What does it mean that airlines shouldn’t be allowed to buy back stocks?
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Essentially companies for the past 30ish years have been using excess cash to repurchase their own stock. This increases stock price by lowering the amount of outstanding shares without changing the effective earnings of the company.
This also means those companies aren’t sitting on as large of cash reserves as they could have. It also means the repurchase of stock is risky because if their company struggles, not only are they struggling, but that cash reserve which was converted to their own stock will plummet in value itself.
Essentially instead of saving adequate amounts of cash to handle economic issues, these companies have blown through huge sums of cash to artificially inflate their stock price. They now can’t simply sell off the stock for cash or they will destroy their stock price, but they need cash as their earnings are starting to tank. They want a bailout because they failed to properly reinvest their earnings in a way which would allow them to survive a temporary economic downturn.
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