I once tried to get Okwui to explain to me why it is that people like GE continue to give loans to clearly failing airlines. I never quite got a satisfactory response, and the article I linked to does nothing more to enlighten me. Both mumble something about having lucrative engine-making contracts from those airlines, but that just amounts to lending yourself money as far as I can see. What's the rationale? Do they get all of the money the lent out back in contract work, and they reason that there's at least a small chance they'll actually make a return on the investment, so they theoretically come out ahead? Is it that they want to be able to continue to lease out their aircraft so that they can put the potentially indefinite lease payments on their balance sheet and make it look like their income is higher than it actually is? I really don't fucking get it. It's all a shell game, and it seems like someone should be noticing.
Rational markets my ass. The airline industry should be allowed to collapse in on itself, just like people like the RIAA should be allowed to drown in the shift to the internet as a distribution mechanism. The article seems to suggest the consumers benefit through low prices, but somebody has to be paying for it. Isn't it those same consumers who are paying for things like the United and imminent Delta pension bailout to the tune of several billion dollars? If you're going to subsidize air travel, fine, but let's call it that instead of dumping money into dead airlines.
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Long and short of it is that, if the companies liquidate, you have to take a loss. If they don't, you don't. You keep booking the asset (loan) and push off taking a writedown on its value. It's crappy business but it's corporate.
Question to ask is why the US government 1) keeps bailing them out and 2) allows the lax bankruptcy laws that keep them in the air. Don't entirely know the answer to that besides politics as usual. In other words, people will freak out if the government does something that's clearly pro-business and, in the short-run, anti-consumer: Let the bad airlines crumble, disappear and take their capacities with them (lest I forget, that also means that the goverment doesn't pay their pensions to get them off the hook) so the half-decent airlines can jack up prices and fix a market dynamic that has sent airline fares down over the last 3-5 years while crude oil has tripled and jet fuel has more than quadrupled.
I'd be the first to vote for the politician that says to dick over United and make it sell every last plane and square foot of terminal space till it can pay its bills (or runs out of stuff, whichever comes first) so American and Continental can charge you and I the $600 it probably should cost for a r/t coach fare from New York-Chicago. Have a feeling I'll be pretty lonely in the voting booth though.
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