US airlines are seeking at $54 billion bailout to deal with the fallout of the coronavirus pandemic.
These same airlines have also received a huge tax cut and spent heavily on stock buybacks in recent years.
Therefore, any bailout should come with some terms.
This is an opinion column. The thoughts expressed are those of the author.
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Hello, US airlines!
We, the American people, thank you for your recent bailout request.
We understand that you would like us to provide you with at least $54 billion so you can avoid bankruptcy.
We value your service to us. We also value the Americans you employ, and the salaries and benefits you compensate them with. You and your employees spend money on other products and services other American companies and workers provide. We want to help your employees, so we will help you. Please see our terms below.
Before we begin, let us say that we sympathize with the bad luck you are experiencing. The coronavirus pandemic has been a terrible blow for all of us. We understand that it has been particularly hard on you.
You estimate that you will burn through $23 billion to $53 billion of cash by the end of the year, and that, without assistance, you may soon go bankrupt, perhaps as early as May or June.
You are therefore requesting a $54+ billion bailout, structured as follows:
$29 billion of “grants”
$25 billion of loans
Forgiveness of taxes on tickets, cargo, and fuel for two years
First, some context. Please understand that times are tough for us, too. Lots of us are getting hammered.
Also, two years ago, our government enacted a corporate tax cut that saved you and other US companies hundreds of billions of dollars. This tax cut benefited you and your shareholders, but it also ballooned our annual government deficit to more than $1 trillion a year.
With the coronavirus now plunging our economy into recession, our tax revenue will tank, and our deficit will skyrocket even more, perhaps to $2 or $3 trillion per year. So we’re not as flush as we should have been.
Second, over the past decade, you raked in tens of billions of dollars of profit and, instead of saving it, gave it to your shareholders.
As you know well—and as you point out in your financial filings—your business is cyclical. So cyclical, in fact, that many of you have already gone bankrupt in the past. So you could have saved this cash for a rainy day. But you didn’t.
Instead, according to Bloomberg, you used a startling 96% of your cash flow to buy back your own stock. The buybacks of one of your members alone, American Airlines, totaled more than $15 billion in the past 6 years. ($15 billion! American, if you had just kept that cash, you might not need a bailout!)
Third, although the coronavirus pandemic is bad luck, it was not unforeseeable. In fact, at least one of your members, American Airlines, explicitly foresaw it. …read more
Source:: Businessinsider – Politics