Exactly. Mission accomplished.

The purpose of lighting that money on fire was not to spend it in the best possible way, but to get rid of it in a way that benefitted those lighting it on fire in the first place.

Its gone now, with many billions more to go, and as trendy as it is to do so now, history will judge this very poorly and we will rue the day we did this (at least to this extent).

The next trough cycle when the balance sheet is threatened, we will see the (re)issuance of additional shares at much, much cheaper prices.

Average stock repurchase price for the first six months of 2019: $51.22

Average repurchase price in February 2019, when they used the $1 billion from the loan: $50.97

Current market price as I write this: $57.01

Certainly not defending the stock buy back, but...

If I buy a house and pay cash.....did I light that money on fire, or did I exchange it for something of value?

It can always be argued whether or not the "purchase price" was fair or not(time will tell), but to use the term 'Light on fire" is a bit over the top

You make it sound like they just dumped the money in the river....not sure that's even close to what transpired

Yes, management bought themselves a bigger house. They traded billions of the employee's money, for a few million in increased compensation. This is why Congress needs to ban buybacks again.

That is ......illuminating! Thanks for that reasonable explanation

BTW....If mgt sold that stock (even with the hit today)....they would be geniuses....shysters...incompetent....what? Since that money is not the employees but instead, the owners(stock holders) would they be happy or disgruntled?

I get it...in your world, mgt should just dole out the billions to the employees.....would that be on a per capita basis...or off W-2? Looking forward to their largess!

If the shareholders held a vote, 98% would choose to increase the dividend, the other 2% is management.

That is the underlying problem with stock buybacks. Our pilot BOD member should be fighting for adjustments to management compensation based on the reduced number of shares. It should be accounted for just like a stock split that requires adjustments to strike price.

Jeez Buck, you don’t have to treat every comment on here as an opportunity to start an argument. I actually agree with what Mesabah said. I agree with a lot of his comments.

Other than new cash in hand for the B-School bonus crowd, there wasn't anything of tangibile lasting value remaining like a paid for house would be.

I'm not saying all of that money should have been off contract redistribution to the workers. That's nonsense. However its absolutely inexcuseable that much needed infrastructure is being ignored, all of which could have been taken care of by now for a fraction of the 14B+ being burned.

The extent they're doing it is impossible to defend and is red meat to lure the socialists into vast power grabs (and our "blue collar" incomes will be swept up in that big time), probably not that long from now. The missing money (with nothing to show for it beyond the accounting trickery compensation of a very few) is bad enough and we (as a company will rue the day we did this). But the superior infrastructure we could have had by now with a (small) fraction of that money is the real hole in the swiss cheese that was sailed right though.

hmmm....here was my question "If I buy a house and pay cash.....did I light that money on fire, or did I exchange it for something of value?"

and...here is the answer from Mesabah.....

"Yes, management bought themselves a bigger house. They traded billions of the employee's money, for a few million in increased compensation. This is why Congress needs to ban buybacks again.


Since no effort was put forth trying to explain (his/Gloopy's) point of view...is it picking an argument to respond with sarcasm ?

Seems to me lots of posters on here "defend their buddies" as opposed to actually trying to explain their position. Was my original question antagonistic....stupid...confrontational....what

So, would you like to 'splain it to me....

After you answer my original question....could you also rationally explain this statement.." They traded billions of the employee's money

How is it "the employees money"

Thank you ahead of time for you insight....I'm sure my ignorance will be resolved

Sorry to be dense....this is what I'm having a tough time understanding. If I own a business with 3 other partners and I use MY money to buy out one of the partners do I have nothing to show for that money? (substitute Delta for I/my)....do you get my question?

Over the last decade and a half, the employee's have made billions in sacrifices to create the company they have today. Buying back shares has the effect of amplifying the upside, AND also the downside. Since there are less shares, EPS, earnings or losses per share go up. This helps absolutely no one, except those who have compensation based on it.
If you want to distribute excess capital to the share holders, you do it through the dividend.

I'd like to add: I'm not a business major, so please correct me if I'm wrong...

If there is 1000 stock and I buy back 100 at $50 then reissue the same 100 at $65 all without losing my relative control of my company, is this a good move or bad move?

If earnings are high as in your example, what would be the need to raise capital in a mature market?

