Yahoo Finance United’s share buyback program returns $320 million to investors
United Continental sees profitability double in 2014 (Part 10 of 10)
Debt repayment and share buyback
At the end of fiscal 2014, United (UAL) had an unrestricted liquidity position of $5.7 billion, including $1.35 billion under its revolving credit facility, after making debt payments, capital expenditure, and buying back shares. United’s debt and capital lease obligation as of 3Q14 was $12,094 million. It repaid $534 million in 4Q14, including $248 million of convertible debt that was converted to 4.3 million shares.
United’s and American’s leverage, measured by debt-to-capital ratio, is very high—more than 70%—compared to peers. Delta Air Lines (DAL), Alaska Air Group (ALK), JetBlue Airways (JBLU), and Southwest Airlines (LUV) have leverage ranging from 25% to 50%.
Only Alaska Air Group (ALK) and Southwest Airlines (LUV) have investment-grade credit ratings. All other major US airlines, including United, are rated below investment grade. Delta’s credit rating was recently upgraded by Fitch. For more on this, read Why Fitch upgraded Delta’s credit rating.
Improving free cash flow has allowed top US airlines, which make up part of many ETFs such as the iShares Transportation Average ETF (IYT) and the SPDR S&P Transportation ETF (XTN), to reduce their leverage over the past few quarters.
Apart from reducing debt, United incurred capital expenditures of $1 billion during the quarter, then returned this to shareholders in the form of share buybacks. In 4Q14, $100 million worth of common stock was repurchased and $248 million worth of convertible debt was converted to 4.3 million shares.
In the full-year 2014, United returned $320 million to shareholders as part of its $1 billion share buyback program, and spent $310 million to retire convertible debt that is convertible into ~5.8 million shares. United, however, hasn’t considered declaring dividend to its shareholders.
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