If you want to be competitive on the market you need to lower costs and cut down on margins. You can't just have a big pile of money lying around "in case all flight is halted for a few weeks/months"
Yes, exactly. There are certain businesses that should not be subject to market forces: essential services that have tiny margins.
> You can't just have a big pile of money lying around "in case all flight is halted for a few weeks/months"
Then you get nationalized ¯\_(ツ)_/¯. If you want to be privatized again, make enough money to do buybacks.
Banks and corporations are requiring their employees and the government to do this for them, while simultaneously claiming to be profitable.
That's what insurance is for.
If an airline can't afford to buy adequate insurance, then it isn't actually a profitable businesses.
If market pressures make it impossible for airlines to run operations in a financially responsible way, then that may illustrate the fact that markets don't always create the best outcomes.
There are no insurance companies that can afford that or that would back it, including Berkshire Hathaway (and they're among the only ones that could even attempt it).
If you tried it, you'd just take down the entire insurance industry again as they suddenly might have to eat $100 billion in losses across the segment in one year, paying out epic cash that nobody outside of Apple, Microsoft and Google have to pay out.
This is exactly the scenario where you should socialize losses across the giant government with the Fed's printing press and balance sheet, and simultaneously also ensure the government and its taxpayers get a fair deal (the airlines have to pay it back, and or taxpayers get the equity which can be sold off and receive dividends over time; all the US airlines were worth maybe $90 billion prior to the crash, producing like $18b in operating profit per year).
Most likely, the price of flights would be an order of magnitude greater if airlines weren't (through various direct and indirect means) publicly subsidised.
Or, maybe such a business model isn't (and shouldn't) be supported by the current rules of the free market. I would say "you can't just toss in billions on average every few years" and call that a legit business model for a for-profit private corporation.
You can. Keep it in some liquid investment vehicle so you can withdraw it at anytime. If you don’t want to do that, then go under and shut your business. Don’t ask tax payers to bail you out. I’m not sure why this notion of responsibility is so difficult.
then the remaining market participants will figure out how to better account for such risks, which can no longer be considered rare (if they ever should have been).
(And then the hard trick is ensuring the next folks in office won't dismantle that legislation to make some cash on the side.)
This is the industry actively sending out planes for repair and refurb to sketchy offshore repair centers, in order to maximize profits for shareholders.
This is the industry that lobbies against more strict pilot fatigue rules, in order to maximize profits for shareholders.
This is the industry that spent the last decade investing heavily in stock buybacks instead of improving passenger experience, maintenance of their planes and employee well being, in order to maximize profits for their shareholders.
Seems maintaining shareholder profitability is its own safety issue.
We should try to get the shareholders to pay for as much of it as possible though, whilst allowing the industry to stay solvent. This seems like some of the intention of making bailouts in the form of low-to-zero-interest loans (not sure if that's the form the bailout ended up taking).
The real question is, “Why were the airlines so poorly equipped to handle a cataclysmic event when the last one was only 19 years ago?”
The answer is short term profitability.
And the follow up question is, “Why would ANYONE bail any for-profit company out to the benefit of the shareholders only, ever?”