These airlines are such punks and shouldnt be bailed out considering how they use their cash.The 3 major airlines ie American Airlines,Delta Airlines and United Airlines have been using 96% of their Free Cash Flow (FCF) to buying back their own stock.
This is how corporate America works.Company executives buy their own stock (for themselves not the company initially)when prices are cheaper.Then by borrowing in the corporate bond market or from revenues generated from company activities,they have their firms buyback their own stock.This massively pushes up the stock plus sucks in other investors to buy into rising stock prices.Then these executives,having bought these equities earlier now sell back their holdings into the market at much higher prices raking in a hefty profit for the executives not the company.Also by buying back their own stock,they reduce the overall float of stocks in the publicly traded market thus Earnings per Share increases since the denominator ie floated shares reduces creating a false impression that their EPS is high due to more effective business operations.70% of the US stock market rise in the last 11 years is due to this stock buyback scheme.
Now that the corporate bond market is in distress,these companies that borrowed to buy back their own stock are in trouble as the stocks are tanking massively so cannot pay back bond holders from proceeds of sales of their appreciating stock.Covid-19 just exacerbated the problem especially for airlines and now they need a bailout so that executives buy back their own stock and repeat the same shenanigans??Even Billionaire Mark Cuban is lamenting that this is ridiculous and that companies that get bailed out do not buy back their own stock
https://www.cnbc.com/202...-stocks-ever-again.html
Contrarian Investor and Trader.Advocate of free markets,limited government interference in the economy and sound money