Hook, Line and Sinker

In the Long Now, we have argued, the single most important executive skill is not talent identification and development. It is not strategic vision. It is not logistical or subject matter expertise. It is not organizational design and process management. You know, all the things B-School management professors who have never actually, y’know, managed anything have been teaching for decades.

In the Long Now, the single most important executive skill is the ability to shape the external narrative of the company.

That is a shame for all of us. This exchange robs our collective future of the manifold promises of productivity, ingenuity and growth that come from investing in that first group of things. Instead it offers us a mess of pottage that is short-term stock price appreciation. For airline executives, on the other hand, it is a damn good thing. For if the zeitgeist is any indication, they have succeeded beyond their wildest imaginations at shaping the external narratives of their companies embraced by the national media.

Indeed, the news that we reviewed as part of our Zeitgeist feature for the last few days has been littered with the evidence of lazy reporting, with business journalists who saw the flash of the shiny lure of the narrative spun by airline company executives. When they saw executives framing the accountable party in the layoffs of tens of thousands of employees as the US Congress, they not only reported it.

They swallowed it hook, line and sinker.

American and United cutting 32,000 jobs as federal aid plans stall [CNN Business]

CNN put forth an honest effort to ingest the rod and reel for good measure, penning a piece that might have caused Doug Parker to call his public relations vendor to ask why their own statements weren’t as powerful a promotion of the story they wanted to tell.

But he probably didn’t make that call. After all, that same P.R. agency is probably who managed to get the same publication to publish this opinion piece the day before.

American Airlines pilot: Thousands of us could lose our jobs this week if Congress doesn’t step up [CNN]

Thousands Of Airline Employees Facing Furloughs As Clock Runs Out On Federal COVID-19 Aid [CBS KPIX 5 Bay Area]

The Bay Area CBS affiliate at least had the good form to “cite” the management-spun lede of Congress accountability instead of accepting it as self-evident.

Not so circumspect at the CBS affiliate in American Airlines’s largest hub.

About 19,000 American Airlines Employees Face Furlough Without Action From Congress [CBS DFW]

American Airlines to Begin Furloughing 19,000 Workers After Pelosi Fails to Agree to Deal with Mnuchin [Breitbart]

Breitbart was able to integrate not only a political angle (“after Pelosi fails” is a nice touch) but a nuanced argument about the incorrect assumptions underlying the original support, quite a trick when you consider that they had half of Doug Parker’s tackle box stuffed down their gullet.

But it was the Washington Examiner which delivered the piece de resistance of on-narrative reporting, going so far as to summon an “independent aviation analyst” quote given to NBC News arguing that no-strings-attached financial support was our only choice if we didn’t want to lose the operational capacity of our airlines when things were better again.

Airlines warn of tens of thousands of layoffs Thursday if pandemic aid isn’t extended [Washington Examiner]

This, of course, is the abstraction that forms the core of the narrative. It isn’t that the American people don’t have a public interest in ensuring the continuity of a very skilled subset of the US labor force. Of course we do. It isn’t that the American people don’t have a public interest in maintaining multiple competing air carriers serving our geographically sprawling country. Of course we do.

It’s that Doug Parker is telling all of us – citizens and media alike – how to think about what an airline is. Doug Parker wants you to think that “American Airlines” is the financial health of AAL, the publicly listed company with its current debt holders, current equity owners, and current programs to programmatically offer cash and non-cash compensation to senior executives. He wants all of us to think that those things are synonymous with having functional, well-maintained airplanes, protected employees and route infrastructure capable of quickly ramping back up when the depression in air travel caused by COVID-19 subsides.

And we’re buying it – hook, line and sinker.

We don’t have to. As citizens, we can carry two ideas in our heads at once. We can believe that airlines are a critical industry, that its workers are important fellow citizens worthy of public financial support and that keeping them in the industry is an indispensable part of rapidly returning to full capacity. AND we can believe that literally none of that requires us to unconditionally support the share price, current equity holders or executive compensation expectations at AAL or UAL or any other airline.

How do we do BOTH? We separate the operating entity from the ownership entity in our heads, we offer financial support for the operating entities we depend on, and we do it with these conditions, taken from a piece we published all the way back in March.

