The 'market value' you calculated is NOT the amount of money it would take to buy them. If someone attempted to buy every available share, the share price would rise significantly.

Not that this is an argument in favor of aiding them, it looks like a ridiculous government giveaway to me.

Yes, but would anyone with any sense of responsibility want to buy a company in such a basket case of an industry?

Let 'em go bankrupt and find a new economic model. We've got Southwest, airTran and jetBlue for the meantime.

More corporate welfare. Bastards. Even in the salad days of the airlines, they had NEVER in their history made one dollar cummulative profit. Mama told me when I was very young, Nixon is a crook and don't invest in airlines. Southwest is left out I surmise, because they actually make a profit for their shareholders. What a novel concept!

Baghdad Bob,
I agree, but the market cap is the best way to understand the current market value. On the other hand, the market caps of the airlines are already inflated. They started going up as soon as the politicians seriously started preparing to give them all this money.

Chris, West - I agree. Let them go bankrupt if they can't make it on their own.

Ahhh, Baghdad Bob...you're still at it aren't you.

Government Giveaway? Ah Hem! Tell the truth. That's a "Taxpayer Giveaway". And to the select special interest groups: The Execs of the Airlines, the shareholders of Airlines, and to a (much lesser degree) the employees of airlines, my friend.

LOL. But seriously....

I'm sure it is a brilliant idea but what's next? A bailout of K-Mart? McDonalds? The hotel industry? The Taxi industry? The list goes on and on....

The airlines were in trouble before the war, even before 9/11. A poor business model is a poor investment. I don't own stock in the Airlines because because I think their poor business models are money losers. (Apparently a lot of other people feel that way too.)

This 'DEAL' will force me (and all other taxpayers) to invest in a Co. that I/we intentionally chose want to invest in.

Thanks, but, "No thanks".

I am against giving money to the airlines -- their risk is really the shareholders risk, and their reward is really the shareholders reward.

But I don't understand the argument that we could buy them for less as being relevant. Regardless of their market or book values, the airlines need working capital to pay for fuel, operations, marketing, etc.

I am not aware that working capital must be less than the market value of a company, in fact with most *new* companies it is almost certainly the case that a company's cash needs are much much greater than the value of the company. (Right? With a new company the value of the company is near Zero.)

That said, I still think failing companies should fail.

BTW,

Excellent Chart, Admiral Quixote! I especially liked your choice of 'mugs' printed on the money.

Ha Ha Ha Ha! Superb!

Yikes! (Fiscal Shock and Awe) UAL market cap is only $47 Million. I've run projects bigger than that.

Hey, maybe they'll bail my company out! Oh, wait, we're profitable. Well, I suppose that won't really matter since money is just falling out of the taxpayer's checkbook.

Jerry,
You are correct that book value would be largely irrelevant. Book values include normal accounting practices such as depreciation (e.g., a jet that is completely depreciated may have a book value of $0, but a market value of $10 million dollars). And, as you point out, the book value of many new companies is indeed less than their working capital needs; but this largely depends upon the industry.

However, this is certainly not true of market value – especially for public firms. Market value – by definition and practice – is the value people place on the firm. This specifically includes future expectations. Any public firm whose operating costs are greater than their market value (or even close to it) is a horrible investment and smart investors will flee in droves. So market value is very good indication. That said, I really doubt the annual airline operating costs even approach their current market values. The amount of money the politicians spend rarely has anything to do with actual need.

Babs,
Many thanks – I wasn’t sure if anyone actually noticed the mug shots, but it was fun making it.

Take a look at UAL. Assuming the prior poster is correct, that its market value is only $47M, and assuming that you thought that at $47M it was a steal -- after all its real estate at SFO is probably worth that much alone, not to mention the slots it has around the world and any airplanes that it may actually own, and the trained employees, etc. If you wanted to take UAL and turn it around, then you would probably be willing to stick more than $47M into it.

Right?

When I did my chart, UAL’s market value was $42.32 million (not much). At the close of today, it actually lost a bit and was valued at $40.61 million. So I can see where you are coming from – obviously United’s assets are far more than $40 million dollars. I expect their assets are well over 4 billion dollars, probably more. But I would not consider United a steal - I would advise you to avoid it.

Here's why. Market value also includes liabilities. In pension liabilities alone, United owes over 4 billion dollars. So let say you could buy 100% of United for its current market value (~$41 million). You would have assets in the billions, but you would liabilities in the billions as well… I would not recommend this.

And in this case, United’s operating costs far exceed its market value. But this prove my earlier point that “Any public firm whose operating costs are greater than their market value (or even close to it) is a horrible investment and smart investors will flee in droves.” Today United’s stock price closed at 71 cents per share.

I expect United will file for bankruptcy if the taxpayer doesn’t bail them out.

I'm Linda, Fly Me.

"Right after then-Congressman Tom Daschle dumped his first wife for a younger, prettier one, the former Miss Kansas Linda Daschle went to work as chief lobbyist for the Air Transport Association, the airline industry’s main lobby; she then became the senior vice president of the American Association of Airport Executives; and these days hangs her hat at the pricey top Washington law/lobby shop Baker, Donelson, Bearman & Caldwell, headed by former GOP Senate leader and ex–Reagan chief of staff Howard Baker — where she peddles influence on behalf of a long list of lucrative aviation clients. The clients for whom Linda lobbied brought more than $5.86 million into Baker, Donelson in one three-year period, including Northwest Airlines ($870,000 from 1997 through 2001) and American Airlines ($1.26 million in fees). Northwest was already teetering on the edge of bankruptcy even before 9/11. American, which has had six fatal crashes since 1994 (not counting 9/11) and has been repeatedly fined by the FAA for a skein of safety violations, had the reputation as the most unsafe major U.S. carrier."

read the rest here:

http://www.laweekly.com/ink/03/09/news-ireland.php

Can you imagine the media howl if she was the wife of a GOP Senator Majority/Minority leader.

"[Linda Daschle] at the pricey top Washington law/lobby shop Baker, Donelson, Bearman & Caldwell, headed by former GOP Senate leader and ex–Reagan chief of staff Howard Baker...
...Can you imagine the media howl if she was the wife of a GOP Senator"

Your indignation is just uninformed.
All's this proves is you don't know much about Washigton.

- You mentioned a firm headed by a Republican who still does work for the government himself, he sits on quite a number of government commissions that make all kinds of decsions relevent to his clients.

- you say the media is being partisan, yet the "Liberal" media is who you uare citing!

- FYI lots of Republicans officials wives work in lobbying...do you think they bake cookies at home all day. They lobby, have PR clients, even work for, and own stocks in companies directly affected by legislation.

Ever here of Halliburton and Cheney? I'm an independent, and am willing to give Cheney the benifit of the doubt, but if you think Daschle should be hung out on this, I want to see you with an impeach Cheney sign in front of the White House.

Moreover:
did anyone pay attention to this debate over the past year? or of positions on the recent bill?

Here is what the white house fought for:
They fought for allowing six, seven and EIGHT figure executives be able to give themselves golden parachutes with bailout funds.

They fought against unemployment benefits for hard working middle and low class employees like the people laid off from restarants at National airport which was closed by government order.

this is a complex issue. The US airline industry conmpetes against airlines around the world which are much more heavily subsized. If we want to be free market libertarians about this, fine, take a train or drive from New York to L.A. or pay $900 for a ticket.

Even after gasoline taxes removed the government money subsidizing the automobile transport system makes the meony subidizing the airline system look like nothing.