I was reading this article where the Airline Union is opposing the Fed to grant stimulus to the Airlines. The reason is that Airlines did a lot of buy back in the past four years. Why is the history of buy back in the past the reason?

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    This is about economics and politics, not personal finance. Commented Mar 18, 2020 at 15:07

2 Answers 2


If someone has $1000, spends it all on losing lottery tickets, and complains the next day of being hungry, how sorry for them do you feel? The airlines had money to survive a recession, but bet it all on the stock market (which is what buying stock is) and lost most of it.

From your link:

We fully recognize that the company had the opportunity to build up its cash reserves and repeatedly advocated for them to do so," wrote Todd Insler, chairman of the union that represents United's pilots, the Air Line Pilots Association. "In spite of ALPA's warnings, they instead chose to spend company resources differently.

The idea is that if the airlines are asking for help because of events beyond their control, people are likely to consider it just to preserve the availability of convenient air travel in the future. But because they are asking for help due to the way they chose to manage their cash, people are a lot less sympathetic.

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    It's worth noting: airlines still deserve to exist so that people can travel by air. However, perhaps the people who made these decisions don't deserve to own airlines any more. The company is not its owners. Commented Mar 18, 2020 at 13:27
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    It's not even lottery tickets -- lottery tickets at least give you a chance to win. This is just a way to artificially prop up the stock price. There's no way the companies would reissue those shares at a profit.
    – Tristan
    Commented Mar 18, 2020 at 14:46
  • @user253751 That sounds like a good thing, but remember that the owners of the airlines are ...you! If you own airline shares, or a mutual fund that owns airline shares, or are part of a pension fund that owns airline shares, it is you who lose money. Commented Mar 18, 2020 at 15:10
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    @DJClayworth Then obviously I don't deserve to own the airline shares. I must've voted for them to waste money. Silly me. Commented Mar 18, 2020 at 15:12
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    @A.Rex: Yes and no. A share repurchase is both a bet on the future value of the stock going up and a gamble by the company that it doesn't have something better to spend it on. A dividend doesn't involve the company making a bet on future stock value -- it's up to the dividend recipients to choose how to spend or reinvest it -- but it still involves the company gambling that it doesn't need that cash for other purposes. Running into cashflow problems soon after paying out abnormally large dividends would also be seen as poor planning/management.
    – Ben Voigt
    Commented Mar 18, 2020 at 16:55

Short Answer:

  • Over the last few years the mgmt teams of the airlines bought back stock instead of improving the financial health of their companies. That made it more likely they would need a bailout should something go wrong, but it also enriched the shareholders and by extension, the mgmt team who receives stock options.
  • When mgmt teams make the company riskier it hurts workers who derive value from the company more like they hold debt than equity. Workers receive a salary and don't have huge upside from a bunch of stock options like the mgmt team receives.
  • The only reason the public would be okay with a bailout is because it helps workers, preventing layoffs. The past actions of the mgmt team indicate that they "can't be trusted" to use all of the bailout money for the workers, for whom it is theoretically intended. Therefore, Democrats(whose constituents are the workers) demand strings be attached. Republicans (whose constituents are the mgmt team/shareholders) don't demand such.

A longer explanation:

I'm not a big fan of either side here, but generally people think of Republicans (the current administration) as being pro management/shareholders (and hence anti-worker) and think of Democrats as being pro workers (and hence anti-mgmt/shareholders). If the gov't gives loans to these companies at rates and in amounts much better than they could get in the public markets, this is essentially like a gift of money to the company from the gov't. Since this money is from the gov't it is really from taxpayers.

The notion behind the bailout is that it's to prevent the company from having to fire a lot of workers and also cause further damage to the economy. This money that is being given to the company in the form of "assistance" or a "bailout" could theoretically be used by the mgmt of the company for anything they want if there are no strings attached. Even if the company gets a bailout they may cut shifts or layoff some workers. If/when things improve a year or two down the road, and they did lay off some workers then mgmt has better negotiating leverage with the remaining workers. They aren't obligated to hire back the people they fired they could hire back other people at lower wages. They could decide to try and squeeze the workers and pay themselves a bonus or buyback some more stock. They could do a bunch of stuff that doesn't benefit the workers, who are the ones that the bailout is supposedly designed to help.

The workers don't want those things to happen, they want guarantees that the bailout money benefits them directly, so they want a lot of strings attached to this bailout. To get that, they are using the history of mgmt against them as "proof" that they will be bad actors.

The history: The company issued debt and bought back stock over the last few years. This enriched the shareholders and management, at the time. Now, because they borrowed so much and spent the money buying back stock, which is now trading much lower, they can't borrow "enough" from the public markets and need the bailout. The buybacks didn't help the workers, and putting more leverage (debt) on the company actively hurt the workers because it increased the probability that the company would go bankrupt. The payout profile of a worker is a lot more like debt than equity because they get a salary (like a coupon on a bond) and they don't get to participate in the all of the upside from the stock going higher.

Democrats are working here with their constituents, the workers, to try and increase awareness of the past actions of the mgmt in this case, so as to sway public opinion and make it more likely that significant restrictions are put on the company, such that the bailout money most directly benefits the workers. They want restrictions that are good for workers. One of these things is no more buybacks or executive bonuses.


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