On Wednesday, Delta Airline announced a major turnaround. The company initiated dividend payout of roughly 1.35% annual yield and authorized $500M stock repurchase program or about 3% of its current market capitalization. The news highlights the improving condition of the airline industry as a whole. While many airlines are still struggling to return to profitability seen in the late 1990s when dividend payments and stock buybacks were common practice, recently several large air carriers have made similar moves. In an effort to return value to shareholders, Alaska Air Group authorized shares buyback and Southwest Airlines did both: initiated dividend payouts and share repurchases.
At an investor meeting in New York, Delta announced that it expects higher earnings capacity and improved cash flow. Recently, its chief executive also pointed out improved balance sheet and highlighted company’s debt that stood at $10B versus $17B just four years ago. The company plans to further reduce its debt burden and anticipates additional repurchase initiatives going forward.
While Delta shares have rallied 52% this year, the move failed to impress investors. The shares of the company were 5% lower the day after the announcement. It is unclear whether other airlines will follow suit, but with the falling gas prices and improving US macro-economic data the future of the airline industry is looking brighter.
Source:
http://online.wsj.com/article/SB10001424127887324244304578470681886203740.html?KEYWORDS=buyback
