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Thursday, March 18, 2004

The Airline Industry 

So, the New York Times today had two articles on the airline industry today. One on United's bankrupcy, here, and one on the shifting fortunes of American, here. Basically, United has supposed to emerge from Chapter 11 by June 30, but now that's going to pushed back until at least the end of the summer (why do I think Jerry Bremer made this timetable?). Now, United's successful emergence from Ch. 11 seems contingent on the Air Transportation Stabilization Board (ATSB) on approving some exit financing--that is, having the federal government guarantee the loans.

Now, I'm no objectivist, or some lighter version of libertarian, but I do not feel sorry enough for United to think that its loans should be backed by the full faith and credit of the US government. Maybe, after Sept. 11, such emergency financing scheme was needed (although I question even this). But not in 2004. The airline industry is terribly cyclical, especially if fuel costs increase at the same time revenue decreases. So, yeah, since 2001 airlines have lost a lot of money. They also made a lot, a whole lot, from 1996-2000. I didn't see anyone calling for a federal scheme to hold some of the airlines' profits in trust as a rainy day fund. I do not want us to start treating airlines like Japan has treated, well, everyone--bailing out every troubled business. This is corporate welfare at it's worst (well, maybe not as bad as what we give Archer Daniels Midland), and should be stopped.
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