Can Delta Air Lines, Inc. (DAL) Really Return $1 Billion to Shareholders?

After the merger, the combined entity should have a debt level in the range of Delta Air Lines, Inc. (NYSE:DAL) and United Continental Holdings Inc (NYSE:UAL). The company though will need to time to integrate the merger before it would ever consider returning capital.

Analysts expect United Continental Holdings Inc (NYSE:UAL) to show substantial earnings gains from $1.59 in 2012 to $3.68 in 2013 and $4.89 in 2014. It appears likely that United will also be able to implement a capital return plan to shareholders probably as the integration of the Continental merger finalizes and profits surge this year. The company has $6.5 billion in listed net debt plus capital lease obligations and such.

Bottom line

The beauty of the capital return plan is that Delta Air Lines, Inc. (NYSE:DAL) has the ability to stop the stock repurchase plan at any point if the market conditions warrant it. If it can continue paying down debt while returning cash to shareholders, it appears the plan has a lot of potential to work regardless of the history in the sector. The biggest concern is that such a move might attract new entrants into the industry.

The article Can Delta Air Lines Really Return $1 Billion to Shareholders originally appeared on Fool.com is written by Mark Holder.

Mark Holder and Stone Fox Capital Advisors, LLC have no positions in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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