Passenger Trains > Airlines and Loan Guarantees

The topic is sure to upset someone, but that's no reason for you not to read it.

http://www.washingtonpost.com/wp-dyn/articles/A34804-2002Jan12.html

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The Airlines Sure Needed a Lift. Or Did They?

By Noam Scheiber
Sunday, January 13, 2002; Page B02

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Yet it's those worst off that have always been the beneficiaries of government bailouts in the past. Federal intervention is supposed to be a last resort, not a windfall for reasonably healthy companies -- or even struggling companies that have access to private credit. For much of the history of American bailouts, the government didn't even put up most of the money. As in the Lockheed bailout of 1971 and the New York City bailout in 1975, the federal government simply served as the final piece in a larger, mostly private, financing puzzle.

In 1976, that all changed. The government got into the business of financing bailouts with public money, and began extracting enormous concessions. (And rightly so. How else to discourage healthier companies from feeding at the federal trough?) That was the year the feds stepped in to form the Consolidated Rail Corporation (Conrail) from six failing Northeastern railroads. In the process they demanded -- and received -- a massive 85 percent stake in the new company.
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It's interesting the Feds believe that we need seven healthy airlines to maintain competitive position, when no major airport in the US except LA, LV, Chicago, and Orlando has anything even remotely resembling competition.

For railroad competition, I'd call Chicago, Atlanta, New Orleans, Cincy, Kansas City, St Louis, Cleveland, and Detroit competitive. Three or more carriers with good market share, or two carriers engaged in head to head combat for the same goods.

NYC, LA, Pittsburgh somewhat competitive. Although there are multiple carriers they aren't usually in head to head competition for the same goods, except LA/NY to Chicago.

Boston, Jax, Baltimore largely uncompetitive

It's not like 1955, when a shipper in NYC had seven reasonably competitive ways to gets his goods to Chicago, three ways to get his goods to Scranton/Wilkes Barre.

In the recent airline bailout, the airlines split $5b, which had no strings attached.

I worked for Lockheed during the bailout time. Supposedly "conservative" folks were walking around the plant saying that we were too important to be allowed to fail. When I asked about letting the market prevail, and reminded them of their their absolute hate of welfare, I was met with snarls.

Face it. When you rescue a large corporation from bankruptcy you are keeping the management team that caused the problem in place to do more harm. It happened at Lockheed. The Chairman/CEO who led us into the mess had to be practically dragged out. Southwest Airlines, actually showed a small profit in the 4th q of 2001, partly as a result of getting their share of the $5b. All other airlines except Jet Blue lost huge amounts of money. Maybe Southwest has it right?

Don't even think about how ridiculous it is to subsidize airlines and not railroads. Outside the industry and the hobby you will get no support at all.

Hal

J-1Hudson wrote:
>
> Southwest Airlines, actually showed a small
> profit in the 4th q of 2001, partly as a result of getting
> their share of the $5b. All other airlines except Jet Blue
> lost huge amounts of money. Maybe Southwest has it right?

Did Alaska Air make money too?