It’s harder to get rid of crony socialists than it is to get rid of cockroaches, and crony socialists are less cuddly. From David Stockman at davidstockmanscontracorner.com via lewrockwell.com:
The nerve of it is a wonder to behold. The US airline industry has spent a decade shoving itself into harm’s way by strip-mining their balance sheets to fund share buybacks and goose top executive stock options.
For crying out loud – the reckless irresponsibility of it is mind-boggling. That’s because for decades upon decades this has been a highly cyclical industry – vulnerable to global dislocations caused by recessions, storms, wars, terror and more. Accordingly, airline companies absolutely need deep equity balance sheets and ample standby liquidity, even at the expense of short-term earnings.
Needless to say, the Big Four US airlines – Delta, United, American, and Southwest – were having none of financial rationality, prudence and common sense. As Wolf Richter properly pointed out:
“These stocks are now getting crushed because they may run out of cash in a few months, yet they would be the primary recipients of that $50 billion bailout, well, after they wasted, blew, and incinerated willfully and recklessly together $43.7 billion in cash on share buybacks since 2012 for the sole purpose of enriching the very shareholders that will now be bailed out by the taxpayer.”
We say nothing doing!
If the Big Four Airlines can’t raise enough cash in the high cost long term debt markets or by issuing highly dilutive preferred stock or equity, there is only one solution – and that is chapter 11. Holy moly, that’s why we have this legal protection procedure.
