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Delta Air Lines Inc. approved a $5 billion stock-repurchase plan, more than double last year’s program, and boosted its dividend by 50 percent, as a windfall of savings on fuel enables it to steer more cash back to investors.
The stock repurchase will run through December 2017, the company said in a statement Wednesday. The dividend will rise to 13.5 cents a share from 9 cents currently, the company said. The shares rose 2.7 percent to $47.35 in early trading.
After a $58 billion run of losses last decade, airlines in the past three years have once again started returning money to shareholders as they seek to restore their appeal to investors. The major U.S. carriers reported record profits in 2014, as they benefited from jet fuel prices that have fallen 37 percent since their peak in September. Delta has projected it will save $2.2 billion on fuel this year.
“Delta continues to raise the bar among industrial companies, leading its peer set in free cash flow generation,” Chief Executive Officer Richard Anderson said in the statement.
Delta has led the way in handing back cash and its announcement may spur other airlines to follow suit. Southwest Airlines Co. and American Airlines Group Inc. are also projected to raise their dividends, according to data compiled by Bloomberg.
Delta resumed its shareholder return program in May 2013 with a $1-billion buyback and dividend plan, after about a ten- year stretch during which it went through bankruptcy and merged with Northwest Airlines. Last year, Atlanta-based Delta boosted its program by announcing a $2.75-billion mix of share repurchases and dividends through 2016.
United Continental Holdings Inc. announced in July a $1-billion buyback plan to be completed over three years, while American currently has a $2-billion share repurchase program and Southwest is finishing up $1-billion in stock repurchases.
Delta said it’s on track to complete the remaining $725 million of its prior $2 billion share repurchase authorization by June 30. It also said it plans to cut adjusted net debt to $4 billion by the end of 2017.
This article was written by Michael Sasso from Bloomberg and was legally licensed through the NewsCred publisher network.