Could airline bailout backfire?

Some prominent experts in the airline business are worried that the government's $15 billion bailout will keep too many airlines flying and affect stronger carriers' recovery.

What they fear: A few failing airlines, propped up by federal aid, will file for bankruptcy reorganization and set off fare wars that drag down the industry.

Article in 25 words or less:

"Government interference in the market winds up weakening the strong and only delaying the death of the weak. Taxpayers and creditors are the big losers."

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I still think it's a can game. American's have been taken once again by our not so bright politicians that are more interrested in stuffing their bank accounts from large corporations than doing the job they are getting paid to do. Billions of our tax dollars to the airlines, they lay off thousands and now they don't want to provide Security. The airlines won't cut the multi million dollar pay checks for executives. Those multi million dollar pay checks cost 7,000 people their lives. Al Gore took millions of dollars from the airlines that should have went for security. Now Dick Gephardt wants that BLOOD MONEY that Gore won't be getting. Gephardt wants to use the Federal Government for Security, another con game. If it keeps up the tax payer will be supporting the airlines and the tax payers will be paying BLOOD MONEY to Gephardt. Our elected officials are making so much dirty money that they don't need a pay check from the tax payers.

Fixit....

The theory that letting any business go bankrupt is good capitalism, is near sighted and often times not in the nations interest.

If you or I go bankrupt, that has zero effect on the entire economy of this nation, capitalism at its best. If the aviation industry becomes the walking wounded, it affects the entire country, down to each and every individual. With that in mind, there are millions that depend on a healthy aviation industry. Also from day one back into the 1920s, the Federal government has fostered the airline industry, each and every step of the way. With that in mind, our airlines have led the way for the entire world. Nearly all of aircraft have been knockoffs of military aircraft, paid for by our government.

In the present day, the weak sisters will fall by the wayside but then we get back to very little competition and the chance that they will once again be regulated by the Federal government. Either way, there will be a role by the Federal government, free enterprise or regulated, one or the other.

Cynicom...

I disagree. I understand the desire to insure that we have enough civil aviation capacity to conduct the business of America. I understand that we may need to rely upon civil airliners to provide transportation capacity for moving troops and equipment to support the war effort.

The problem with this bailout, however, is that we currently have a great excess of capacity when it comes to airlines. This was true even before September 11th and the impact it has had on air travel. It did not take a crystal ball back in August of this year to be able to see that at least one of the "major" airlines would soon have to merge with a stronger competitor or accede to its credtors and go bankrupt. Now we face a situation where nothing has changed but for the fact that congress spent a lot of money so as to appear that it was "doing something." A major airline is still going to go bankrupt and all we have to show for it is an extra $15,000,000.00 added to the national debt.

The amount that taxpayers have spent and are going to spend on the "bailout" is greater than the market capitalization of all of the "major airlines" (excluding Southwest). The shareholders of the airlines are winners. Our tax dollars are flowing out to them as dividends. (Yes, at least one (Continental) airline still paid its dividends after the September 11th attacks and their lobbying for federal aid.)

This "bailout" is a boondoggle, a fiasco and a grand falloon created with smoke & mirrors out of distraction and fear. Follow the money to find out why it really was passed and signed.

(Bailout in quotes because it is doomed to fail. Many of those "bailed out" will still go bankrupt, it will just take a little longer than it would have otherwise, and it will damage other carriers on the way.)

Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.

-- Ronald Reagan

Fixit...

I go back to the old days of 40s and 50s, when for example, United was the only airline allowed to fly non-stop NYC to Frisco. With that, they had to fly each trip, regardless of amount of passengers, and the Federal government paid them for each trip. There was no competition, zero. You paid a huge price, liked the service or lumped it. If memory serves me correctly, American had the only service, NYC to LAX. From the pioneer days of airmail service in the 1920s, it has been the Federal government that has spurred the growth.

I am as anti-government as anyone but there is also reality, the facts are there, have been for 80 years and cannot be refuted.

Swissair, in business for 75 years, was the first giant to go under since Sept 11. The Swiss government has decided that they cannot let that happen. No country is more capitalist than the Swiss. Yesterday, British Airways said it was in trouble and might go under, Sabena Belgian is already under. Others will follow suit but none will be allowed to go out of business.

If the aviation industry becomes the walking wounded, it affects the entire country, down to each and every individual.

If there are more airlines in business than the market can support, the effect is that they all become the walking wounded.

Is there anything that United or American does which no other airline could do were United or American to go out of business?

Part of the normal capitalist cycle associated with many industries is that so many companies get into the industry that their competition drives prices down below survivable levels. Consequently some companies drop out of the market and prices rise, allowing those staying in the market to better survive.

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Great, just in time for them to go bankrupt!