The Corner

Economy & Business

Moral Hazard: Airline Edition

Do you know what happens when the government bails out airlines each time there is a crisis? Moral hazard happens, meaning that airlines, their creditors, and their shareholders soon learn that they need not worry, because in times of crises, taxpayers will bail them out, thanks to the airlines’ preferred status with the political class.

Here is a clip sent to me by my colleague Gary Leff of Delta CEO Ed Bastian speaking at the Alliance Bernstein 37th Annual Strategic Decisions Conference this morning, explaining why airline stocks are investible.

Forty-seven minutes and 59 seconds in, he says:

My hope is that we’ve tested at Delta at least the proposition ‘are airlines investable’ and I think the strong answer is ‘yes they are investable’. And even in the worst crisis imaginable we’ve proven ourselves. We’ve proven the value of what we bring to society. We’ve proven that governments will be there for us if ever needed again, hopefully never again.

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