[stavrus]

> This is the money they could have used to have a buffer to deal with these situations or to improve their systems.

Matt Levine covered this last year [1]. The basic gist of it was that the CEO is focused on the shareholders, and the best use of the money was on stock buybacks. Spending money on improving customer or labor relationships wouldn't have helped during the start of the pandemic when all the airlines were stuck in the same boat unable to fly planes, and the cash used by e.g. American Airlines for buybacks in the past 7 years to increase the stock value 113% would have only bought them 4 months of operating expenses. The most long-term value for shareholders was created through the buybacks, and the government being willing to prop the businesses up during downturns reduces the risk exposure from this strategy.

[1] https://www.bloomberg.com/opinion/articles/2020-03-17/the-go...

[erostrate]

Thanks, I like Levine and remember reading that. He basically argues that airlines financial strategy was optimal for shareholders, given covid and guaranteed government support. But firstly, he only considers the two uses of money proposed in the NYT, improving customer service or reducing the debt burden. Secondly, his whole argument is predicated on airlines being bailed out by government - which is true, but I believe shouldn't. I personally believe a lot of value is being destroyed by lack of long term investment and short term incentives, leading to problems such as these ones. And finally, even Levine admits that buybacks might be suboptimal for other stakeholders (eg employees, clients).

[matwood]

Airlines with government backing end up with the only rational choice being to take more risk.

I'm reading a book right now called "The Power of Nothing to Lose" which explores the primary and second order effects of individuals and companies being put into situations where they literally have nothing to lose. It's been an interesting read so far - recommended.