American Consequences - August 2020

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GM – the loans will be converted to debt or equity in the new entity. If we see a new round of relief programs and the government lends an airline more money, then it will just take a larger stake in the new entity once it restructures. Either way, we can be absolutely certain of one thing... The government will get its money back . The government’s only goal is to keep the U.S. passenger airline fleet operational. When the dust settles, it could care less who owns it... as long as people can get around as needed. Folks who think the government will save existing airline shareholders are sorely mistaken. The government can only delay the inevitable... So if you own airline stocks right now because they seem cheap – think again ... Most of these companies are racking up debt and burning through cash. Soon, they’re going to run out of assets to borrow against. Sure, they’ll mostly keep flying... But they’ll have a reshuffled deck of owners. And for current shareholders, that means you’ll be left holding the bag when it happens. Warren Buffett got out in April... and he still booked a $2 billion loss. If you’re holding airline stocks today, don’t waste any more time before you follow his lead. The clock is ticking... Which major airline will be the first to go bankrupt? And will they be the last?

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American Consequences

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