White House tells GM boss to step down

[grumbler]

And what, pray tell, happened to United Airlines in the end.

You don't know?    What fucking planet have you been living on?

[dps]

Such a mess. Plus, seems too much owned by the government now? This couldn't have been done better, even a govt controlled bankruptcy a while ago, or something?

Well, as far as Chrysler is concerned, the government shouldn't have bailed them out the 1st time, 30 years ago or so.

[Alatriste]

And what, pray tell, happened to United Airlines in the end.

You don't know?    What fucking planet have you been living on?

Tsch, tsch... since when the Moon is a planet?



Yes, United ended up in Chapter 11-land. So did  Continental Airlines (twice), US Airways (twice), Delta Air Lines, Northwest Airlines... in 2006 over half the industry's seating capacity was on airlines that were in Chapter 11. Airlines are fragile things, there is nothing so easy to cut as airline tickets for both businesses and families, and, to be honest, I foresee another brutal round of mergers, closures and general upheaval in the sector during the next years.

[garbon]

Virgin America

[Zanza]

Opel has apparently lost all suitors. Fiat definitely, Magna most likely. GM (and the US government which participates in the talks) is adding unreasonable demands all the time.

The German government has now made a calculation that shows that it is cheaper for the government (cash, not prestige) to let Opel liquidate.

[alfred russel]

Yes, United ended up in Chapter 11-land. So did  Continental Airlines (twice), US Airways (twice), Delta Air Lines, Northwest Airlines... in 2006 over half the industry's seating capacity was on airlines that were in Chapter 11. Airlines are fragile things, there is nothing so easy to cut as airline tickets for both businesses and families, and, to be honest, I foresee another brutal round of mergers, closures and general upheaval in the sector during the next years.

If governments wouldn't step in to prevent the collapse of major airlines, the industry wouldn't be as fragile.

[Alatriste]

Yes, United ended up in Chapter 11-land. So did  Continental Airlines (twice), US Airways (twice), Delta Air Lines, Northwest Airlines... in 2006 over half the industry's seating capacity was on airlines that were in Chapter 11. Airlines are fragile things, there is nothing so easy to cut as airline tickets for both businesses and families, and, to be honest, I foresee another brutal round of mergers, closures and general upheaval in the sector during the next years.

If governments wouldn't step in to prevent the collapse of major airlines, the industry wouldn't be as fragile.

That's Theology, not Economy.

Let's see... we have an industry with

a) Very high public profile (a single accident can have dramatic consequences; Hindenburg tickets, anyone?)

b) Extremely high dependence on oil prices (these days airlines are suffering because they bought fuel when price was highest; of course they were getting it cheaper before, but in any case high prices mean huge problems for airlines... that they often aren't in synchrony with gas price on the street is no consolation)

c) Easily prescindible products (both businesses and families can very easily fly less often, fly economy class rather than business, and/or fly nearer... or stop flying at all)

d) Very costly vehicles from a very limited range of makers, with years long lags before delivery (meaning all too often you buy planes when you have high profits and plan for expansion, but only receive them when you don't want them anymore)

e) High dependence on highly qualified, expensive and not easily replaceable personnel (pilots, ATCs...)

f) High dependence on general political and economic climate (9-11, anyone?)

How would a non intervention policy help solve these problems?

[Zanza]

That's the wrong question: how does intervention policy help solve all these problems?

Not at all. It rather excerbates them by keeping airlines that are not able to cope with them on their own alive.

[Berkut]

That's the wrong question: how does intervention policy help solve all these problems?

Not at all. It rather excerbates them by keeping airlines that are not able to cope with them on their own alive.

Shush you, it is a matter of faith that government intervention can fix any problem, and failures of a business to cope with market realities is really just a failure of government.

We find your lack of faith in these principles disturbing.

I am always bemused by the idea that simply pointing out a problem is considered to be sufficient argument that some proposed fix in fact will work. GM is going bankrupt, therefore giving tens of billions of dollars to the UAW and propping them up is a good idea.

It is classisc:

1. Oh noes! GM is going into the shitter!
2. Give them insanely large amounts of taxpayer money!
3. ???
4. Profit!

How this intervention will actually achieve the goal is not important - simply doing something, anything is needed! And hey, if we can push our ideological (or as Ally puts it, their theological) agenda at the same time, and nationalize a major industry, then so much the better.

