'At some point, owners of a business deserve a return, too': Delta CEO defends stock buybacks despite $5 billion bailout

• Delta Air Lines CEO Ed Bastian defended the airline's $11.5 billion in stock buybacks between 2013 and 2019.
• During an interview with Axios on HBO, Bastian said that "at some point, the owners of a business deserve a return, too."
• The comments came after the airline industry was criticized for seeking a federal bailout earlier in the coronavirus pandemic — Delta received $5.44 billion in payroll support through the CARES Act.

Delta CEO Ed Bastian defended the airline's stock buybacks during the 2010s, saying that they were a necessary business transaction.

The defense, which came during an interview with Axios on HBO that aired Monday night, came as US airlines, including Delta, have faced criticism for seeking bailouts after spending billions in capital on the buybacks in recent years.

"We've put all the priorities in the right place, but at some point, the owners of a business deserve a return, too," Bastian said. "I have no issue with respect to the capital allocation discipline we've employed."

Delta spent a total of $11.5 billion on stock buybacks between 2013 and 2019. For comparison, the airline spent $11.25 billion on wages and benefits for its 91,000 employees in 2019.

When asked if the money used for the stock buybacks could have been kept as a "rainy day fund," Bastian suggested that while that would have been possible, it would not have been practical due to business expectations.

"I think our owners of our business would wonder what we were doing, setting up for a pandemic," he said.

Delta received $5.44 billion from the federal government through the CARES Act's payroll support program. Of that, $1.6 billion is in the form of a low-interest loan, while the rest comes as a grant.

The payroll support program was designed as aid for airline workers amid plummeting travel demand, and must be used by airlines to pay employees' wages. As a condition of the funds, airlines agreed to not lay off or furlough workers until after September 30, 2020. The airlines are also prohibited from buying back stock or issuing shareholder dividends for a certain amount of time.

The stimulus "goes to pay the salaries of our employees for the next six months," Bastian said. Although layoffs are possible after September 30, Bastian said that the six months of salary "buys us a lot of time to figure out how not to do that."

However, Bastian said, he does not expect travel to return to normal before the payroll support runs out.

"Travel at scale, the way we were in 2019, that's going to take at least two to three years before we start to see the types of crowds, the type of return of demand," he said. "So what we need to be doing in the interim is deploying all of the safety protocols that really has changed the experience dramatically."