Will they learn anything?
 

DL spent a ton on buybacks before 2006 BK. Best of times till they weren’t. Then couldn’t fund our pension. ESOP stock and options went to zero. Froze then terminated pension plan. Needed massive payouts to recover. Paid themselves massive bonuses post recovery and big raises while we fought for every nickel. Now DL goes from best of times to worst in 3 months time span. Spent ?10B on buybacks in 5 years. Could potentially file BK again. May ask for massive payouts and possibly attack non con pensions. Does anyone still want a pension tied to the corporation in any fashion and will they ever learn? Good luck. OFG. Retired. Gets every day off

unfortunately it only worked to make them richer every time.

Bastian and Mullin are cut from the same cloth. Hopefully we can upgrade when Bastian's gone.

Besides management incompetence I believe our financial laws would also need to be updated. If airlines accumulate a lot of excess cash doesn't it make them a juicy hostile takeover target ala Lorenzo and Icahn? There was definitely some things management should have done differently which would have minimized our exposure or at the very least it could have bought us more time to respond.

This is all Monday morning quarterbacking but why not use some of the free cash flow to pay cash for Jets? Fuel costs decrease greatly with a reduced flight schedule. Employee costs can also be reduced with leaves, SILs, early outs and furloughs depending on the time period involved. But I assume aircraft loan payments must go on. Perhaps DAL can get a grace period. Another thing to look at is a one time dividend bump, stressing the one time aspect so it would not be expected and not seen as decreasing dividends. Not even sure that would work.

In any case the very nature of stock buybacks for airlines seems to make them counterproductive. The only times airlines have extra cash to buy back stock is when things are humming along - consequently the stock is usually priced high at such times. When the stock is in the dumps (ie now) airlines usually don't have any excess cash to buy back shares.

So to answer your question - No I don't see anything being changed by management either learning or becoming more altruistic. If any change comes in my opinion it will be structural and encouraged through updating laws and financial rules.

Scoop

Everyone also acts as though stock buybacks are an airline invention. Quite the opposite, it's routine across almost all industries and in fact the airlines only sporadically have been able to do it over the last decades. The exact reasons you mentioned above play into it and also incentivized by paying execs in mostly stock who also benefit from a price boost.

Most mgmts would say that the $$Billions in Lines of Credit are their (emergency fund) in case there was an abrupt slowdown in service. Nobody really can plan for basically a $0 revenue environment with no definite end in sight.

Not an MBA (just a pilot), but read an article very recently that said all the growth in the stock market over the past X years (don’t remember the #) was from corporate stock buybacks - airlines, hotels, Apple, etc. Everything else pretty much canceled each other out. So...from a micro perspective, it screwed is, but from a macro perspective, it had enriched us. Just a different perspective. Donning flack jacket now...

This has been my argument since this happened. I keep hearing too much cash on hand and too little debt is bad. Well, maybe it’s time for some regulatory protections from congress. We seem to be the first hit when things go bad but we aren’t “allowed” to carry extra cash on hand to withstand these shocks. It’s time for a change. We should demand it as employees, taxpayers should demand it because they are bailing us out. I’m planning to write my reps until I get a legit answer.

Not to excuse the carpetbaggers......but i think at the time pension trust contributions were limited similar to our individual savings limits.

I dont think a company was allowed to 'overfund' or frontload in good times to enable meeting funding mins thru bad times.

Imagine the gov allowing us to contribute up to 100% of our paycheck to self directed accounts? Lol

They would miss the tax revenue. Just a little bit.

Yes this was true and in fact in 1999 or so I remember reading that Delta actually petitioned the IRS (and was denied) to prefund the pension funds because they had profits and the Stockmarket was high which actually eliminated Delta's actual need to fund pensions (according to the feds).

They could have put more funding into the pension plans. The limits were on the amounts they could put into the plans and receive tax benefits.

Similar thoughts and in fact have an idea brewing...

Stock buybacks are not allowed going forward and CEO/exec board salaries are capped via a matrix of company size/revenue. All excess cash goes into what is essentially an employ/company solvency trust that cannot be touched or raided via law. Once this trust reaches a certain dollar amount only then can exec bonuses be paid out from it, but it must retain a minimum figure based on revenue. So CEOs and investors can still get rich but also must be truly beholden to the people they employee.

I'm not an economist, but something along these lines should probably happen going forward.

Orrrr.......we could have recognized the risks of being suitcased in such a predicament.

And maybe instead executed a voluntary termination to freeze plan and transitioned to a DC that would have freed delta to put some of all that excess cash into our individual retirement accounts.

I think the self directed limit in 2000 was mid $30k/year

Corporation are never beholden to employees. Employees are only a means of production. If a corporation could operate with artificial intelligence and robots at a more cost effective level they would. There is no requirement to employ anyone. Employment while the backbone of society, is not a corporate goal unless it enhances profits by growing the size of the company or lowering costs. The corporation is an individual entity (person) under the law. This construct will be tested as the population grows and efficiency increases but for now this is the landscape.

Employees are treated as economic widgets and are not considered by management in their calculas. An investor can "dump" their stock and move on. Employees are married to the airline for their career. But, management is loyal too who? They are loyal to management first, institutional investors second, fund managers third, standard wall street investors fourth, and employees fifth.

I will re-post my thoughts on this....

Howdy from the UAL side.

My 2 cents is this: stock buy backs benefit management's stock options and the institutional investors they court.. There is a small group of folks that feel it's a strategic move to help prevent a hostile take-over. But, there aren't too many Gordon Gecko's around any more. The real thing we should be telling management is this: Save up for a rainy day. and have access to cash via a substantial line of credit. It could be a pandemic, a public health crisis, or a national security event, or a global security threat. Those are all possibilities, and all require an executable plan.

Stock buy-backs don't figure into any of those plans. We can reasonably predict some sort of major crisis every 20 to 30 years. managements need to have plans ready and actionable when the balloon goes up. This profession hasn't been made whole since 9-11 and the airline pilots who staff it must sacrifice allot to get here and to stay here. Without pilots to staff the airline and to keep it staffed, you don't have an airline. Best to plan for the future. History has a way of repeating itself, even if the circumstances are not identical, the ramifications after the fact most certainly follow a predictable pattern.

It has to do with management, not the laws, Delta, AA, UAL can protect themselves from hostile actions, they choose not to. https://www.fool.com/investing/2020/...ion-after.aspx