GM is dead. Even the best case result of this intervention is simply going to be that we end up with a essentially new, government owned, union run automobile company that the government will then prop up with more and more regulations to "protect" our investment from those nasty market vagaries mentioned.

[The Minsky Moment]

How would a non intervention policy help solve these problems?

Every industry has problems.  The reason the airline industry's problems always seem to become fatal is that the airlines make the same mistake every economic cycle - they over-invest in capacity at the top of the economic cycle (and agree to fat deals with the unions to service that capacity) in order to milk short-term profits, only to make them wholly unviable when the cycle dips, as it inevitably does.

Non-intervention deters that behavior and resolves its consequence by permanently terminating the worst offenders.

The alternative is to be honest that the airline market just doesn't work and re-regulate it.  But the socialization of losses and privitization of gains system we have going now is the worst of both worlds.

[jimmy olsen]

along with a hundred billion dollars or so of our money.

For $100 bn you could buy Honda. I bet that would be a better investment for the American taxpayer. 

You're a genius!

[alfred russel]

Yes, United ended up in Chapter 11-land. So did  Continental Airlines (twice), US Airways (twice), Delta Air Lines, Northwest Airlines... in 2006 over half the industry's seating capacity was on airlines that were in Chapter 11. Airlines are fragile things, there is nothing so easy to cut as airline tickets for both businesses and families, and, to be honest, I foresee another brutal round of mergers, closures and general upheaval in the sector during the next years.

If governments wouldn't step in to prevent the collapse of major airlines, the industry wouldn't be as fragile.

That's Theology, not Economy.

Let's see... we have an industry with

a) Very high public profile (a single accident can have dramatic consequences; Hindenburg tickets, anyone?)

b) Extremely high dependence on oil prices (these days airlines are suffering because they bought fuel when price was highest; of course they were getting it cheaper before, but in any case high prices mean huge problems for airlines... that they often aren't in synchrony with gas price on the street is no consolation)

c) Easily prescindible products (both businesses and families can very easily fly less often, fly economy class rather than business, and/or fly nearer... or stop flying at all)

d) Very costly vehicles from a very limited range of makers, with years long lags before delivery (meaning all too often you buy planes when you have high profits and plan for expansion, but only receive them when you don't want them anymore)

e) High dependence on highly qualified, expensive and not easily replaceable personnel (pilots, ATCs...)

f) High dependence on general political and economic climate (9-11, anyone?)

How would a non intervention policy help solve these problems?

If several major carriers actually permanently went under, the players left would have less competition and be under less pricing pressure. That would make them more financially stable, which would make the industry less fragile.

Whether that is good for consumers and the public as a whole is debatable, but I'd still put government intervention as one of the top reasons the industry is fragile.

[alfred russel]

How would a non intervention policy help solve these problems?

Every industry has problems.  The reason the airline industry's problems always seem to become fatal is that the airlines make the same mistake every economic cycle - they over-invest in capacity at the top of the economic cycle (and agree to fat deals with the unions to service that capacity) in order to milk short-term profits, only to make them wholly unviable when the cycle dips, as it inevitably does.

Non-intervention deters that behavior and resolves its consequence by permanently terminating the worst offenders.

The alternative is to be honest that the airline market just doesn't work and re-regulate it.  But the socialization of losses and privitization of gains system we have going now is the worst of both worlds.

Industries that have very high fixed costs, sell commodities, and must determine capacity years in advance are tough places to make money. The nature of business is optimism, and the result is excess supply without significant variable costs to reduce.

[The Minsky Moment]

Industries that have very high fixed costs, sell commodities, and must determine capacity years in advance are tough places to make money. The nature of business is optimism, and the result is excess supply without significant variable costs to reduce.

That's a polite way to put it.

Another way to put it is that in the presence of the separation of ownership and management, there is an incentive to maximize profits during the up phases to secure the maximum possible bonus and option comp, even at the expense of harming firm prospects in the future.

[Zanza]

Industries that have very high fixed costs, sell commodities, and must determine capacity years in advance are tough places to make money. The nature of business is optimism, and the result is excess supply without significant variable costs to reduce.

There are those airlines that are able to manage it though. As long as it does not lead to consolidation that results in a monopoly or other market distortion, I don't see any reason at all to support ailing airlines.