Bailout USA Airline Industry

So, what does bailout means?

The bailout is all about the future but not for the past. When any government is bailing out it means it’s protecting the economy from significant damage. Govt. would get the stock ownership in distressed companies and when the economy will recover it’ll sell off its stake. This way the company will get funds to manage their working capital.

But is it worth it to provide financial aid to the Airline industry?

2 years before the government enacted a tax cut rate even though GDP was going in deficit. It reduced the tax paid by companies. This way the company was able to save millions of money, instead of saving it money was distributed among shareholders. American Airlines Group Inc. — which is not shown in the chart has repurchased more than $12.5 billion of its shares. United Airlines Holdings Inc. used 80% of its free cash flow on buybacks, while the S&P 500 Index as a whole allocated about 50% for the purpose. It could have stored up its cash reserves for a future crisis, knowing that airline is a cyclical business.

Source: FactSet



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