Delta to restart dividend, launch share buyback program

Wed May 8, 2013 11:32am EDT
 
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By Karen Jacobs

(Reuters) - Delta Air Lines Inc (DAL.N: Quote) plans to return $1 billion to shareholders over the next three years, starting with its first dividend in a decade and a $500 million share buyback program, the company said on Wednesday.

The initiatives are part of a five-year plan that seeks to generate as much as $5 billion in value for investors, the carrier said in a statement.

The move shows that airlines, which weathered a tough decade after the September 11, 2001, attacks, have gained more solid financial footing and are now focusing on improving their investment potential [ID:nL1N0BS0W2].

"With the Delta announcement here, it's going to signal that the industry has indeed changed," said Chris Terry, an analyst with Hodges Capital Management in Dallas. "Profitability seems sustainable, and I think it's just going to open up the industry to more investors."

U.S. carriers have merged, stopped flying money-losing routes and created new revenue streams with baggage and food fees to restore profitability. Fare increases have also helped improve revenue and earnings.

Terry said he expects other airlines to unveil plans to boost shareholder value as they reach return-on-capital goals. "The timing on that is probably the biggest question," he said.

SEPTEMBER DIVIDEND

Delta declared a quarterly dividend of 6 cents a share, to be paid September 10 to shareholders of record August 9. Its board also approved a share repurchase program of $500 million, due to be completed by June 30, 2016.   Continued...

 
A Delta Air Lines jet lands at BWI Thurgood Marshall International Airport near Baltimore, Maryland October 24, 2012. REUTERS/Gary Cameron