Boeing and the airline industry are clamoring for billions of dollars in bailouts as the coronavirus crisis has dramatically impacted them financially. Clearly, Boeing, the largest US exporter, will be considered too big to fail, just as General Motors was considered too big to fail and rescued under the Obama administration. The problem in this case, particularly for Boeing, is that share buybacks, on top of misleading the FAA, two fatal crashes, egregious executive compensation, and underperformance on the KC-46 program will likely result in calls for Chapter 11 restructuring before any bailout can occur. The Moral Hazards of rewarding Boeing management for their failures simply won’t fly with the public.
Similarly, a number of the major airlines have also bought back shares to increase their share prices, and share a fiscal moral hazard with Boeing in that regard. Since those share buybacks are now the equivalent of burning up their cash reserves to enrich shareholders and executives with stock options, revisiting Chapter 11 restructuring may also be required for some airlines if Congress reacts negatively to their fiscal behavior.
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