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To: GVTucker who wrote (143870)	9/20/2001 4:52:27 PM
From: fingolfen	Read Replies (2) \| Respond to of 186894

fingolfen, OT, RE: airlines, a couple more points and then I guess we'll have to just agree to disagree. Again, you make excellent points here. I believe relative to the airlines, our disagreement lies in the extent of the cost of government regulation, and whether that is a fixed cost, sunk cost, or variable cost. I think that the regulation will be more expensive now, which essentially wipes out the already small profit margins the airlines enjoyed (or suffered with). The band aid will slow, and may possible eliminate, the possibility of fundamental changes. I'm not sure I agree here, although this has a far more reaching implications. It goes back to the whole "soft landing" vs. "hard landing" question. What is better for the country? Bailouts could create a soft landing. No bailouts will definitely create a hard landing. Sometimes people don't pay attention unless there's a "thud." Maybe the economy needs a "thud" to kick the complacency out of Congress and the Fed. It's a very valid point. What sort of fundamental changes do you see as needed to get the economy going again? Clearly airlines, travel, and insurance are going to get the short end of the stick in the short term. It looks like the IT capital equipment makers may be short-term beneficiaries (Dell and Compaq have recently received large orders). Will the insurance and legal settlements from this disaster have a net positive or negative effect on the economy? Some are estimating a $70 billion insurance payout... and that doesn't include all of the legal payouts American and United may face. Where will this money come from and where will it go (which could get us into a velocity of money debate, and I'm not sure we want to go there!)? What's it going to take to turn the corner at this point???

To: GVTucker who wrote (143870)	9/20/2001 4:53:29 PM
From: Road Walker	Read Replies (1) \| Respond to of 186894

GV, There is the issue that the airlines were not brought down by normal business conditions, they were brought down by an "act of war" (if you buy the rhetoric). And the airlines are of strategic importance to the economy, government and even the military. As you say chapter 11 doesn't ground them, but it brings them a step closer. I would agree with a bailout, I think this situation is unique. If it was one airline that mismanaged it's business, that would be another story. But this is a very competitive industry that was directly targeted in a terrorist "act of war". Plus the spectacle of AMR and UAL flying under bankruptcy would certainly tank the market further (if that is possible, and it certainly appears to be at this point). Academically I agree, in practice I think the bailout is better than the alternative. John