OK, Airlines, here are your bailout terms | Hacker News Reader

OK, Airlines, here are your bailout terms

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47 pointsgshubert1710 comments

As someone who leans heavily free markets, even I buy the argument that it's not wise to let every airline in the country fail simultaneously, regardless of fault.

Here's the thing, there is nothing unfree market about demanding terms for those bailouts, it should be a negotiation, not an ultimatum from the airline industry. So for example, if you enforced all bonuses to be canceled for the next three years and retroactively fined for the last three years, set executive pay at a max of $50k for the next three years (and banned any new stock incentives during that time), fined the executives equal to 125% of capital gains they made on stock incentives, during the stock buyback period, and made all bailouts loans not grants at above market rates, you could ostensibly let them decide how much bailout they wanted without continuing this endless cycle of letting them run at losses knowing the public will foot the bill. And if they don't take it, then let them die.

Basically the end result of the bailout has to be drastically net negative over the last 3-5 years for every airline executive for this not to create moral hazard. I think that is achievable.

Unfortunately well probably just hand them $50 billion and make poor people pay for it.

The shareholders who invested in companies also need to feel the effect of moral hazard. They need to be wiped.

I say so as someone with 80% of my assets in the market. If we keep bailing them out, they will keep doing the same.

The business is dead. Shareholders would be wiped without the bailout. Nationalize the airlines that need money, fix em up new management, new charter and mission, and IPO them immediately after the crisis ends.

Investors need to think about the long term risks of the companies they are investing in, and face the consequences of those risks. Because why wouldn't you invest in airlines if you know they will do a ton of buy backs and will get bailed out at the slightest hint of trouble?

I’m not sure I see the point of bailing out airlines in the US. What is it?

I would think the key thing for the government to consider is 1) protecting the assets of any failing airline so they can be reused when it comes time to reboot the domestic market. 2) taking care of all the workers that are going to be laid off. Because regardless of bailout the airlines will lay them off anyway.

In a lot of smaller countries bailouts make sense because they have tiny markets and there is only one airline, or they have a strategic need for a national carrier.

It’s missing a component for minimum 15-degree seat recline and minimum leg room consistent with the largest leg room available in emergency exit row in economy cabin, not subject to shrinkage.

Why should I be forbidden from choosing to save some money by getting a smaller/non-reclining seat?

Because that interferes with my ability to get better service?

This is a very broad question, applicable in many situations. For example, signing non-compete agreements may get you better employment deals, but some legislations decided it's better to forbid such practices.

In this particular case I'm not sure what would be a good approach :) .

Banning non compete deals often makes sense, if they have become a standard part of terms and conditions and are hard to avoid. But people flying budget airlines usually have many other choices. Often they could upgrade to an exit row seat for a small fee, or choose a more expensive carrier with more room. They usually have the choice and the majority choose not to. This doesn't look like a market failure.

I have mixed feelings about things like airline bailouts.

If we do, you essentially reward bad behavior.

If you don't, you are likely to induce a massive consolidation within the airline industry, leading to less competition and more anti-consumer behavior.

I don't really see a solution, and maybe the second point is less likely than I think...

> If you don't, you are likely to induce a massive consolidation within the airline industry

Maybe this should not only be forbidden by law, but also reverse process - splitting existing airlines - should be started. "Economy of scale" benefits could be estimated lower than benefits to the society from increased competition and stimulus to innovate.

”If, despite our help, you fail, we will sell your airplanes and recoup 100 cents on our dollars before any of your other lenders get a penny.”

Which airlines actually own their own planes as collateral? I thought they all were leased now.

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