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Delta Air Lines, Inc. Unveils $5B Buyback Plan, Increases Dividend

Investors of Delta Air Lines woke up to some great news this morning as the airline announced that they would be continuing to focus on returning value to the shareholders.  Delta Airlines announced they would be boosting the dividend by 50% and approved an additional $6 billion in buybacks. The move comes as airlines continue to benefit from falling fuel costs, which led to the airline industry booking record profits in 2014.  Shares of Delta Airlines are up 2.71% in premarket trading.

Delta Air Lines, Inc. Unveils $5B Buyback Plan, Increases Dividend

Delta leads the way in airline industry, in terms of shareholder value

Delta’s dividend boost will raise annual dividend per share from $0.09 to $0.135.  As far as the share buyback program is concerned, Delta management projects that the program announced today will run through December 2017.  Delta’ struggles over the past decade led to losses totaling $58 billion over the past decade.  The losses stemmed from high fuel costs, bankruptcies, restructurings, mergers, etc.  Now, Delta says they estimate to save $2.2 billion in fuel costs this year alone, which paves the way for shareholder value.  Other airlines have approved buybacks, such as United Continental Holdings Inc, which approved a $1 billion buyback last July, which is set to be completed in three years.  Additionally, American Airlines Group Inc and Southwest Airlines Co are finishing up buyback programs of $2 billion and $1 billion, respectively.

Delta posts record first quarter earnings

Delta reported first quarter earnings back on April 15th, which set the bar higher for the hot airliner.  Delta Airlines reported net income of $746 million or $0.90 per share.  On an adjusted basis, Delta reported earnings per share of $0.45 on revenue of $9.4 billion.  Delta adjusted earnings due to $1.1 billion fuel hedge loss and $300 million in contract paybacks.  Delta’s management was very happy with the results, but made an emphasis on continuing to cut international flight capacity due to falling demand from strong US Dollar.  Cutting lagging hubs, cutting international exposure, and focusing on North American region will continue to help Delta see higher profits.

Finance Chart
Finance Chart

Overall, Delta has turned a corner from several years ago.  The airliner is leaner and meaner than it has been in the past, mostly thanks to $61 a barrel for oil, down from $100+ last July.  Airliners will continue to profit and post powerful gains, as long as oil remains within the range we have seen over the past year.  Additionally, with summer right around the corner, airlines could see a fantastic summer vacation season if oil stays within where it is now.

Disclosure: None