Meanwhile, Joe Average, who ended up running a food truck when Wells Fargo "right sized" him during the last recession, will find a comfortable slab of concrete upon which to rest his head, under the viaduct.
I've been seeing this on twitter a lot. Is there some context you can provide for why these particular repurchases were in bad taste, given no awareness of the upcoming pandemic. I am assuming you don't view repurchases as 'selfish' generally.
Improvements in leg room, amenities, services, infrastructure, etc, are a form of capital return to customers.
When executive compensation is tied to operating profit or market capitalization, there is an incentive to reduce the product quality (the air traveler experience, in this case) to the minimum competitive level and boost the share price. A buyback boosts the share price in two inter-related ways. First, it reduces the amount of shares available in the secondary market (the "float"), which distributes the market cap across a smaller number of shares. Second, it provides artificial demand for the stock, impacting the price upward by buying shares.
Warren Buffett has stated that he likes investing in equities in part because companies reinvest their profits in their business. A buyback doesn't do that because when you spend $5B on your own stock, you're not spending it on providing a better experience to your customers, and you're not spending it on R&D. You're just spending it on concentrating shareholder ownership and driving up the stock price.
Guess who often gets paid in shares? Executives. It's common for a CEO to get a small portion of his compensation as salary and a large portion as shares and options.
The point is that these companies could have reinvested that money in their business, but instead they aimed to boost share price and financial optics.
That's not to say the airlines don't care about the little guy. Some shareholders are regular folks. Plus, at least Delta paid out a bonus to employees a few months ago. But there is indeed a reason to dislike large buybacks.
In fact if airlines had actually reinvested that money, they would be even more fucked up than they are now. At least now they have free cash flow to make a temporary drop in revenue hurt less. Reinvesting money in the corporate world often involves converting cash flow into debt, which they’re probably going to have to do now to meet their existing financial obligations. Much better than if they were midway through financing some large fleet expansion and had less FCF on hand to weather the travel slowdown
This would make buybacks worse than dividends for everyone who isn't a shareholder.
Buybacks are an accident of tax law and ought to be taxed the same way as dividends.
The problem is it's really the other way around -- reinvested dividends should be taxed like buybacks, i.e. taxed when the purchased shares are sold.
By contrast, taxing buybacks like current dividends would create a really grisly incentive for corporations to hoard a giant pile of money, since that would be the remaining way to defer the tax. This is already what international corporations do with offshore profits because of a similar incentive to defer corporate income tax, and it's a huge problem.
We have a policy of allowing people to avoid tax on investment gains until the investments are cashed out -- this is what a 401k is all about. We might as well make it consistent across the board so it stops creating all of these perverse incentives. (That would reduce the amount of tax collected, but it would also remove most of the justification for taxing capital gains at a lower rate than earned income, so changing both at once would about balance out.)