Skykid,
Here is another Song reference---from an interview with Fred Reid on CNBC. He talks about Song and the brand name, and the cost cutting.
Delta Air Lines - COO Interview
Date: 8/20/2003; Publication: CNBC/Dow Jones Business Video; Author: Mark Haines
MARK HAINES, CNBC ANCHOR: Delta`s low fare carrier Song launching service at all three New York metropolitan area airports, the first and only low fare carrier to do so. Service will provide nonstop flights between the Northeast and key Florida leisure destinations plus Atlanta, Las Vegas, L.A. and San Juan. Here is look at Delta`s stock over the past five years.
The high back around `99 or so was 70 or better, and now we`re at 12. So let`s get an outlook for the company and talk about the airline industry, the effect of the blackout et cetera, joining us now from the New York Stock Exchange where they will be ringing the opening bell to kick off the celebration, Frederick Reid, COO of Delta Air Lines.
Good morning sir, thanks very much for being with us.
FREDERICK REID, COO, DELTA AIR LINES: Good morning, it`s a pleasure to be here.
HAINES: What is the strategy here, the regular Delta, now you`ve got Song, it seems like you are neither fish nor fowl.
REID: Well, I think maybe we are both. We are cognizant of the fact that air transportation in the country and in the world for that matter is segmenting itself into mainline hub and spoke products, regional products, low cost products and global alliances. And all of these products interact because you`ve got the same passengers traveling across these products over time, so Delta wants to play offense and defense in all of these segments.
ROBERT HORMATS, GOLDMAN SACHS INTERNATIONAL: Can I put a question to you?
You and other airlines have tried to establish airlines within airlines.
And they haven`t been overly successful. What have you learned from your own experience with Delta Express and from other airlines` experience that is going to make Song different and more successful than those experiments of the past?
REID: Well, some of those experiments have had mixed results. And I would point out that for the first three-and-a-half years of its existence, Delta Express did extremely well and had quite an effect on the passenger market as well as some of our competitors. What we`ve learned mostly is that you have to have the right aircraft, it has got to be young enough to have a long shelf life and you`ve got to come out of the blocks with a substantial cost advantage over your mainline operation. Song has come out of the blocks with a 22 percent improvement in unit cost performance. And we think if anything that unit cost difference from the mainline will grow over time.
HORMATS: How will pilot costs be different between Song and Delta?
REID: Well, we`ve - for efficiently purposes we are flowing the pilot group across the mainline product and Song, and sometimes on the very same day. So our goal, as I think you know, is to achieve greater cost competitiveness and productivity in the pilot group across all of Delta.
HAINES: Let me read you some research from Nicholas Owens (ph), who is the stock analyst from Morningstar, he says, Delta isn`t the worst airline around, given the unsustainable nature of Delta`s business model we don`t see any good reason to invest, one of our concerns is the strategy is not viable over the long-term, and he goes on to say you are either a low-cost provider like Southwest or you find some premium niche to occupy. You are somewhere in between and he, for one, feels that is not going to work.
REID: Well, there are varying opinions out there, but Delta has been around for 70 years and we plan to be around for well longer than that in the future.
HAINES: Does Delta have a net profit over those 70 years?
REID: I don`t have that number available to me, but certainly we`ve been...
HAINES: The entire industry has a net loss over those 70 years, it`s unlikely, you know.
REID: I think we have outperformed the industry average, and certainly I am not denying the fact that there is a great deal of cyclicality in here.
You mentioned the word premium, and I do want to mention that historically and even today that Delta does enjoy a revenue unit cost - a unit revenue premium, excuse me, over the low-cost competition because we offer many things that the low costs carriers do not. Nonetheless, that revenue premium has dropped over time and the cost disadvantage has grown. We are recalibrating both of those numbers and simply have to get to the point where the cost is much better and that is where we are going in the next two years with a targeted reduction of 15 percent of our unit costs.
HORMATS: Another question, you have invested a lot over the years in the Delta brand. And that raises the issue why have you decided to create a totally different brand with Song? I have seen the planes, they look pretty cool, but you have a good brand name and people recognize it, why did you decide to do something different and establish a wholly new name for this new airline?
REID: Well, the Delta brand has huge equity value and it`s got a great tradition and in my view, a great future, nonetheless, in the low cost segment, customers are really looking for differentiation and they want to know that you are going to have something that is low fare all the time, which Song is, and really makes itself - looks, feels and acts different from the mainline carrier. And that is what we are doing here. We don`t see it as an issue of dilution, we see it as an issue of enhancement.
HAINES: Next year, 2004, you have to start making contributions to your underfunded pension plan. How is that going to impact the company?
REID: We are prepared for that, that is fully baked into all of our outlook. And we`ve announced the numbers that we intend to fund in the first half of 2004.
HAINES: Two hundred and fifty million in the first quarter?
REID: We`ve given a range that goes from 250 to about 350.
HAINES: All right, sir, well, thank you very much, we wish you the best of luck with Song.
REID: Great to be here and thank you.
HAINES: Frederick Reid, COO of Delta Air Lines.
Well, he obviously wants to cut pilots costs, but has other things in the works. Some analysts like the prospects of Song, and some do not. It will be interesting to see what happens when all 37 757s roll out in DEC--and the Song brand may expand with more 757s etc. We shall see. What happens when gas prices eventually tumble in the upcoming months? Will that help the bottom line? Sure it will. All airlines will benefit, including ours. But, it would be advantagous for them to get pay cuts now. We offered it to them, but with snapbacks for us etc....
Bye Bye--General Lee
. Leo is savy, but has done a poor job with organized labor. If he was going to roll over, he should have prior to C2K. If he was going to fight, he should have never signed C2K.
