Dividends and Airlines make their case for funds

For months the average person who collected air miles through the various companies which catered to the travelling business class and public has not been flying. They have used Zoom or one of the other companies because in many cases, if you travel somewhere you have to spend 14 days isolated. When you fly back, you have to be isolated again. COVID has been terrible for hospitality and tourism related businesses. Prior to COVID, every airport in the nation dreamed of being an hub for the airlines because as a hub there were plenty of jobs at the airport. Airports themselves were turned into destination points with shopping, food and hotels. Airports became economic driving areas for cities for jobs and taxes.

One of the issues with COVID is no one knows how long it will last and can things return to normal? In the meantime should airlines, hospitality and tourism facilities be given aid? How much aid should be given and would it be easier to give all citizens discounted seats to travel when normal has returned?

The airlines were given $25 billion plus low interest loans of $25 billion. The airlines have used the money and need more. The airlines had kept people on the payroll but since has furloughed 32,000 workers. Should the airlines receive more money?

In an article by David Koeing of the Associated Press, he spoke to Nicholas Calio who is the president and CEO of A4A (Airlines for America) a trade group representing the largest US passenger and cargo airlines.

If you go back to March, all the A4A members were considered to have fortress balance sheets that were designed to withstand an event 3 times worse than 9/11. In the past decade the passenger airlines spent $424 billion on their work force; $143 billion of their fleet; they retired $91 in debt; and returned $56 billion to shareholders (in dividends and share buybacks).

The companies were in good shape and then traffic fell to less than 10% capacity. Traditionally the peak travelling periods are Thanksgiving and Christmas.

An issue for all airlines is people need to be constantly recertified and retrained which is a process. The airlines can not open up quickly but it is important to note the airlines will not be declaring Chapter 11 bankruptcy because they have strong liquidity in their balance sheets. They need help.

Prior to COVID, airlines were having record years and 2019 was a record year. Airlines will start slowly and build when people can fly. What should the government do?

Linking to dividend paying stocks, the companies were in many portfolios do you still own one or more? There were very good reasons for owning airlines in 2019, there are less reasons now. Markets change and can rebound which is why with airlines you ask are you going to fly soon? if not find alternatives.

There are more questions than answers, till the next time – to raising questions.

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