First, impose regulated caps and clawbacks on ALL senior management compensation, including stock-based compensation, for the next decade, regardless of how quickly any loan support is repaid. If these guys aren’t willing to work for $1 million or $2 million dollars per year in total comp, I’m sure we can find a perfectly good replacement CEO who will.

Second, the current board Chair for each airline should be summarily dismissed and replaced by an independent director appointed by the government. This is also a 10-year right that the government maintains, regardless of how quickly any loans are repaid.

Third, require each airline to raise new equity capital in the open market dollar-for-dollar to whatever low-interest loan facility is backstopped or made available directly by the US government. In other words, if Delta wants access to $10 billion in loans, they must raise $10 billion in new equity at whatever price the market demands to clear the equity raise. We require banks to maintain a certain level of equity capital, because we’ve judged them to be too strategically important to fail. Let’s do the same for the airlines.

Fourth, until the loan facility is repaid in full, no stock buybacks and no dividends. Duh.

This kind of bait-taking has become so prevalent in large part because financial and business media have restructured their business models to be cheerleaders for common knowledge missionaries in corporate executive positions. They drive ratings by creating stories instead of reporting them. If we are going to reclaim financial markets as a venue in which capital is channeled to its most productive ends by free participants who price such capital based on a good faith, fundamental evaluation of those ends, an independent, skeptical financial media that doesn’t buy every transparent corporate narrative hook, line and sinker is a necessary condition.

And yes, it’s on the list.

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  1. As I’ve said on my Twitter header forever - “Humans do 2 things well: Tell stories & work in teams.” The antidote to a well-told story is a better-told story.

  2. Avatar for rguinn rguinn says:

    True in almost every circumstance! Although I would also accept as an acceptable antidote fewer storytellers among those (e.g. financial media) who purport to be truth-tellers.

  3. When you get CNN and the Washington Examiner to both bite on the same narrative that’s genuinely impressive. They captured pretty much the full spectrum of right to left with one message, which was basically “why aren’t you in favor of these workers keeping their jobs? What do you have against them?” Just brilliant.

  4. Avatar for Zenzei Zenzei says:

    Bread and Circus. I would be completely in favor of bringing back the Lions and setting them loose on the political class. Would make the battle of the septuagenarians significantly more interesting.

  5. Why can’t I shake this feeling of Ponzi? If rates move off of 0%, it all comes down. If we don’t allocate more to risk, it all comes down. If the Fed doesn’t supply more liquidity, it all comes down. If the government doesn’t bail something out, it all comes down.

    Tulip, South Sea, Mississippi … What should we call this one?

  6. All true. Two related notes. (1) MSM gullibility worsened as politicians (both parties) have hammered point that taxpayer aid was for “workers” while it was actually a ploy to give airline stock prices a quick boost (2) One of the less noticed impacts of extreme industry consolidation is that it eliminates all critical thinking in the trade press, since any outlet that doesn’t slavishly endorse the narrative can be cut off. As have been writing since April, its not just that ample public evidence contradicts the airline narrative, but after six months, absolutely no one within the industry dares challenge the narrative. See https://www.nakedcapitalism.com/2020/08/hubert-horan-the-airline-industry-collapse-part-3-recovery-expectations-were-always-dreadfully-wrong.html

  7. Avatar for rguinn rguinn says:

    It is hard to say, because the US Dollar permits us (for now, anyway) to act like there are no consequences for far longer than any of us would ever expect. The Long Now can be exceedingly long.

    But if I was picking, I’d go with “Boomer.”

  8. I have been fuming for months over the ridiculous airline bailouts.

    A neighbor of mine is a United Pilot. He hasn’t flown since March but is on full pay and just bought a 37 foot power boat so he has something to do. Meanwhile, I’m effectively paying his $200,000 salary through my taxes.

    If we did not have the bailouts, the planes would still be there, the airports would still be there, the pilots would still know how to fly. The shareholders and bondholders might get wiped out, and the pilots might make $125,000 in the future, but who cares?

  9. Avatar for 010101 010101 says:

    Bank smoothed treasury oil

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