ICYMI: Venture Capitalist Palihapitiya Says Airlines Deserve To Fail

The airline industry deserves to fail amid a business downturn driven by the coronavirus pandemic, venture capitalist Chamath Palihapitiya said Thursday on CNBC's "Halftime Report."

Bankruptcy is a misleading term that doesn't automatically translate to job losses, he said.

Palihapitiya On 'Packaged Bankruptcies'

Wall Street has gotten away with telling a "lie" for some time about failures and bankruptcies, Palihapitiya said.

If an airliner fails, it doesn't by default fire all of its employees and cease to exist, the venture capitalist said.

In a "packaged bankruptcy," pension holders and employees would end up owning a bigger portion of the company, he said, adding that the people who are "wiped out" as part of a bankruptcy process are speculators that own the unsecured tranches of debt and equity shareholders.

"They deserve to be wiped out," Palihapitiya said.

Main Street 'Wiped Out'

Ordinary "Main Street" people are "getting wiped out" in the current market while "rich CEOs" are not, Palihapitiya said.

Boards with poor governance, poor-performing CEOs and hedge funds are in a better position to emerge unscathed, he said.

What's Next

CEOs don't deserve special treatment, and the end result is that many won't be able to "summer in the Hamptons," he said, adding: "who cares."

Airline Stocks

American Airlines Group Inc AAL shares were down 7.99% at $11.51 at the time of publication Monday.
Delta Air Lines, Inc. DAL shares were down 6.56% at $22.79.
Southwest Airlines Co LUV shares were down 6.44% at $34.14.
Spirit Airlines Incorporated SAVE shares were down 4.97% at $13.38.
JetBlue Airways Corporation JBLU shares were down 4.32% at $9.09.