Biggest U.S. airlines spent bulk of free cash flow on stock repurchases
FCF is <i>supposed</i> to go to shareholders: it&#x27;s what&#x27;s left over after spending money running and growing the business. And this problem (and related solutions) will probably apply not just to airlines but also restaurants, retailers, etc.<p>In normal circumstances, chewz is right and they should either call up more capital from existing shareholders or go under. But these are not normal circumstances. 1) Everyone is capital constrained, and 2) airlines collectively are extremely important to the economy. This isn&#x27;t a handful of one-off bankruptcies of a few laggards.<p>Investors are capital constrained and would need to sell off their other holdings at the very moment everybody else is trying to unload those same assets at depressed prices, risking a broader liquidity crunch that goes well beyond airlines, as other sectors are also in trouble.<p>So the next best solution is for governments to lend them cheap money to hold them over, or to recap with equity (diluting current shareholders, possibly by a lot) and gradually sell off that equity after conditions return to normal. That&#x27;s what happened to the banks: in a sense, they went 90% bankrupt with existing shareholders getting massively diluted, but the companies were able to continue without the massive disruptions caused by them all going belly-up.<p>When it&#x27;s a normal economic cycle, even most recessions, the right approach is to let the laggards die and let the shareholders get wiped out. When there&#x27;s lots of volatility, it&#x27;s better to let the shareholders get 60%, 80%, 90% wiped out but keep the companies alive.