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My financial health has been devastated by this. What has happened to me from a financial standpoint is the health equivalent of a fever, a dry cough, and mild shortness of breath not requiring intubation. Due to this, I like the idea of starting up the economy. Starting up the economy gets the clock rolling on helping my financial recovery. The length of time that it will take me to recover from this is unknown. It is also unknown how painful this recovery is going to be for me. The recovery from what 2008 did to me was quite painful and took 5+ years.
That's not the whole story. Starting up the economy again needs to be done in a manner that is based upon sound scientific principles. If it is not done based upon sound scientific principles, the private sector will react negatively, freeze up, and do more layoffs. I'm not sure if the private sector has finished its layoffs yet. Part of me would like to think that any company in the private sector that has wanted to conduct layoffs has already done so in the last 6-7 weeks. That's plenty of time to react. Additionally, Wall Street had its mass freak out already in March and is off the lows for now. There could be a double dip. I'm not sure the equity markets have hit bottom. My sense is that they have not. If the economy is opened too soon and not based upon sound scientific principles, both the private sector and the equities markets will behave in a way that is undesirable to most.
I personally do not think May 1 is feasible for anything right now. I would like to think June 1, but that's still unknown if that is sensible. I'll take more pain in Q2 for a stronger Q3 and/or Q4. I'm likely suffering to some degree in Q3 or Q4 regardless of when the economy re-opens, but I think it would be less if there's some patience in Q2.
Sorry for your financial distress. I appreciate you being able to see the long game here.
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Unfortunately, the US jumped back up to 30,200 new cases and 2,482 deaths (a record) today. Texas was down to 30 deaths, but that's still the second-worst day yet. There were nearly 1,000 new cases added (996), which is off of the high but still a top 3 or 4 day, I believe.
I think we need to be very cautious about the enthusiasm regarding new daily cases peaking. First, I would not describe it as "We've passed the peak." That's simply not true. Peak virus is peak active cases, not peak new daily cases. Second, and more importantly, because we have flattened the curve, we should expect a relatively long stretch that isn't much better than the peak. If peak new daily cases was 34k, we very well could have three weeks of 24-30k. We'd be on the downslope, but that's a terrible run. I honestly think that should be the scope of our expectations, and getting too wild because we've technically hit our worst day for new cases would be premature.
We aren’t even in the 2nd or 3rd innings of economic weakness from all this. No way have all the layoffs already happened. Texas and DFW will be hurt worse than many other places due to the fact that the oil industry is going to massively contract, and then there will be commercial and residential real estate fallout.
Let's use your analogy. If this is the 3rd inning, a whole lot of businesses panicked in the 1st and 2nd innings.
Here's a DFW headquartered business experiencing issues...JCPenney
JCPenney would probably file for Chapter 11, buy some time, and if things get really bad, it is full on liquidation. JCPenney's death rattle impresses me. This is been a company on its death bed for 5+ years, yet it still keeps going. Meanwhile, small businesses panic in an instant and conduct mass layoffs relative to their size. For instance, 10 layoffs in a 50 person company would be considered mass layoffs. There is something about big companies that keeps them alive for far longer than they should be alive.
Quote:
Originally Posted by Wittgenstein's Ghost
Sorry for your financial distress. I appreciate you being able to see the long game here.
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Unfortunately, the US jumped back up to 30,200 new cases and 2,482 deaths (a record) today. Texas was down to 30 deaths, but that's still the second-worst day yet. There were nearly 1,000 new cases added (996), which is off of the high but still a top 3 or 4 day, I believe.
I think we need to be very cautious about the enthusiasm regarding new daily cases peaking. First, I would not describe it as "We've passed the peak." That's simply not true. Peak virus is peak active cases, not peak new daily cases. Second, and more importantly, because we have flattened the curve, we should expect a relatively long stretch that isn't much better than the peak. If peak new daily cases was 34k, we very well could have three weeks of 24-30k. We'd be on the downslope, but that's a terrible run. I honestly think that should be the scope of our expectations, and getting too wild because we've technically hit our worst day for new cases would be premature.
You convinced me a couple of weeks ago about how the issues of economics and public health are intertwined. You had an incredibly insightful bit of analysis. The main takeaway is that the economy cannot re-start until there's mass containment. That's not happening on May 1.
South Korea is now reporting an uptick in cases from recovered patients who now test positive for coronavirus again. They don't yet know why this has happened, but the reasons vary from a faulty negative test result to the virus mutating and allowing reinfection. This is definitely something that needs to be figured out before we engage in relaxing social distancing guidelines, and I doubt they'll have a concrete answer by May 1. That has a lot of implications for the US since we have by far the most cases.
For now, I'm going with a June 1 date for reopening things. There's a huge push building to reopen and since social distancing is working, it's giving a lot of people a false sense of security about how bad this virus is because so far, most of the country is not facing a crunch like New York is. I'm just anticipating a really bad 2nd wave at this point.
