Tue, January 31, 2023

CARES Act, Aviation Industry and Stock Buyback

United Airlines and its employees

It is not a secret that the once-thriving aviation industry is struggling to adjust to the new reality. The coronavirus pandemic had a dramatic impact on giant companies from the U.S. to Asia. Companies connected with aviation are trying to stay afloat. However, it won’t be easy to accomplish this goal. Some of the biggest airlines decided to suspend their stock buyback programs. 

Interestingly, since the start of March, 51 companies amounting to 27%  of 2019 aggregate buybacks halted their repurchase programs. United Airlines, as well as Delta and Alaska Air, decided to change their strategies. 

Chipmaker Intel also suspended its buyback plan. According to Goldman Sachs, in 2019, Intel spent $13.5 billion on buybacks. 

Authorities across the world imposed travel restrictions. As a result, most of the companies had to change their plans for the upcoming months. 

Importantly, airlines plan to ask for money as part of Coronavirus Aid, Relief and Economic Security (CARES) act. Interestingly, Companies that will receive money as part of the CARES act, they won’t be able to repurchase stock or pay a dividend for one year after repaying the debt. 

Stock buyback and U.S. CompaniesThe future of stock buyback

It is important to mention that, the stock buyback was popular among U.S companies. Many companies spent billions of dollars on mighty buyback from 2017 to 2019. 

At the moment, if not all the top executives but at least, some of them probably are wondering why the spent so much money on the stock buyback. 

Furthermore, stock prices fell from their record highs inside of two months. People should keep in mind that, it is hard to say when the companies, as well as governments, will solve all the problems created by the coronavirus. 

Also, companies could have used the money they spent on repurchase programs, to support their workers. Another option was to buy the competitors that are on the verge of bankruptcy.

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