Thursday, March 19, 2020

Bailouts Now - CEO Bonuses Later

The US government is currently considering a request from Airlines for America, a group that represents the nation’s major carriers, for a pay-out to help firms cope with the pandemic. With travel bans in place, industry groups are warning that airlines could run out of money within months. Over the weekend, the Centre for Aviation warned that most of the world’s airlines will be bankrupt by the end of May this year without help from governments and industry action.
But airlines are now facing criticism for paying out billions to investors – mainly through share buybacks – rather than saving this money up. The United States’ five largest airlines – which are pushing for a $50bn-plus bailout to help them survive the Covid-19 crisis – have handed out more than $45bn to shareholders and executives over the last five years, research by the Guardian has found.
Delta, American Airlines, United, Southwest and Alaska have spent $44.9bn on share repurchases and dividends in the last five years, according to Guardian research. In addition, nearly $750m has been paid out to executives over the same time period.
According to separate data compiled by Bloomberg, these five airlines have spent 96% of their free cashflow on buying back their own shares over the last decade.
Delta spent $13.6bn on share buybacks and dividends between 2015 and 2019. The firm paid out a further $208m to executives between 2014 and 2018, according to data released in proxy statements sent to investors. Pay figures for 2019 should be released ahead of Delta’s 2020 annual meeting. Over the same periods, American Airlines spent $12.6bn on dividends and buybacks, as well as $177m on executive pay. United spent $8.4bn on share buybacks, and paid executives $186m. Southwest has not yet released its dividend and buyback data for 2019, but spent $8.7bn between 2014 and 2018, and handed out $97m to executives in this period. Alaska spent $1.6bn on buybacks and dividends, in addition to $71m on executive pay.
Sara Nelson, president of the Association of Flight Attendants, has demanded that any US government bailout package come with “significant conditions” that would not allow companies to “enrich shareholders or pad executive bonuses”. She said: “We have told Congress that any stimulus funds for the aviation industry must come with strict rules. That includes requiring employers across aviation to maintain pay and benefits for every worker; no taxpayer money for CEO bonuses, stock buybacks or dividends; no breaking contracts through bankruptcy; and no federal funds for airlines that are fighting their workers’ efforts to join a union.”

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