Southwest and American Airlines are combined two of the largest DFW area employers. Unless there is another bailout on October 1st when the CARES Act money runs out, both will likely have massive layoffs and both might go into liquidation if the economy has not re-opened. No airline has the cash reserves to survive very long in the zero demand scenario we are in. If load factors are suppressed and economy locked down until a vaccine comes, both airlines will be gone and 30,000+ more will be unemployed in the DFW area.
I think going into this American had about 5 months and Southwest about 9 months of available money. That means American would run out of cash in roughly February and Southwest roughly in June in 2021. A new vaccine might not be ready until the end of 2021. The recovery of passenger numbers could take longer. So several bailouts may be needed to prevent liquidation or massive layoffs. Im not sure the government can keep giving 10 billion to both every six months.
Both these employers feed other businesses around their corporate headquarters and also at DAL/DFW airports so there will be a domino effect if both significantly shrink or go bust.
Southwest and American will be in bad shape for a while.
None of the laid off blue collar or service sector will have the money to travel for a while. A laid off white collar workers right now will take months to get re-employed in most cases, they will not not have enough banked up PTO to travel in 2020 upon re-employment, and they will also be suffering some financial constraints. Remember right now that unemployment is higher than it was at any point during 2008-2012.
Notice that I haven't even mentioned the topic about concern of the spread of a virus yet. I still think that will be a secondary concern after a lack of funds.
Southwest and American will be in bad shape for a while.
None of the laid off blue collar or service sector will have the money to travel for a while. A laid off white collar workers right now will take months to get re-employed in most cases, they will not not have enough banked up PTO to travel in 2020 upon re-employment, and they will also be suffering some financial constraints. Remember right now that unemployment is higher than it was at any point during 2008-2012.
Notice that I haven't even mentioned the topic about concern of the spread of a virus yet. I still think that will be a secondary concern after a lack of funds.
Also keep in mind the profit engine for both companies is business travel, not leisure. Managers who have to buy a last minute $700 ticket are more important to the health of the company than the family who booked 3 discounted seats on Expedia. For American, business class overseas ticket sales ARE the company’s profit.
Cancelled conventions, cancelled company meetings, cancelled awarded banquets, cancelled vendor meetings and trade shows. All of this is BAD for airlines.
American is in the worst shape of all legacy carriers in terms of weathering this storm. They came in with a mountain of debt and declining numbers already.
Yesterday's death figure has actually been revised up to 2,763.
South Korea is now reporting an uptick in cases from recovered patients who now test positive for coronavirus again. They don't yet know why this has happened, but the reasons vary from a faulty negative test result to the virus mutating and allowing reinfection. This is definitely something that needs to be figured out before we engage in relaxing social distancing guidelines, and I doubt they'll have a concrete answer by May 1. That has a lot of implications for the US since we have by far the most cases.
For now, I'm going with a June 1 date for reopening things. There's a huge push building to reopen and since social distancing is working, it's giving a lot of people a false sense of security about how bad this virus is because so far, most of the country is not facing a crunch like New York is. I'm just anticipating a really bad 2nd wave at this point.
Yep. There should be a strategy, and a strategy not based on a gut feeling. This is what Germany is doing as explained by a physicist
Southwest and American will be in bad shape for a while.
None of the laid off blue collar or service sector will have the money to travel for a while. Laid off white collar workers right now will take months to get re-employed in most cases, they will not not have enough banked up PTO to travel in 2020 upon re-employment, and they will also be suffering some financial constraints. Remember right now that unemployment is higher than it was at any point during 2008-2012.
Notice that I haven't even mentioned the topic about concern of the spread of a virus yet. I still think that will be a secondary concern after a lack of funds.
Quote:
Originally Posted by TurtleCreek80
Also keep in mind the profit engine for both companies is business travel, not leisure. Managers who have to buy a last minute $700 ticket are more important to the health of the company than the family who booked 3 discounted seats on Expedia. For American, business class overseas ticket sales ARE the company’s profit.
Cancelled conventions, cancelled company meetings, cancelled awarded banquets, cancelled vendor meetings and trade shows. All of this is BAD for airlines.
You're exactly correct. Whereas I focused my analysis on a much smaller profit center for airlines, you focused on where the real money is for the airlines. Business travel is going to take a huge hit for the next 12-24 months. There will be plenty of canceled conventions, business conferences, trade shows, vendor meetings, and other business travel. Most of my jobs over time have had little to no travel, which I greatly appreciate.
My sense is that American makes more $$$ on business travel than Southwest.
You're exactly correct. Whereas I focused my analysis on a much smaller profit center for airlines, you focused on where the real money is for the airlines. Business travel is going to take a huge hit for the next 12-24 months. There will be plenty of canceled conventions, business conferences, trade shows, vendor meetings, and other business travel. Most of my jobs over time have had little to no travel, which I greatly appreciate.
My sense is that American makes more $$$ on business travel than Southwest.
I honestly don’t know about AA vs SWA for business. AA obviously has the long-haul business class flights but I also know a lot of small business owners who operate in TX/Southwest who live on SWA every week. SWA has done better financially than AA over the long term but I don’t know enough about the industry to compare them.
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