Realist, not conformist analysis of the latest financial, business and political news

Stobart Air Goes Bust And We Don’t Care

We have the usual sight of some politician bemoaning the manner in which we taxpayers, us out here, haven’t been willing to subsidise a business. Of course, this is tied up in bleatings about jobs but still:

Henry Smith, Conservative MP for Crawley and leader of a cross-parliamentary group on the future of aviation said: “The collapse of Stobart Air must serve as a wake-up call to the Government with our current overly cautious approach to international travel likely to push more and more aviation, travel and tourism businesses to the brink unless a greater degree of flight operations is allowed and soon.”

We can tell that came off the Quotogenerator as the entire point of Stobart Air was that it serviced domestic routes.

The more important point being that there’s no obvious truth in the claim that jobs will be lost:

British Airways and Aer Lingus aircraft said they will operate the services directly instead.

Same flights will be operated using, presumably, the same number of people to do so. So there will be no jobs lost.

What has actually happened is that the capitalists who owned the thing are wiped out. Or even, given this particular airline, they’ve finally admitted that they are. And we all weep bitter tears for the capitalists, don’t we?

Another way to put this is that the flights haven’t changed, nor have the jobs, the aircraft, the carrying capacity or the emissions for those who care about such things. The legal envelope, the wrapper that all were contained within, has gone. To be recreated again – so that the flights haven’t changed, nor have the jobs, the aircraft, the carrying capacity or the emissions – as another and new legal envelope.

Which is what bankruptcy means in a capitalist world. Not the destruction of the business or the underlying economic assets, but the transfer of them from those who fuck up in their ownership over to those who, by some mischance, might not fuck up in their ownership of them.

The confusion is between bankruptcy and liquidation. That’s when all the planes get sold off (or, in this case, handed back to the lessors), the staff get fired, the logo ripped up and the flight slots sold off. Well, those that weren’t already taken off into Virgin the last time.

But even this isn’t something for us to worry about. For if liquidation is necessary then it means that this particular combination of economic resources does not add value. So, clearly, we’d like people not to be using economic resources in this combination. We would much prefer that those same economic resources be sent off to be used in some other configuration that actually did add value.

Recall the obvious, GDP is the amount of value added in an economy. Value is what we hope to produce because value added is what we consume. So, value subtraction is something we don’t want – when it happens we want it to stop. We want the reconfiguration of the organisation of the economic resources into something that might – by some happenstance – actually add value.

Bankruptcy is just a reshuffling of the capitalists and who gives a damn about that? Liquidation is a thing that makes us richer by first reducing the amount of value subtraction and second possibly increasing value addition through the reallocation of economic resources.

So, err, frankly, we don’t give a damn.

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John B
John B
1 month ago

Far too complex for any MP to understand, if they could they would not be MPs but working in the productive economy making us all richer instead of making is poorer.

Spike
Spike
1 month ago

“Using, presumably, the same number of people to do so.” Yes, and in some cases the same people. Reorganization is about getting production resources into the control of people who can make them productive. It’s the ultimate MEASUREMENT of mgmt. MPs don’t need to know how to run an airline. They should take the point that lockdown over a chest cold has costs.

john77
john77
1 month ago

If Aer Lingus are going to run the routes directly, doesn’t that mean they will be using some of their own aircraft, currently redundant due to fewer passengers and hence fewer flights, and some of their own, currently employed but under-used staff? So some of Stobart Air’s workers will be redundant instead of some of those at Aer Lingus and some of their planes will gather dust until aviation demand picks up. There may be one or two additional redundancies in accounts departments as no-one will have prepare and check/challenge all the inter-company invoices so overall efficiency will be marginally… Read more »

Nila24
Nila24
1 month ago
Reply to  john77

Is there a reason someone might want to keep staff that is “currently redundant”? If it is then they will hire more redundant staff for that reason, if it is not then that is bad management and it is that company who will be getting bankrupt next.

john77
john77
1 month ago
Reply to  Nila24

The Redundancy Payments Acts. There is one in Ireland as well as one in the UK.

UK specifies a week’s pay for every year of employment between 22 and 41 (half-a-week for periods before 22 and one-and-a-half weeks for periods over 41).

So it’s cheaper to keep long-serving employees who are redundant for a short period than it is to sack them.

Michael van der Riet
Michael van der Riet
1 month ago

Down at the southern tip of Africa we have the same problem with Sow Theffrikin Ehwaze swallowing a few billion of taxpayer money a year. https://www.youtube.com/watch?v=VuLL8g8ena0

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