Delta Air Lines approves $5 billion buyback plan, to hike dividend

Wed May 13, 2015 5:40pm EDT
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By Rohit T. K. and Jeffrey Dastin

(Reuters) - Delta Air Lines Inc (DAL.N: Quote) said it will return more than $6 billion to investors through share buybacks and dividends by the end of 2017, and raised its target for operating profit margin.

The Atlanta-based carrier promised on Wednesday to return at least 50 percent of its free cash to stockholders via a new $5 billion share repurchase program, and by hiking its dividend to 13.5 cents per share from 9 cents, starting in the third quarter.

The carrier said it is targeting an operating margin of 14 to 16 percent through 2017, up from earlier goals of 11 to 14 percent. It estimated earnings per share would rise more than 15 percent over the same period, up from a target of 10 to 15 percent growth.

Mergers, new passenger fees and measures to fly fuller planes have helped U.S. airline profits soar in recent years. The plummeting price of oil since June has added hundreds of millions of dollars more to carriers' bottom lines, with fuel often representing a third or more of their operating expenses.

Southwest Airlines Co (LUV.N: Quote) on Wednesday also announced a $1.5 billion share buyback program and raised its quarterly dividend by 25 percent.

Delta rose almost 1.5 percent to close at $46.78, while Southwest fell 2.3 percent to $41.27, both on the New York Stock Exchange.

Southwest's "capital deployment plan is not as lucrative" as Delta's, CRT Capital Group analyst Adam Hackel said in an email.

"Investors seem on edge (that Southwest's) new pilot contact, which will be finalized this year, will raise costs significantly," he added.   Continued...

Customers wait their turn to be served in a line at the Delta airlines office in Caracas July 7, 2014.  REUTERS/Carlos Garcia Rawlins