up in such a way that the risk
| is mitigated. This would help prevent an aggressively
| spending company from out-competing savers through excess
| spending, buying them out, then going out of business
| itself when hard times come around.
| chrischen wrote:
| Current tax incentives push companies to spend money
| (allocate it to productive areas) as much as possible or
| git hit with corporate income taxes. So generally hoarding
| money is not only not encouraged, there is a tax penalty
| for doing so.
|
| That's also why you see so often companies with "no
| profit". If a company is operating efficiently, they
| wouldn't be turning a profit (they'd have already
| reinvested profit).
| ijidak wrote:
| I would love to see a study that shows how much money
| publicly traded companies are keeping on hand as a
| percentage of revenues over the last 75 years.
|
| My guess is: (1) The long period of relative peace post WW-
| II and (2) the collapse of the Soviet Union, and (3) the
| ever-expanding size and liquidity of global financial
| markets, have led to slowly dwindling cash reserves for all
| non-financial, publicly traded companies. (Especially if
| you exclude the most profitable tech companies)
|
| I'd also love to see the trend in cash reserves post 2008
| bailouts.
|
| That data might help settle this debate.
|
| Are companies taking advantage of bailout culture?
|
| E.g. there is a social safety net for large companies that
| doesn't exist for small companies.
|
| As that safety net has formed, has that led to no change in
| net cash reserves, an increase, or a decrease?
|
| My guess would be that it has led to a decrease.
|
| Because, it seems safe for the largest companies to
| understand that every 10 years or so, they will need a
| bailout for unexpected global turmoil. (A war, a man-made
| disaster, a pandemic, etc.)
| maerF0x0 wrote:
| But the fact they do not have the warchest (or insurance)
| against an event such as this means all those earnings were
| false. They weren't risk adjusted. Kind of like I can drive
| around without insurance, but once i crash (or get a ticket)
| my savings disappear.
| monksy wrote:
| Lets not forget that they've been devaluing and increasing the
| price of the product/service. Yes the costs are cheaper but
| compared to what it used to be you're getting much less for
| your money.
| a3n wrote:
| > "The key element for us is to avoid running out of cash so
| refunding the canceled ticket for us is almost unbearable
| financially speaking," IATA Director General Alexandre De Juniac
| said.
|
| I think he just said that it's too financially risky for a
| consumer to book a flight, lest they be forced to have their
| ticket converted to an unsecured loan, "secured" with something
| that they didn't want (a flight next year) that may expire
| anyway. They're selling you a gift card.
|
| I'm surprised that people are still flying in closed up metal
| tubes during this pandemic. If anything the airlines should be
| giving discounts to lure consumers, and even that is morally
| questionable.
|
| Flights at this point should be freight or emergency only, for
| national medical needs and repatriation.
| bovermyer wrote:
| I'm OK with airlines being allowed to never refund fares for
| cancelled flights on one condition:
|
| Every time a flight is cancelled, the CEO and every manager below
| him/her is required to commit ritual suicide.
| thaumasiotes wrote:
| Is this an actual airline-specific regulation? I would expect the
| ordinary law of contracts to already provide that, when one party
| unilaterally cancels a contract, they don't get to keep the
| consideration from the other party.
| JamesBarney wrote:
| Usually it would depend on what the contract says.
|
| For instance my gym went out of business, but hidden in the
| contract it was written they could transfer my membership to
| any other gym within 10 miles of the gym. And I was forced to
| pay a cancellation fee of several month to get out of it.
| WalterBright wrote:
| Contracts that "hide" things in them tend to get invalidated
| by the court if you refuse to pay. Courts take a dim view of
| attempts to trick consumers.
|
| If you didn't read the contract before you signed it, though,
| next time you should.
|
| When I bought a house, they gave me a stack of paper about
| half an inch high to read, including a document for me to
| sign that said "I have read and understand the documents." So
| I sat there with the agent and read every word of it. She was
| clearly quite irritated with me "wasting her time" by reading
| it, but too bad for her.
|
| A couple issues I was particularly interested in was what
| happens if I default on the mortgage, and what happens if I
| prepay the loan.
|
| BTW, I recommend reading the fitness club contracts first.
| They are negotiable, but if you don't read them you won't
| know what to negotiate, and will be paying the "sucker
| price".
| reaperducer wrote:
| _Contracts that "hide" things in them tend to get
| invalidated by the court if you refuse to pay._
|
| Which court is that? The one that finally hears your case
| three years after the gym has reported the debt to the
| credit bureaus and ruined your credit?
| xivzgrev wrote:
| If you are unable to provide a service people paid for, then you
| give them their money back. It's pretty simple.
|
| You can give people an option to leave as credit (e.g., we'll
| give you $400 of credit instead of a $300 refund) but it should
| be just that - an option.
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(page generated 2020-04-07 23:00 UTC)