- Jun 6, 2007
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It has been heavily panned President Trump's plan on how to inject the twenty-five billion dollars from the CARES Act into the U.S. Airline industry. It is really shocking how President Trump could allow his reputation as A Financial Guy, A Person Proficient In The Highest Level of Financing, A Top Level Deal Maker to take such a devastating blow! He took a situation that could have easily been a Win-Win situation for everyone and turned it into a Lose-Lose situation for everyone!
President Trump's U.S. Airline Industry relief package is a Lose/Lose for everyone because the terms seventy percent of the Grant Program money is given to an individual airline as a grant and thirty percent is given to them as a loan is tantamount to just adding a significant debt burden on them. Remember the Grant Program money isn't money an individual airline can use where it is in the best interest of the airline it is money the airline must pay out in payroll for the next six months even for employees who are not needed because flights have been stopped because of Covid 19. The only thing this President Trump plan will do is insure that in six month America's airline businesses will have billions of dollars of additional debt on their books! Keep in mind the U.S. Airline Industry has been getting crushed from the Covid 19 crisis; it has taken on an additional fifteen billion dollars of debt since the middle of February of this year because of the crisis! The President of the nation's largest flight attendants union said this plan will lead to airline company bankruptcies; at minimum though it will restrain growth in the industry monies spent servicing debt cannot be spent expanding routes or number of flights on a route. Not only is this plan as described a loser for airline companies, airline workers and airline customers but it is a loser for American taxpayers; get this President Trump's deal to lookout for the U.S. taxpayers is that for all this Grant Program money transferred to an airline corporation the U.S. Treasury will get warrants valued at three percent of the money being transferred in the loan part of the transfer. Now a competent advocate for the American people would at least shape the deal so that I am getting the taxpayers money back and I am going to share at least to a significant degree in the capital appreciation of the stock of that airline corporation that will of course one day happen. With the President Trump deal the current stock price of an airline company participating in this program would have to rise twenty three hundred percent for the U.S. Taxpayer just to be made whole to cover the seventy percent of the transfer in grant form. One can bet their house a house they really love that has been in the family for generations that the U.S. taxpayer will take a loss with this plan!
This is what a competent Deal Maker would have done. The purpose of the U.S. Airline industry relief plan should have been that the Federal Government will carry the industry through the devastating part of the crisis the shutdown of the economy and the climbing of the bell curve to the foreseeable new normal by that it is meant that by October of this year things in the economy will have stabilized, the economy will be up and running, but things for the airline industry won't be the pre-crisis normal there won't be big sporting events w/public attendance there won't be big conventions there won't be as many vacationers because of job loss and income loss,etc.. So first what the program should have done is commit to the airline industry we are not going to pay to carry all your employees until October that is just a waste of taxpayer money because they will be layed off in October but airline we will carry as many of those employees you will need then and will thus have a job in October you airline executive come up with the numbers of employees and let us know that payroll cost and you will get every penny of that amount in a grant form. Now when a competent Deal Maker presented this plan he or she would hear the politics driven members of Congress going ballistic ranting and raving that you are not following the law the law says all of the airline businesses employees have to be kept on the payroll for six months. The competent Deal Maker would say to those critics I am sorry that provision is null and void, it has no effect on this program because the provision in the act funding the program did not provide the funds to carry out the "all employees must be kept on the payroll" provision; a CNBC article checked airline industry filings with the government and the industry's six months payroll expense is $31 billion sorry you political panderers your funding provision is $6 billion dollars short. A competent Deal Maker would have made an offering to the airline CEO's saying listen folks we have to make the taxpayers whole here for this grant money the taxpayers will be giving you and I am going to make it as easy as I can this is the specifics of the deal Uncle Sam gives you the grant money and you give Uncle Sam warrants for the number of shares at your current share price that equals the total amount of the grant money and the real beauty for you is that the warrants don't go into effect until your stock price rises forty percent above your current stock price thereby having minimal effect on your current stock price. The win for the U.S. taxpayer is it is almost guaranteed that the stock price will eventually double although Uncle Sam will have to be very patient when that occurs the U.S. taxpayers will be made whole! One last note it is pretty clear that Treasury Secretary Steven Mnuchin although a dedicated public servant really doesn't have the skill set to run the campaign to save America's Industries and have the American taxpayers share in the bounty that will result from the recovery. America needs an Investment/Merchant Banker from one of the big name firms to run the campaign, whose done things like this a hundred times, and the campaign should be hiring people like him or her from the big firms that do this type of stuff as part of their normal business, the JP Morgan's, the Bank of America's, the Morgan Stanley's, the Citibank's, etc.. You need a leader to look at these businesses separate the lost causes and for the non-lost causes determine how much money they need to get to the place of being in great shape and out of the $450 billion CARE Act program offer them preferred stock and warrant deals to get them to that place; just like America did in 2008-2009!
