Stock buybacks had A LOT of problems people don't discuss.
But this isn't really what ruined the airlines.
UAL -- the hardest hit and worst buyback offender -- bought back $1.2Bn in 2015, $2Bn in 2016, $3Bn in 2017, $1.2Bn in 2018, and $3Bn in 2019.
That's a total of $10.4Bn. To my knowledge, less than 4% of that was on borrowed money.
They returned roughly ~95% of free cashflow to investors mostly through buybacks instead of dividends.
UAL's Cash on Hand increased 25% in 2019 to $4.9Bn.
Even if they had that $10.4Bn, they could not get through Coronavirus. Airlines have HIGHLY volatile margins on INSANE amounts of revenue. None of them could withstand a 70% decrease in air traffic for a year.
Maybe they're all terribly run. I dunno. They were pretty bad buyback offenders, but far from the worst. And buybacks are not what ruined them.
Most companies keep less than 10% of Op Ex in cash on hand. UAL's Op Ex is about $38Bn/year. A lot of people think it's healthy for a business to have 25-50% of Op Ex in cash. For UAL, that would've been $9.5-$19Bn.
They could've been in that range if they didn't issue any dividends or buybacks since 2014. But they still wouldn't be able to make it through this.
And, no, I'm not saying that they should've done buybacks at the rate they did (or at all). I'm just saying this isn't what ruined them, and they are far from the worst offenders here. They're just the hardest hit.
Edit:
Curious if anyone familiar with the industry can comment:
How much of Airlines' Op Ex is fixed? How much can they realistically cut? I don't know enough about how this "mandatory" flight schedule works. How many flights do they need to keep flying to keep their gates?
Ignoring Tech industry, most companies on earth could not withstand a 70% drop in revenue. The world we are in today is that everyone is trying to go for Big Revenue and Slim Profit Margin. A side effect from QE or worsen by it.
How many tech companies have withstood a 70% drop in revenue? BlackBerry comes to mind.
The correct thing would be to nationalise them if they go bankrupt, not to bail out the investors that earned money with the explicit expectation of risk.
And I say that having lost 10k in stock value in the past month. Still my fault and my risk and I don't deserve to be bailed out for it.
No insurance policy covers war. This is pretty much like a war. It's uninsurable because it affects everyone.
Bailouts in 2020 are not gifts to the reckless rich like in 2008, they're like the Marshall plan.