[QUOTE=Mesabah;2870232]Over the last decade and a half, the employee's have made billions in sacrifices to create the company they have today. Agreed But the Huge profits don't belong to the employees unless I missed that in the contract

Buying back shares has the effect of amplifying the upside, AND also the downside. Agreed , but they run a business to make money...not lose money

Since there are less shares, EPS, earnings or losses per share go up.Agreed....but again...they aren't running the business to lose money

This helps absolutely no one, except those who have compensation based on it. Does it not help ALL the other stockholder by increasing their investment?


If you want to distribute excess capital to the share holders, you do it through the dividend. Have you every seen what happens to a stocks share price when you cut the dividend? Once you "give" something...it is very difficult to take it away.....Dividends are not analogous to PS{/QUOTE}

Very true, but why not sell after the buybacks are finished, it would be the same concept.

so...back to my follow up question previously...

"BTW....If mgt sold that stock (even with the hit today)....they would be geniuses....shysters...incompetent....what? Since that money is not the employees but instead, the owners(stock holders) would they be happy or disgruntled?"

Not being argumentative....but this is NOT as simple as it is being portrayed as

That was the only point I was trying to make....You guys seem to think it is...."SO BE IT"

[QUOTE=Buck Rogers;2870238]The problem with stock buybacks is they don’t generate anything, other than a way for executives who can offload stock in which they are paid.

Your example of paying for a house, you actually purchased something, and avoided paying interest, which is good. Our most recent stock buy back was actually done on credit so we paid interest to buy.... what a slightly higher percentage of stock?

Nobody has said all that money should be handed over to the employees, but using cash on hand is intended to generate more money. Sometimes it’s to pay employees to get better service, in our business it can be used to purchase stuff that makes money, like aircraft, or better IT systems or equipment to make the business be more efficient, or investing in different businesses that generate income.

But you won’t hear any of this because you like to belittle anyone who disagrees with you, which over the past few weeks has been just about everyone. Hashtag sarcasm amiright

I did answer your question, if the shareholders had a vote in their money as you say, they would vote for the dividend increase.

[QUOTE=Gooner;2870253]..........

But it's Delta's money do with as they wish(within fiduciary guidelines)....they would make money...a lot of money....so as a stock holder I go YEAH....you can go BOO...again I get it

BTW...if given a chance to vote they would vote to give themselves ALL the profit....leaving none for us....yes...I do think if given the opportunity they would strangle the golden goose, just short of killing it, if they thought that would maximize their total return.....thus I find your question without merit....nobody turns down MORE good stuff

Deuces

You're just rambling. Mesabah was your (or his argument) "people don't accept more good stuff"?

Am i illiterate here? I cant track any of this.

“
 

I am not really getting your point. From what I learned from my Finance professors in college, the stock buyback/dividend aspect is a function of the book value of the company.

Both of you and Mesabah are correct in ways. Cutting a dividend usually is not a good thing for a share price. If the stock price is extremely high vs what the company is worth, it would have been better for the shareholders to issue a special dividend vs buying the stock back.

A very good case in point. I invested a very large part of my claim sale in 3 US Bank stocks (a commercial, custody and investment) when the European Contagion threat drove their share prices down after the banks were recapitalized after the 2008 financial collapse.

As the old saying goes, “‘Greed’, got us into this mess, and ‘Greed’ will get us out of it.” So, it was about a $100,000 position. It was time to put some capital to work at such an opportunity.

When their share prices have been at or below book value, after the federal stress tests, they have bought back stock in slugs of equity off the open market. My percentage of ownership has increased over time. It has been a great investment for my retirement. This is even when they have awarded dividends.

If a stock buy back doesn’t reduce outstanding share count, at a good value, a dividend would have been a better choice for allocation of capital.

YMMV

[QUOTE=Buck Rogers;2870277]Is carl spackler back? (Been a while since we’ve seen a reply with all these embedded quotes)

I didn't know this! You would think they should just base their compensation on total earnings (not on a per share basis), so that they can't manipulate it by shrinking the denominator.

The company proxy states the majority of executive compensation comes from stock. Apply the duck test to buybacks.

Because its all a matter of degree. I realize some are grabbing their pitchforks and acting like every penny a company makes should be allocated to the workers or whatever. Obviously (or at least it should be) this doesn't work.

I'm not against a dividend or even some of the buybacks. But 14B is very hard to defend in this industry because these days will not last forever and when they end, and they will, we will desperatly wish we held back a small fraction of that as well as further invested another small fraction into the business.

