Defining challenges for airlines and stock buybacks

The next few weeks or likely months will be rough for airlines. Major airlines in the US have announced major cuts to their flights, domestically and internationally.

Major airlines in the US already asked for assistance and bailouts from the government. When you are in a bind and employ thousands of folks, it’s understandable to request for help for the greater good, right? Or is it?

Bloomberg reported that in the last decade, biggest US airlines spend almost 90% of its free cash flow on stocks repurchases. In other words, instead of saving cash for a rainy day like what we are going through now or investing in back to the business more than what they already had or paying employees more, airlines repurchased their stocks to please shareholders and increase stock prices (likely).

Source: Bloomberg

Am I opposed completely stock buybacks? Absolutely not! Stock buybacks is definitely a legitimate use case of free cash flow at the disposal of executive teams whose fiduciary duty is to shareholders. If the folks who monitor the business on a daily basis decide that stock repurchase is the best course of action, who are we to argue?

However, the current pandemic and the criss that is engulfing airlines put things in perspective. The public has all the right in the world to question why airlines deserve a bailout after years of spending a boatload of money on stock repurchases. On an individual level, we are all advised to save up money for emergencies. Why should airlines receive a bailout? Especially when a recession was always a likely scenario after a decade of bull market.

Airlines have a lot to answer for after this crisis blows over. There should be some measures put in place to prevent this phenomenon from happening again. Nonetheless, I, by no means, advocate for a complete ban of stock buybacks. Truth be told, it’s a fairly complicated matter. But it’s how the government officials earn their paychecks. Mark Cuban already offers some sound advice

Fairness for High Skilled Immigrants Act vs BELIEVE Act

A few days ago, the Fairness for High Skilled Immigrants Act was passed by the House. If it’s passed by the Senate and signed by the President, it will have dramatic implications for immigrants coming to and living in the US. That prospect; though, faces challenges from a few Senators from both sides of the aisle.

Apparently, no country in the world is allowed more than 7% of the total green cards handed out by the US government every year. For workers from China and India, due to high demand, there is a current backlog of applications that it can take up to 50 years to receive the green cards.

The Fairness for High Skilled Immigrants Act plans to eliminate the capped amount per country. Doing so will benefit high skilled workers from China and India the most, but at the expense of, well, almost everybody else from other countries. The backlog of current applications from India and China will take years to clear and after that it will mean 8-10 years for folks from low-demand countries like myself from Vietnam to get my turn.

The bill essentially seems to tackle only one problem in a myriad of problems with immigration. Hence, it is said to create other issues, per path2usa.

Senator Rand Paul introduced a different immigration bill called Backlog Elimination, Legal Immigration, and Employment Visa Enhancement Act or BELIEVE Act. The act is aimed to change immigration on a broader level and tackle more issues than the Fairness for High Skilled Immigration Act. Cato.org has a pretty good summary of what BELIEVE Act can deliver here. This is a snippet, in case you are too lazy to click and read the article

There are a couple of problems with skilled immigration that the bill doesn’t address—including the outdated H-1B limit and the burdensome and nonsensical labor certification process for employers—but overall, the legislation would make the United States far more competitive for foreign talent than current law and prevent the removal of hundreds of thousands of skilled workers. This legislation would benefit the U.S. economy enormously.

Cato.org on BELIEVE Act