Delta Air Lines (DAL) initiated a 6-cent quarterly dividend on Wednesday and said its board has authorized a $500 million share buyback program as part of a broader five-year financial plan aimed at slicing its debt and ramping up pension contributions.

The news sent shares of Delta higher, closing up about 3.5% to $18.71 after touching a 52-week high of $18.84 earlier in the day. 

The largest U.S. airline by market cap said the “balanced capital deployment program” is aimed at creating up to $5 billion of shareholder value, which includes returning more than $1 billion in cash to shareholders over the next three years.

"Delta's financial performance and balance sheet have strengthened considerably over the past five years and the board believes the company is now in a position to begin returning cash to our shareholders," Delta Chairman Daniel Carp said in a statement.

The announcement came as Delta outlined a comprehensive five-year financial plan at an investor meeting Wednesday morning. The strategy puts high focus on generating free cash flow through what it believes will be a combination of earnings improvements and a “disciplined approach to capital investment.”

In light of high fuel expenses and other headwinds, Delta has been working to cut down on costs and debt, a move that has helped lower its adjusted debt to just under $12 billion at the end of 2012 from $17 billion in 2009. The airline believes net debt will fall to $10 billion by the end of this year with the goal of reaching $7 billion within five years.

From now through 2018, Delta plans to reinvest $2 billion to $2.5 billion annually, or roughly 50% of its cash flow, to the continued improvement of its fleet, facilities, products and technologies. It will use the remaining cash flow to fund shareholder programs like dividends and buybacks and reduce its debt.

"Delta's strategy has resulted in a solid financial foundation for our company, tremendous improvements in our fleet, facilities, products and technology, as well as top-notch operational reliability and service to our customers," said Delta CEO Richard Anderson.

The Atlanta-based carrier last month reported adjusted first-quarter earnings that topped Wall Street expectations on slightly higher revenues of $8.5 billion. The company at the time called the period its best in a decade as both demand and fares ticked higher.

Delta also says it plans to make up to $1 billion of incremental contributions to the company’s defined benefit pension plans over the next five years, contributions it says would be in addition to the $650 million to $700 million annual required minimum contribution.

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