SWA almost put 1-2 legacies under (really under, like Ch7 gone bye bye under) from a lucky hedge bet that netted them a what...1B/yr advantage during a tough time? They spammed key markets and almost put thousands of pilots and others out of work and it only barely didn't succeed. This will happen again and when it does we (and others) won't be prepared for it. The only option at that point will be shrinking to profitability while yielding marketshare (regardless of to whom) and probably trying to raise a tiny portion of the burnback billions by issuing more shares at firesale prices.

So you may have "bought out a partner" but if the inevitable is because of how much you paid to do so you will later have to sell to numerous other partners and for much cheaper, then what point is it other than bonus time today.

14B lit on fire is impossible to defend. Acting like these salad days are eternal and this level of largess is sustainable is is the corporate equivalent of climbing over the fences and past the warning signs to take a selfie on the edge of a cliff because it looks cool.

As for us, its contract time and its very reasonable we get significant gains in all areas and that can happen with far less than the burnback monies; I don't look at the 14B and counting as all ours.

We should at the very least peel some of that off to invest in still much needed infrastructure. Do we have multipile redundant failsafe I.T. systems to stop the next meltdown? Does every jetway have high volume cold air? Does every station have adequate tugs and towbars? Do we still have rusted jetways that act up? Do we have enough agents and ground crew to get ground air on and be there for flights promptly? Are the salaries paid in certain markets sufficiently competitive to motivate our mission critical personnel to show up during a record cold snap/etc?

We could fix all of those issues for a small fraction of the 14B and counting lit on fire mostly for the indirect compensation of those making the decision to do so.

We can have dividends, buybacks, infrastructure and employee investments. Its the out of scale emphasis on the burnbacks that many are concerned with and its driving outrage far outside our industry and giving fodder to literal socialists to sway moderates because of it. No one will win from this, other than the golden parachute private island money crowd in the short term. You're free to defend it to this scale, but its not going to work out very well for any of us in the long run.

It's a catch-22, because billions sitting around become a target for corporate raiders in the airline industry, always has been that way. There are really two choices for the money, either it goes to the employees, or management/shareholders in various forms. Buybacks are for management alone.

Thank you!! I didn’t want to get baited into the argument. You summed up the future risks of burying this money in stock, and all the other areas that could use a cash infusion that are being ignored.

Back during the APU sheriff days, it frustrated me to no end that Delta wanted us to take the time to fill our FCR’s when the jetway air wasn’t working or was inadequate. In ATL, the ramp agents work the same gates all day....they know by their second aircraft of the day whether the AC system is working or not. Why is it incumbent on me to fill out a form online later in the day that could be handled with one phone call from a ramper in between flights? It COULD be fixed by the time I get a chance to fill out an FCR. I’ve noticed lately, jetway air doesn’t keep the airbus cool in many stations. LAS, SAT, and AUS are usually pretty good but a couple million could have all of our stations set up with great ground air.

I believe this is the start of what many of you are asking for throughout this buyback debate.....

https://beta.washingtonpost.com/busi....co/CwBdnVuaLf

CNBC summary of the CEOs’ statement:

“The re-imagined idea of a corporation drops the age-old notion that corporations function first and foremost to serve their shareholders and maximize profits.
Investing in employees, delivering value to customers, dealing ethically with suppliers and supporting outside communities are now at the forefront of American business goals.”

Nothing new here. Prudent managers have always known that doing the latter is the best long-term way to achieve the former. These CEOs want readers to believe that they have just discovered Wisdom and Ethics. :rolleyes:

I’ll counter with this quote from the article. Perhaps fluff, perhaps a marker for the beginning of some sort of change. All I’ve heard for the last 15-20 years that I’ve been a serious investor has been “maximizing shareholder returns”. I haven’t heard much rhetoric like this.

“Others suggested that while it’s unclear what impact the statement will have, it’s notable coming from a group that has traditionally been cautious. “It really is quite significant,” said Peter Cappelli, a professor who studies labor economics at the University of Pennsylvania’s Wharton School. While "the entire Wall Street community is not going to roll over because of this,” he called it a “marker for change” and a “corrective.” “It sounds like what they’re describing is what was the standard view before the mid-1980s — before the shareholder value idea really started to spread.”