A Transaction of Mutual Necessity

[General Lee]

No, I don't hate RJs, and I think they have a place in this industry, but they aren't what Fred Greed thought they would be--a panacea for this industry. Businessmen don't really need "frequency" as much as the want lower prices. With lower prices, RJs become too expensive to operate---and larger planes with more seats are needed to compete.

Agreed! But one problem; Why in the heck is the newest Delta Management still procurring RJ's?? What is going on here with your and Boyds assessment concerning the bad, bad RJ?? I consistently read about how the RJ is the high cost dead weight that has cost Delta its doom and gloom, but Delta Management continues to grow the fleet. What gives? I am lost on this one.

GE is supposedly forcing us to take more deliveries than we want due to a financial agreement. That is why if we go to court we may park a bunch. But, we have to becareful, since we want GE as a DIP lender. Those guys in the boardroom handle that stuff.

Bye Bye--General Lee

 

[FDJ2]

DL didn't really want all of these 50 seaters, but DALPA wanted it this way.

I see, DALPA forced management to acquire the largest 50 seat RJ fleet in world, with its high costs and the highest fuel burn per passenger seat mile in the industry. I guess DALPA also forced Leo to squander $3B in two RJ carriers, spend billions doubling them in size in the last 5 years, just to have them be worth less then half the original purchase price. 50 seat RJs are nice in a few small markets, but with yields down and Simplifares, they are an albatross for DAL. The resale for 50 seat RJs is nill, and for good reason.

 

[General Lee]

Medflyer,


Your statement really is misguided. Come on now.


Bye Bye--General Lee

 

[FlyComAirJets]

It's deja vu all over again.

The vast majority of RJs are leased. As such, it is not a particularly long term liability if they have been leased for, say, ten years already. Comair has been operating RJs since 1993 so I would expect some of them to be coming up if they were ten year leases (need to dive into the 10k Form for that). Assuming you are correct and the "resale [market] for 50 seat RJs is nill," well, then new leases could be renegotiated for a Song, kind of like what happened to turboprops in the mid nineties. They haven't gone away completely either. Sorry to disappoint you.

 

[theo]

The vast majority of RJs are leased. As such, it is not a particularly long term liability if they have been leased for, say, ten years already. Comair has been operating RJs since 1993 so I would expect some of them to be coming up if they were ten year leases (need to dive into the 10k Form for that). Assuming you are correct and the "resale [market] for 50 seat RJs is nill," well, then new leases could be renegotiated for a Song, kind of like what happened to turboprops in the mid nineties. They haven't gone away completely either. Sorry to disappoint you.

Unfortunatly, I think most leases run 15 years minimum...so any renegotiation is
probably years away from happening....minus a bankruptcy filing of course.

 

[MedFlyer]

I see, DALPA forced management to acquire the largest 50 seat RJ fleet in world, with its high costs and the highest fuel burn per passenger seat mile in the industry.

Actually, yes. DL management wanted more 70 seaters and fewer 50 seaters, but DALPA said NO. The prime reason DL bought so many RJ's was because MAINLINE costs had gotten out of control. DL couldn't fill the mainline planes at a profitable yield, so the routes were converted to RJ's. The theory was that the RJ's would simply cherry pick the high-yield customers and leave the low-yield stuff for someone else.

Was it the best strategy? No. The better strategy would have been to dramatically cut mainline costs, but neither DL management nor DALPA were willing to do that. DALPA wouldn't help out the company until it was bled down to nothing.

If the RJ's are such an albatross, why are the carriers that had far fewer of them going BK too? United didn't spend any money buying regional affiliates and had a relatively small number of RJ's, but they still went BK. USAirways had very few RJ's and they still went BK. In fact, CO has one of the highest ratios of RJ to mainline and they are probably in the best shape.

You can try to blame it all on RJ's and make yourself feel better, but the RJ's are only a small part of DL's downfall.

 

[FDJ2]

Actually, yes. DL management wanted more 70 seaters and fewer 50 seaters, but DALPA said NO.

There were and are no limitations on how many RJs DAL can deploy. The only limitation is on how many can be outsourced to contractors.

 

[FDJ2]

In fact, CO has one of the highest ratios of RJ to mainline and they are probably in the best shape.

The airlines with the highest ratio of RJs are Indy and DAL. In todays economy passengers just don't want to pay the 20cents/seat mile an RJ costs to operate.

 

[standaman]

The airlines with the highest ratio of RJs are Indy and DAL. In todays economy passengers just don't want to pay the 20cents/seat mile an RJ costs to operate.

Doesn't seem like they want to pay it on a mainline aircraft either. Hence our mutual problem.

 

[FlyComAirJets]

And the winner of the Flightinfo Double Speak Award goes to FDJ2!

There were and are no limitations on how many RJs DAL can deploy. The only limitation is on how many can be outsourced to contractors.

There is no limit on how many RJs DAL can deploy if flown my Delta mainline but there is a limitation on how many can be flown by outside contractors, did I get that right?

Sounds like a limitation to me.