To illustrate how this can work well Top Snoopy Riding Bicycle Hearts Shirt for everyone, imagine a company buying 100,000 shares of their own stock at $10/share. They spend $1,000,000 and sit on the shares for some time. Later on down the road, they decide to distribute the shares to employees while the stock price is $12/share. By doing so they generate $1,200,000 in value to their employees at a company cost of only $1,000,000. The primary issue isn’t even really stock buybacks, dividends would’ve been bad as well. If the airlines borrowed billions of dollars and just gave that money to shareholders as dividends, it would’ve been just as ridiculous.
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Now, if the company is in a cash Top Snoopy Riding Bicycle Hearts Shirt crunch then they may be forced to sell the treasury stock back to the market instead of distributing it internally. This is an easy way to raise capital, but it usually isn’t very efficient because if they are in a bind then share prices will be down anyway. That’s the situation that the airline industry is finding itself in now- they bought back a significant amount of their stock at a much higher price than what it’s currently trading at. If they sell their treasury now then they’ll get fucked by the massive loss they’ll take from the buyback, hence their asking for favorable loans from the government to avoid those losses.
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