United Airlines (NASDAQ:UAL) suddenly looks like one of the cheapest stocks in the market. UAL stock at less than 3x 2019 adjusted earnings per share of $12.05.

Of course, it’s not to hard see why that it is. The coronavirus has essentially shut down the airline industry at this point. Earnings in 2020 are not getting back to 2019 levels. Even with some help from lower jet fuel prices, it may be years before United returns to those levels again, if it ever does.

Still, there’s room for some optimism. UAL stock now trades well below book value. The industry is seeking a government bailout worth over $50 billion — and may well get it. The conditions of those funds are unclear; it’s possible the deal could mimic the financial crisis-era bailout of General Motors (NYSE:GM), in which the U.S. government became a significant shareholder.

Of course, giving up equity or taking on low-cost loans is a small price to pay if that cash prevents a near-term bankruptcy. From that point on, investors can, and likely will, focus on the long-term case. That case seems attractive, particularly at this valuation.

But looking forward for the industry, and for United in particular, investors can’t gloss over a key problem. Industry representatives would like to act as if the coronavirus was a “black swan” event for which no one truly could prepare. That’s only partially true.

The fact is that United management has made terrible decisions over the past few years. They may escape the consequences of those decisions — but investors need to judge whether they can trust this management team and this board of directors, when and if normalcy returns.

The Case for UAL Stock

The irony of the present situation is that U.S. airlines headed into 2020 on excellent footing. The economy was solid. A decades-long history of destructive fare wars seemingly had come to an end. Up-and-coming millennials preferred spending money on travel and experiences over the ownership of physical possessions.

An industry with an unchallenged record of capital destruction looked like it had finally figured out the way to create real shareholder value. So much changed that Berkshire Hathaway (NYSE:BRK.A,NYSE:BRK.B) chairman Warren Buffett, after years of criticism of the industry, had his firm become a major shareholder in four U.S. airlines, including United.

Indeed, the industry brought me in as well. My choice for the Best ETF of 2020 was the U.S. Global Jets ETF (NYSEARCA:JETS). Valuations were cheap, and those long-term tailwinds (pardon the pun) seemed to be in place.

I was wrong. Buffett was wrong (though he said this month that he’s still not selling). JETS has lost half of its value so far this year. United stock has done even worse.

I was wrong in a way that can’t be blamed on the coronavirus. And I was wrong in a way that goes beyond the fact that call looks bad, and in fact, was bad. I didn’t look close enough to see a key risk that should have been obvious all along. United didn’t either.

The Bailout

In the wake of the bailout, a statistic highlighted this week by Bloomberg has made the rounds. Over the past decade, U.S. airlines spent 96% of their free cash flow on stock repurchases.

In this politicized climate, and with so many citizens home and on Twitter (NYSE:TWTR) instead of at work (and, to be fair, maybe on Twitter anyway), that figure has angered many.

To them, executives bought back stock to inflate their stock prices and the value of their stock options. Now, the likes of United chief executive officer Oscar Munoz, whose total compensation over the last three years nears $39 million, are asking taxpayers for billions.

The Management Problem

For several reasons, I’m not interested in wading into that political debate. But it’s a debate that investors need to consider and understand, as well.

It’s tempting to argue that United couldn’t have known that the coronavirus would shut down worldwide air travel. And it’s obviously true that the company couldn’t have forecast the specific cause, nor the actual impact, of the outbreak and the response.

But in the “Risk Factors” section of its Form 10-K filed with the U.S. Securities and Exchange Commission, United specifically calls out “outbreaks of disease or pandemics” as a risk for shareholders to watch. After the H1N1 flu, it should have been a risk that management and the board of directors considered as well.

Even that aside, one issue for UAL stock and the industry is that a short-term shutdown could drive a longer recession. It’s not as if planes will be instantly full once U.S. airlines start flying again. And recession risk is something for which United, and its peers, should have been planning. United, at least, did nothing.

Debt and Buybacks

Last year was a good year for the airline industry. But it was also the eleventh year of a macroeconomic expansion that was the longest on record.

That alone suggested the odds of a near-term recession were rising. And this is an industry where airlines go bankrupt when the economy turns. United itself went bankrupt in 2005, and the attacks of September 11th were far from the only reason why.

In that environment, United should have steeling itself for a downturn. It didn’t. Over the last three years, United generated a little over $4 billion in free cash flow. It spent $4.7 billion on share repurchases.

The fact that United bought back stock itself isn’t in the issue. The issue is that the company did not try to de-risk its balance sheet even as recession risk increased with every month that went by. Instead, debt net of cash actually rose from about $6.3 billion at the end of 2016 to $9.5 billion at the end of last year.

The year-end figure didn’t look that aggressive, admittedly. EBITDA (earnings before interest, taxes, depreciation and amortization) was in the range of $7 billion for 2019.

A 1.4x debt-to-EBITDA ratio is not particularly dangerous. American Airlines (NYSE:AAL), for instance, had much more substantial leverage. But in a downturn, that EBITDA falls. Leverage rises, as does the risk. The stock price usually goes in the opposite direction.

Simply put, United didn’t plan for the worst in an industry where the worst-case scenario historically has always played out. As much as the coronavirus itself, that’s why the company is begging for a bailout, and a key reason why UAL stock is down over 60% so far this year.

Looking Forward at UAL Stock

And that’s a problem looking forward, too. Munoz is leaving United in May — but he’s being replaced by President Scott Kirby. The board of directors that helped steer United into this ditch remains.

Whatever an investor’s feeling toward buybacks, the trust in this management team and in this board has to be broken. It is obvious in retrospect that the capital allocation strategy failed. It should have been obvious ahead of time as well.

So what happens from here? Does United learn its lesson?

It doesn’t seem likely. This is a company that within a decade had forgotten the lessons of its own bankruptcy. That lack of institutional memory is why Warren Buffett spent decades pointing investors away from the industry. It’s advice that he 1 and I — should have heeded.

The concern now for UAL stock, and the sector, is that both seem like the “same old”. However the near term plays out, the long-term trust the industry rebuilt in recent years has been lost. That alone might make the industry once again a place for long-term investors to avoid — permanently.

Vince Martin has covered the financial industry for close to a decade for InvestorPlace.com and other outlets. He has no positions in any securities mentioned.