President Trump's U.S. Airline Industry relief package is a Lose/Lose for everyone because the terms seventy percent of the Grant Program money is given to an individual airline as a grant and thirty percent is given to them as a loan is tantamount to just adding a significant debt burden on them. Remember the Grant Program money isn't money an individual airline can use where it is in the best interest of the airline it is money the airline must pay out in payroll for the next six months even for employees who are not needed because flights have been stopped because of Covid 19. The only thing this President Trump plan will do is insure that in six month America's airline businesses will have billions of dollars of additional debt on their books! Keep in mind the U.S. Airline Industry has been getting crushed from the Covid 19 crisis; it has taken on an additional fifteen billion dollars of debt since the middle of February of this year because of the crisis! The President of the nation's largest flight attendants union said this plan will lead to airline company bankruptcies; at minimum though it will restrain growth in the industry monies spent servicing debt cannot be spent expanding routes or number of flights on a route. Not only is this plan as described a loser for airline companies, airline workers and airline customers but it is a loser for American taxpayers; get this President Trump's deal to lookout for the U.S. taxpayers is that for all this Grant Program money transferred to an airline corporation the U.S. Treasury will get warrants valued at three percent of the money being transferred in the loan part of the transfer. Now a competent advocate for the American people would at least shape the deal so that I am getting the taxpayers money back and I am going to share at least to a significant degree in the capital appreciation of the stock of that airline corporation that will of course one day happen. With the President Trump deal the current stock price of an airline company participating in this program would have to rise twenty three hundred percent for the U.S. Taxpayer just to be made whole to cover the seventy percent of the transfer in grant form. One can bet their house a house they really love that has been in the family for generations that the U.S. taxpayer will take a loss with this plan!
This is what a competent Deal Maker would have done. The purpose of the U.S. Airline industry relief plan should have been that the Federal Government will carry the industry through the devastating part of the crisis the shutdown of the economy and the climbing of the bell curve to the foreseeable new normal by that it is meant that by October of this year things in the economy will have stabilized, the economy will be up and running, but things for the airline industry won't be the pre-crisis normal there won't be big sporting events w/public attendance there won't be big conventions there won't be as many vacationers because of job loss and income loss,etc.. So first what the program should have done is commit to the airline industry we are not going to pay to carry all your employees until October that is just a waste of taxpayer money because they will be layed off in October but airline we will carry as many of those employees you will need then and will thus have a job in October you airline executive come up with the numbers of employees and let us know that payroll cost and you will get every penny of that amount in a grant form. Now when a competent Deal Maker presented this plan he or she would hear the politics driven members of Congress going ballistic ranting and raving that you are not following the law the law says all of the airline businesses employees have to be kept on the payroll for six months. The competent Deal Maker would say to those critics I am sorry that provision is null and void, it has no effect on this program because the provision in the act funding the program did not provide the funds to carry out the "all employees must be kept on the payroll" provision; a CNBC article checked airline industry filings with the government and the industry's six months payroll expense is $31 billion sorry you political panderers your funding provision is $6 billion dollars short. A competent Deal Maker would have made an offering to the airline CEO's saying listen folks we have to make the taxpayers whole here for this grant money the taxpayers will be giving you and I am going to make it as easy as I can this is the specifics of the deal Uncle Sam gives you the grant money and you give Uncle Sam warrants for the number of shares at your current share price that equals the total amount of the grant money and the real beauty for you is that the warrants don't go into effect until your stock price rises forty percent above your current stock price thereby having minimal effect on your current stock price. The win for the U.S. taxpayer is it is almost guaranteed that the stock price will eventually double although Uncle Sam will have to be very patient when that occurs the U.S. taxpayers will be made whole! One last note it is pretty clear that Treasury Secretary Steven Mnuchin although a dedicated public servant really doesn't have the skill set to run the campaign to save America's Industries and have the American taxpayers share in the bounty that will result from the recovery. America needs an Investment/Merchant Banker from one of the big name firms to run the campaign, whose done things like this a hundred times, and the campaign should be hiring people like him or her from the big firms that do this type of stuff as part of their normal business, the JP Morgan's, the Bank of America's, the Morgan Stanley's, the Citibank's, etc.. You need a leader to look at these businesses separate the lost causes and for the non-lost causes determine how much money they need to get to the place of being in great shape and out of the $450 billion CARE Act program offer them preferred stock and warrant deals to get them to that place; just like America did in 2008-2009!
