by David Stockman
The nerve of it is a wonder to behold. The US airline industry has spent a decade shoving itself into harm’s way by strip-mining their balance sheets to fund share buybacks and goose top executive stock options.
For crying out loud – the reckless irresponsibility of it is mind-boggling. That’s because for decades upon decades this has been a highly cyclical industry – vulnerable to global dislocations caused by recessions, storms, wars, terror and more. Accordingly, airline companies absolutely need deep equity balance sheets and ample standby liquidity, even at the expense of short-term earnings.
Needless to say, the Big Four US airlines – Delta, United, American, and Southwest – were having none of financial rationality, prudence and common sense. As Wolf Richter properly pointed out: