With airlines posting record-breaking financial results, The Motley Fool took a look this week at what the big three airlines are doing with all that cash. The article highlighted how Delta, American and United have distinct strategies as to how they spend their money, from purchasing new aircraft to reducing debt.
The story applauded Delta for its responsibility, utilizing a significant percentage of its cash flow to pay down debt while returning a healthy percentage of cash to shareholders and employees. Delta expects to return nearly $2.5 billion to shareholders this year, consistent with the company’s goal to return at least 50 percent of free cash flow to shareholders through dividends and share repurchases. Delta has also paid out $1.6 billion in profit-sharing to employees for 2013 and 2014 and led the industry in the June quarter with $411 million in profit-sharing contributions.
American’s strategy includes heavy investments in aircraft and the company’s capital expenditures are expected to rise to $6.4 billion in 2015. United is spending most of its free cash flow on share buybacks as it plans to complete a $1 billion buyback program announced last year. The company also recently announced a new $3 billion share repurchase authorization.
American Airlines has nearly $19 billion in debt on the books and United’s adjusted gross debt is currently at about $17 billion. Delta, as a result of prudent cost-control measures, ended the third quarter with an adjusted net debt of $7.1 billion, getting closer to its goal to achieve and maintain a $4 billion adjusted net debt level by 2017.
The article said Delta’s strategy “will give it maximum flexibility to respond to changing industry conditions in the future.”