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
It's better as a shareholder in many cases to be able to control when you recognize the gain from the return to investors.
Too bad, I guess anyone thinking outside the box and pointing out that our herd is going off a cliff is problematic...