A bankruptcy judge has admonished the chief financial officer of Delta Air Lines Inc. for a stock buyback program in effect between 1996 and 2000.
Chief financial officer Edward Bastian told U.S. Bankruptcy Court Judge Prudence Carter Beatty that the embattled airline needs $3 billion in annual cost savings to survive, reported the Associated Press.
In response, Beatty lambasted Delta for spending $2.4 billion to repurchase its shares. “It is a question of if you had that money rather than had spent it that way, you might not be in the position you are in,” she said, according to the AP.
Beatty then suggested that the company may have instituted the buyback to satisfy Wall Street. “I’m buying something worth nothing to me in order to make stock market price look good,” she added, according to the report.
Bastian, in turn, asserted that the cost reduction plan is absolutely necessary. “We are losing cash at a fairly alarming rate,” he reportedly insisted. “If we don’t stop losing cash we won’t make it.”
The cuts Delta is seeking would come on top of $1 billion in annual concessions the pilots agreed to in a five-year deal reached in 2004, the AP noted. The company reportedly added that rising fuel costs and stiff competition from low-fare, non-union airlines are requiring it to seek cuts in costs.
“We are in an intensely competitive industry,” said Bastian, according to the report. “There is excess capacity. Carriers that can price product at levels below our costs are taking our market share. Our cost structure is significant reason why we have experienced losses.”