If you had hoped that 2023 would represent a cooling down in partisan political rhetoric, think again. Although far from being a victim, Southwest Airlines has become the pawn in a partisan blame game that pits counter-narratives over the recent meltdown from the left and right.
Partisan Blame Game Makes Southwest Airlines The Pawn
Independent Senator Bernie Sanders of Vermont, a self-labeled “Democratic Socialist” who caucuses with the Democratic Party, blames the Southwest Airlines meltdown on stock buybacks.
Corporate greed is Southwest getting a $7 billion bailout during the pandemic & spending $5.6 billion on stock buybacks to enrich wealthy shareholders, while stranded passengers are threatened with jail time for the crime of trying to rebook canceled flights during the holidays.
— Bernie Sanders (@BernieSanders) December 29, 2022
Says the man who voted for said bailouts and worked to include verbiage in the final bailout that prohibited stock buybacks for an 18-month period…
View From The Wing eloquently explains why blaming the meltdown on buybacks is so foolish on both a practical and theoretical level.
“Businesses with cash that they can’t productively invest to earn high rates of return should not be holding that cash. They can pay dividends or buy back shares. Buybacks are more tax-efficient. The money then gets invested in companies that have a better opportunity to earn returns. And it is better to transfer assets from low return businesses, back to shareholders to invest in higher social return opportunities…
“Whether a business is holding sufficient cash to operate is ultimately a reasonable question. Whether they’re investing their cash well and growing where they have opportunities, is important for boards to consider when evaluating management. As an issue for a Senator, however, it’s ill-informed nonsense.”
Then again, airline CEOS seem to think that future bailouts are a sure thing. If Congress wants to ban buybacks, will it guarantee in writing those future bailouts?
That said, Southwest has failed to invest in its infrastructure, to its great detriment. And was there greed at play? Absolutely. Did that “cause” the meltdown? The answer is more complicated. Nobel Laureate economist Paul Krugman, an ardent liberal, blamed Southwest’s point-to-point network in the New York Times this week:
But point-to-point turns out to be especially vulnerable to extreme disruptions. Snow and bitter cold evidently left most of Southwest’s planes and personnel stranded in scattered locations.
Antiquated technology that left Southwest unable even to find many of its crew members, plus the absence of agreements that would have made it possible to rebook passengers on other airlines, made it worse. A system that has some real advantages in normal times fell apart when it encountered, well, a perfect storm.
Are there any broader lessons from this disaster?
…What happened at Southwest is another reminder that, for all the talk of an information age, we’re still living in a material world. Notably, there’s a clear family resemblance between the Southwest meltdown and the supply chain crisis of 2021-22, when a constellation of unusual events left many of the shipping containers central to modern commerce stranded in the wrong places.
Certainly, point-t0-point networks can leave airlines prone to disruption, but they can also insulate an airline if horrible weather strikes a major hub, suspending traffic. A point-to-point network seems more apt to a diversified stock portfolio that can withstand hits better than networks that concentrate their planes in a small handful of major weather-prone airports.
So Krugman does not convince me either, but at least he doesn’t foolishly assail stock buybacks as the root cause.
Then there’s Fox News, which seemed to blame Transportation Secretary Pete Buttigieg for the Southwest Meltdown. That happened on the Ingraham Angle, The Five, and on Hannity:
Is Fox News suggesting that the government should take over operations for private airlines?
Part of me just sits back and chuckles at all of this tomfoolery, but what a sad reflection on the U.S. political culture and media. Before I am charged with making a “false equivalency” please realize I am simply pointing out two different reactions on opposite sides of the political fence to the same core issue, both of which I find baseless.
Should Southwest do a better job of investing in its infrastructure? Yes. Should the Department of Transportation do more to hold Southwest and other airlines accountable? Yes. But blame and the root of the problem are a bit more complicated than the talking points from Hannity or Sanders.