A "good treatment drug and a vaccine," as you noted, are hard to come by. Vaccines can take years before tests show they are safe and effective. Treatments may come earlier, but without thorough testing of random, preferably double blind samples, one may not know for at least several months whether the drug is effective, and for how long.
The most promising vaccine, ironically, is not the much publicized new vaccine under test by Moderna, which could actually be approved in another six months to a year. Back in 1960, the developers of the polio vaccine gave samples to two Russian virologists, who began by experimenting on their own children. They found that not only were the children immunized against polio, but they seemed also to have resistance to various types of the flu. Russia is now testing whether the simple, cheap polio vaccine, administered often on a cube of sugar, will work for Covid-19. If it does, it will come into use long before any other vaccine, and long before any drug treatment that has been found safe and effective.
What is happening now to the airlines was predictable as soon as the coronavirus began to spread. The only known effective way to stop the spread is to stay at home in a self imposed, or government imposed quarantine. Warren Buffett, in disposing of all Berkshire Hathaway airline holdings, was pretty much spot on. One of the biggest holdings was Delta, whose stock they sold probably close to its current level near $27.
All the airlines have huge debt service costs, some of them, like Southwest, not as heavy as others. But when a large portion of your fleet is just sitting on the ground, because the number of seats sold is down anywhere from 50% to 80%, you've got a lot of assets not returning even a penny on your investment, but at the same time eating up your meager earnings from continued interest payments.
So far the government has not treated the airlines as if they were the auto companies back in 2008-09. The government did bail out GM with funds used to purchase preferred stock. But in the current situation, it appears that the government has simply handed out the money, urging the airlines not to fire employees, in return for which, they can keep the so-called loans. Well, this may make the airlines solvent again, but who wants to invest in an enterprise that can only thrive on a gift of public money, and that has no legal obligation to return that money?
Art |
