Delta CEO Defends $11.5B in Stock Buybacks as Carrier Received $5.4B Bailout

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Delta CEO Defends $11.5B in Stock Buybacks as Carrier Received $5.4B Bailout

Stock buybacks by airlines have been a hot topic recently, when the same airlines needed government bailouts to stay afloat during the pandemic. But Delta CEO Ed Bastian defended buying back stock during the 2010s in an interview with Axios on HBO, saying that they were a necessary business transaction.

“We’ve put all the priorities in the right place, but at some point, the owners of a business deserve a return, too,” Bastian said according to Business Insider.

Delta spent a total of $11.5 billion on stock buybacks between 2013 and 2019. That about the same amount the airline spent last year on wages and benefits  for its 91,000 employees in 2019. Bastian said that setting that money aside for emergencies would not have been practical due to business expectations. “I think our owners of our business would wonder what we were doing, setting up for a pandemic,” he said.

But if Delta had at least half of that cash in hand, they would not have needed government bailouts earlier this year. The carrier received $5.44 billion through the CARES Act’s payroll support program. Only $1.6 billion of that is a low-interest loan that needs to be paid back.

Other Airlines Have Spent Billions on Stock Buybacks

Delta is not alone. Other airlines have also spent billions in the past decade on stock buybacks and then received billions in government bailouts. American Airlines leads the pack with almost $13 billion spent in stock buybacks in the last 10 years. Southwest has spent $10.6 billion and United $8.9 billion.

American Airlines received a total of $5,814,516,440 from the CARES Act grants and loans. United Airlines received $4,958,498,096 and Southwest received $3,259,181,720. A total of 96 U.S. airlines were awards government bailout money.

DDG
Based in NYC. Points/miles enthusiast for years and actively writing about it for the last two years at Danny the Deal Guru. I'm always looking out for deals. Making a few bucks is always nice, but the traveling is by far the best part of this business.

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8 COMMENTS

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8 COMMENTS

  1. He is wrong.

    Buybacks are fine. Executives, stockholders, bondholders, and employees just have to realize that when things go south, which they do almost like clockwork, (1974, 1987, 2000, 2008-9, 2020), the company should vanish in an instant. You want to take that risk, go ahead. Fine with me.

    But we do not have capitalism in this country. The idiots and losers get bailed out at MY EXPENSE.

    THAT is the problem. The bailouts. Without those, there is no problem at all with buybacks. You just need to have the financial wherewithal to survive shocks to the system.

    Case closed, the end.

  2. Stock buybacks really don’t benefit long term holding shareholders, but do help senior execs boost their own wallets. As we’ve seen, all that money has vanished and the only beneficiaries have been those who sold their shares, not those who invested in keeping the company afloat for the long term. To benefit shareholders who invested “the old fashioned way”, DL and other companies should have issued special dividends to get rid of their surplus cash. That would have rewarded those long term investors versus the “in-and-out” speculators who sold off stock, and rightfully returned some in taxes to cover the cost of the airline infrastructure (improved navigation system, better FAA testing of new aircraft systems).

  3. AC,

    You never have anything positive to say. Why are you even here. You troll these blogs and complain and tell all of us how we’re wrong and how we should be as great as you are. With all the money you have, don’t you have something better to do with your time than to sit at the computer and rag us who aren’t as wealthy and as powerful and as awesome as you are?

    Move on already…we’ve had enough of you.

  4. It’s disingenuous to blame management for actions before Coronavirus that maximized shareholder value and made sense. A global shutdown of travel hasn’t happened since 1945. I don’t blame management for not accounting for a Coronavirus global shutdown of travel. Before Coronavirus, the big 3 were doing very well. They had some headaches because of 787 engine problems and the Max issues, but they were doing well. I don’t like some political decisions Delta management made that alienated half of the country, but I don’t blame them for Coronavirus.

  5. @AC … I’m not a charity either and I paid $110K in income taxes last year…not with the intent to subsidize delta shareholders. Holy cr*p. It’s simple….if you’re overextended and don’t have the cash, you declare bankruptcy and recapitalize. Tough sh**. Maybe next time, your new shareholders will learn from the old ones that you’re trying to run a business, and not to bow down to the guys running around, beating you over the head with a spreadsheet. I certainly learn more from failure than I do from success. I think that it’s high time that those lessons are learned. The planes aren’t going anywhere and I know that someone will pick them up and make a run at operating an airline. Sure, it won’t be delta, but I bet that the new company will have a rainy day fund. When does this madness stop….I don’t pay taxes to prop up billionaires. (well, I guess that I do, but that’s exactly the problem)

  6. What AC said and also what Glenn said.

    If Delta had NOT done what it did even as keeping the corporation running, they would definitely had been targeted by stockholders and maybe even sued.

    Poor headline and basically click-baity. I do expect better from this site. It ain’t Gary Leff stuff and shouldn’t act like it.

  7. That’s a misleading headline as you make the two actions sound concurrent. No one predicted a pandemic. Corporations don’t store money, stockholders expect them to use it. That’s normal for all corps, not just airlines.

  8. I guess most people aren’t investors or don’t understand a companies fiduciary responsibility to maximize shareholder value.

    Sorry but he, along with other CEOs, did EXACTLY the right thing. Businesses aren’t charities. They also don’t have a crystal ball where they could predict something like COVID. To keep cash on the sidelines isn’t something that makes much business sense. Either buy back stock, increase dividends or use it for capital expenditures to create value. That is it and if a CEO (and board) don’t do it activist investors (like hedge funds or private equity firms) will demand change.

    If you don’t like it sorry. How about doing like I have for 40 years and learn about investments so you can put your money to work for you!

    This article was worthless click bait playing to the ignorant masses.

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