marnold3

According to Bloomberg, the largest airlines received the greatest amount of federal aid with AA getting the single largest amount.

"Five major airlines have received the lion’s share of federal aid Treasury Secretary Steven Mnuchin has approved in the past six weeks as the industry copes with an economy forced to shut down by the coronavirus pandemic.

American Airlines Group Inc. is the biggest recipient, getting $5.8 billion in payroll assistance from the federal government, according to details the Treasury Department released Tuesday."

mvoight

No shock there. The largest airlines getting the most aid... After all, they have the largest payrolls.

fotographer

lets all hope AA spends that money wisely...(wishful thinking on my part?)

USFlyerUS

It's meant to pay employees who would have otherwise been laid off, not to make capital investments or product improvements.

bitterproffit

Last year, American's total salaries, wages, and benefits were $12.6B

http://s21.q4cdn.com/616071541/files...cial-Recap.pdf

This payout represents just under half of their total annual payroll expense. They better not lay anyone off.

Especially since they earned $1.7B last year.

hyho61

Last years earnings means nothing. They have a huge debt load and were busy doing stock buybacks. All that money is wasted now. Instead of paying down higher cost debt they rather spent it on buybacks. They will have no choice but to layoff a significant number of employees once the CARES act restrictions are removed (in Sep or Oct this year).

bitterproffit

it does mean something. When this all hit, hundreds of articles came out lecturing Americans on how they should have had an emergency fund and all sorts of tsk tsk about why the average American didn’t plan for a rainy day.

in my mind, it remains important to note the Previous profitability of a company when they receive billions in aid they don’t have to pay back. AA didn’t pay any cash income tax last year either as they were able to offset previous losses.

MiamiAirport Formerly NY George

Well it's not like UA and DL were leagues behind. Sadly corporate executives are not different from what the average consumer has become-thinking the good days will never end but they do.

Lux Flyer

I don't think it's so much corporate executives not anticipating the good days ending, as it is the demands of their shareholders for return on their investments without regard for the long term. If these executives weren't doing buy backs etc and keeping the shareholders happy they'd be shown the door pretty quick. Few people are willing to sit on cash just because there will be a down turn in the future that will likely get bailed out when it occurs anyway. Just look at the example the government set with the pathetic national stockpiles of PPE, they didn't invest in sitting on that inventory, why should that be different from what corporations do.

rumboj

At least there is one poster who actually understands how businesses work and how business decisions are made.

Airlines did have cash on-hand, just not anywhere near the magnitude required for this behemoth of a problem...nor should they. It is horribly poor cash management for a corporation to have large amounts of cash just sitting in the bank, much like it is horrible financial planning for an average-aged working individual to do so. Any executive who did that would (and should) be let go. There are better uses for the money. Additionally, there are significant benefits to using debt to finance operations rather than just rushing to pay it off.

bitterproffit

I never said airlines should be sitting on massive cash when there is a perfectly good government that they can go and get money from. I did say that I couldn’t figure out why those same lawmakers expected poor people to have an emergency fund when it’s considered ‘not good business’ and ‘ not understanding how business works’ for corporations to have a rainy day fund.

rumboj

Corporations, including the airlines, were sitting on billions of dollars in liquidity. You might have missed it. So yes, these were their “emergency funds”. Nobody ever said they shouldn’t have ANY, and it is disingenuous for anyone to imply they didn’t.

What is considered “not good business” though is having massive amounts of cash sitting idle.

Some emergency funds (corporate or individual) = good business/personal finances

No emergency funds/massive amounts of idle cash (corporate or individual) = bad business/personal finances

Lawmakers made that statement because an alarming number of individuals (some unfortunately poor; many others not so much) have nothing at all saved for emergencies. Did it sound bad to say such? Sure. Did it lack empathy? Maybe. Was it accurate? Yes.

Case in point: my neighbor who had a great job with good pay, who has now been laid off. He won’t be able to pay his rent and bills from June onward. Why? Because the money that should have been put towards some type of emergency fund all went towards buying nice material things and gifts and traveling to nice international destinations every other month purely for leisure. And here I thought I was the travel fanatic.

alec_b

Question: if cash on hand is "bad business", why does Apple, with $100b in gross profit in 2019 have over $200b in cash on hand? Compare this to Delta, almost $18b in gross profit and $2.88b in cash on hand in 2019. Apple has equal to 200% of it's gross profits saved in the bank. Meaning it could theoretically survive TWO YEARS without a dime in income. Airlines couldn't even survive 2 months. That business model doesn't make sense to me. If the economy takes a turn, the "liquid assets" (aka the planes they OWN, outright) turn into liabilities REALLY quickly. Whereas unless the economy fails completely and the banking system grinds to a halt, Apple doesn't have to sell a single thing at fire-sale prices to maintain it's position, nor does it have to take BILLIONS in government loans.

EDIT: I'm a total layman, and I'm sure some of my math is wrong, but my post was more about highlighting a problem. Apple (a company who's products I don't especially care for, and own none of), can provide a product and service that people eat up with a spoon. The airlines also provide a product, but how have they repaid their customer's loyalty? Apple rarely introduces a NEW product, just a solid refresh of the existing. Airlines to much the same. However, does Apple constantly change it's fee structure? Constantly devalue it's product? Charge you to visit a store to buy their product? No. The airlines have done this to themselves, as have the consumers! I realize that this comparison is completely apples to oranges, but again: I'm a layman, and that's the way my simple mind sees it.

AndyPatterson

Good observation. In the case of AAPL, it helps that a good chunk of its shares are owned by mutual funds (Vanguard, etc.), hedge funds (Black Rock), Laurene Powell Jobs (the widow) and Berkshire Hathway, all of whom are happy with the company's current financial approach. AAPL is up about 490% since 2013. In other words, the shareholders don't mind that it has huge cash reserves.

RichardNixon

Should just let them fail. The airplanes won't turn to rust, the pilots and mechanics won't suddenly die, and the flight attendants won't suddenly all discover fulfilling careers as a Sonic carhop. AA goes under, ten other smaller airlines get a really good deal on slightly used airplanes that they need to rebrand.

Of course, I'm sure more than one Senator is owned by a certain CEO, so we know why that's not happening.