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Airlines to go bust. Bailout or nationalise?


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They've maximised profits at the expense of any defensive slack. Borrowed for stock buy backs. Now they can neither raise money through equity nor borrowing as they are topped out on the latter and stockmarket is deserted.

Should they get bailed out or nationalised in the national interest. The UK ones. ?

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My idea would be go bust.

Think about it.

The planes will still exist, the pilots will still exist, there will still be no shortage of people that for some reason want to be cabin crew.

Better new airlines could formed.

However, no doubt they will get a bail out.

 

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1 minute ago, LetsBuild said:

Neither, let capitalism run its course. Not all airlines have been like that, Jet2 is going to clean up.

No. They're going to go bust. Jet2 included.

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Just now, LetsBuild said:

Neither, let capitalism run its course. Not all airlines have been like that, Jet2 is going to clean up.

Agree with this, the airlines that actually bothered to be well run will lose out if there is a universal bailout.

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1 minute ago, reddog said:

Agree with this, the airlines that actually bothered to be well run will lose out if there is a universal bailout.

They are all going to go bust every last one

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2 minutes ago, LetsBuild said:

No they aren’t, but rather than argue about it lets watch - time will tell. The answer is still to let them go bust.

The information coming from financial journalists is unequivocal as far as I can tell. Fair enough though, worth a debate. Why won't they go bust?

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Just now, Si1 said:

No. They're going to go bust. Jet2 included.

One of the problem with universal bailouts, is we will never see what the missed opportunity is.

 

There could be a great opportunity for some new airlines, but we will never see it if we give everyone a, paint everything with the same brush bailout.

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Just now, PeanutButter said:

It will be hard for govt to let BA go. But they can’t pick and choose. An industry that requires taxpayer subsidised fuel and bailouts isn’t an effective business. 

Thumb down.

One could actually say BA is a pension scheme, doing air travel as a side business.  In the free market, it would have got shaken out eventually anyway.

 

If it new there would be no bailouts, it would not of allowed it's self to get in such a position.

Edited by reddog
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3 minutes ago, reddog said:

One of the problem with universal bailouts, is we will never see what the missed opportunity is.

 

There could be a great opportunity for some new airlines, but we will never see it if we give everyone a, paint everything with the same brush bailout.

True. But there's the wider commercial contagion and demand destruction that would occur if our air industry stopped operating for a year or two whilst the wider economy removes its knickers from its crack.

I'd say nationalise them in order to maintain a service through the crisis then reduce state services and allow new private sector operators to enter the market in a year or twos time, eg bidding to buy out the state operator's airport slots, aircraft, facilities, leases etc.

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1 minute ago, PeanutButter said:

I mean, can we even afford to bail it out? What about the trains, the car industry, the banks (again). Can we print fast enough to magic enough for all the failures?

I think airlines are a particularly special case. They are in a more acute crisis than other industries because of the nature of the crisis, and yet they are also a vital part of national and international infrastructure, unlike, say, cruise ships.

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10 minutes ago, Si1 said:

The information coming from financial journalists is unequivocal as far as I can tell. Fair enough though, worth a debate. Why won't they go bust?

Basically because they seem like shrewd operators with an old fleet of aircraft that they probably picked up on the cheap, they have a decent amount of cash and compared to other airlines are not drowning in debt.

Ive not seen them howling for a bailout anywhere which cannot be said for Virgin, EasyJet, Ryanair etc. Makes me think they have a plan. I’m assuming this blows over in 6 months.

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3 minutes ago, LetsBuild said:

Basically because they seem like shrewd operators with an old fleet of aircraft that they probably picked up on the cheap, they have a decent amount of cash and compared to other airlines are not drowning in debt.

Ive not seen them howling for a bailout anywhere which cannot be said for Virgin, EasyJet, Ryanair etc. Makes me think they have a plan. I’m assuming this blows over in 6 months.

Interesting. Sounds fair.

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6 minutes ago, Si1 said:

I think airlines are a particularly special case. They are in a more acute crisis than other industries because of the nature of the crisis, and yet they are also a vital part of national and international infrastructure, unlike, say, cruise ships.

I meant the cascade from saving airlines (and airports?) would be later obligation to save the rest. 

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14 minutes ago, Si1 said:

Interesting. Sounds fair.

You've got me checking now, but this is an interesting link of comparison (if a bit old):

https://www.lanzaroteguidebook.com/news/features/details-1623/antique-airways-how-old-is-your-holiday-jet

They are like the HPCers of the airline world, driving around their old Volvo with 200k miles on it, whilst the Norwegian Air types are zooming around in their brand new leased PCP Audi/BMWs ?

Didn't help Thomas Cook though, but I guess they had the dead weight highstreet shops to pay for too.

 

 

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1 hour ago, reddog said:

My idea would be go bust.

Think about it.

The planes will still exist, the pilots will still exist, there will still be no shortage of people that for some reason want to be cabin crew.

Better new airlines could formed.

However, no doubt they will get a bail out.

 

Why bailout a Spanish company? 

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40 minutes ago, PeanutButter said:

I meant the cascade from saving airlines (and airports?) would be later obligation to save the rest. 

Indeed. I don't know for sure what's right, that's why I started this topic as I think it's a prescient debate.

What has happened to was it BMI and its 'strategically important' routes?

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I do understand that we need airline "infrastructure".

 

One suggestion would be let the airline go into some sort of bankruptcy protection, wipe out the bond holders and shareholders, then re-float the the airline.  (this could be bit risky though, as it has taken the government an awfully long time to offload RBS)

 

The bond holders and shareholders should have realised they were in a risky business, and made the airlines structure their businesses accordingly. 

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Ryanair, easyjet and BA will make it through in some form - and national governments will save their national airlines.

But the likes of norwegian or jet2?

Unrestricted global air travel has spread this virus - so there may be some focus on that down the line. If all flights leaving mainland China had been stopped in mid Jan would we be where we are now in Europe?

Edited by MARTINX9
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3 hours ago, reddog said:

One could actually say BA is a pension scheme, doing air travel as a side business.  In the free market, it would have got shaken out eventually anyway.

 

If it new there would be no bailouts, it would not of allowed it's self to get in such a position.

Last I heard BA has a cash pile which is one reason Walsh objected to Flybe being allowed to defer payment of the aviation tax it had collected. He since repeated his objections when more of his competitors asked for bail-outs.

And what happened to that? I assume HMG are a preferential creditor. Maybe they won't get it all back and are feeling pretty stupid right now, oh wait they never do. Would doubt Flybe died from the virus, might have lasted a bit longer without it.

Your first paragraph has been around for a long time, I assume it's true but how much does it matter other than seeming a bit ridiculous?

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