Bailing out

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Remember previous federal 'bail outs'. They were not government money provided or loaned to the sick organizations (NYC or Chrysler). Bailout simply meant that government underwrote those loans, if the organization defaulted. Chrysler had to obtain bank loans at prevailing rates to qualify for the government bailout. A German bank, at the last minute, almost destroyed the entire Chrysler rescue package when they almost backed out at the last minute.

Any bailout for the airlines should be based on the same concepts. The Feds don't really save the organization. They simply underwrite the loans. When Iacocca let the engineers, rather than accountants, run the company, then Chrysler was repaying those bank loans in four years.

IOW the loans simply permitted new management to correct reasons for problems. The poor Lindsay and A Beam leadership in NYC was replaced by responsible leadership - Koch. Townsend and Ricardo, who could not even drive a car, were replaced by Iacocca - a man with engineering training and experience. He even had a driver's license.

Same must apply to the airlines. Crisis is due to poor management. A loan without corresponding management solutions would be wrong.

Previously cited were airlines such as TWA. Anyone notice that TWA's top management did not come with airline experience. Instead they just kept flying the same planes longer - cost controls. When TWA went under, they had the oldest airplanes in the industry. MBA attitudes saw profits in money games - depreciation and cost controls - rather than in better airline operations.

Why does Southwest do so well? Before discussing bail outs, we should be discussing whose top management comes from where the work gets done and whose management instead has a cost control mentality.