whose money is it anyway?
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Join Date: Feb 2005
Location: India
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whose money is it anyway?
Been wondering for a while and decided to take a chance and pop the stupid question, viz..
"If every airline in the world is losing money, who exactly IS putting in the money to keep things right side up..?"
Looked it up on Wikipedia on this link.. Airline - Wikipedia, the free encyclopedia
here's what it says,
"Since 1980, the industry has not earned back the cost of capital during the best of times. Conversely, in bad times losses can be dramatically worse. Warren Buffett once said that despite all the money that has been invested in all airlines, the net profit is less than zero."
So, if airlines as a whole have been losing money for the last 3 decades, who exactly lost the money?
Any enlightened thoughts on the subject.? or unenlightened ones too, for that matter.
"If every airline in the world is losing money, who exactly IS putting in the money to keep things right side up..?"
Looked it up on Wikipedia on this link.. Airline - Wikipedia, the free encyclopedia
here's what it says,
"Since 1980, the industry has not earned back the cost of capital during the best of times. Conversely, in bad times losses can be dramatically worse. Warren Buffett once said that despite all the money that has been invested in all airlines, the net profit is less than zero."
So, if airlines as a whole have been losing money for the last 3 decades, who exactly lost the money?
Any enlightened thoughts on the subject.? or unenlightened ones too, for that matter.
In the case of lots of US airlines, it's their creditors - companies who have sold them things and not been paid when the airline enters Chapter 11.
In the case of state airlines, it's the taxpayer, who just underwrites any level of loss.
In the case of privately owned airlines, it's the shareholder, who sees the value of his shares reduce, either due to losses, or the dilutive effect of new shares being issued.
Of course, with privately owned airlines, it's far more complex than that. Another interesting approach would be to look at the total level of debt compared to the 'start'. If debt has increased, then it has effectively been used to replenish balance sheets following losses. And there is more than just cash debt - most of today's aircraft are funded externally in some way or other, so they too represent debt.
As they say, the best way to become a millionaire isto start an airline (with a billion).
Greatly simplified, but helpful, I hope.
In the case of state airlines, it's the taxpayer, who just underwrites any level of loss.
In the case of privately owned airlines, it's the shareholder, who sees the value of his shares reduce, either due to losses, or the dilutive effect of new shares being issued.
Of course, with privately owned airlines, it's far more complex than that. Another interesting approach would be to look at the total level of debt compared to the 'start'. If debt has increased, then it has effectively been used to replenish balance sheets following losses. And there is more than just cash debt - most of today's aircraft are funded externally in some way or other, so they too represent debt.
As they say, the best way to become a millionaire isto start an airline (with a billion).
Greatly simplified, but helpful, I hope.
