Airline Bailout

Congress enacted a $15 billion bailout to save the airline industry from bankruptcy. But what if an airline goes bankrupt? Does that mean their airplanes will go poof and disappear into thin air? That's nonsense! Bankruptcy means that there is a change in the title to those assets. Someone who thinks he can turn a profit buys them.

Does the bailout help passengers? Let's look at it. If flying a given route costs an airline company $40,000 and it earns $60,000, it will fly that route. If they only earn $20,000, they will not fly that route. That decision is independent of the recent $15 billion bailout.

So who benefits? The bailout enriches the millions of airline stockholders at the expense of the millions of others who aren't stockholders. In any economic activity there are risks both man-made and natural. Those who want to take those risks and rewards buy stock in the company.

During the 90s, airline stockholders were claiming large rewards. That's great with me. But today they should be just as willing to accept the downside risk instead of going to Washington and demanding that Congress force non-stockholders to share in that downside risk.

I'm Walter Williams
Nightly Business Report
October 2001
Return to Commentaries Page