DAL and ATA face liquidity crisis

[storminpilot]

http://news.ft.com/cms/s/131e7658-2078-11d9-af19-00000e2511c8.html

Two US airlines face liquidity crisis

By Caroline Daniel in Chicago-Financial Times
Published: October 17 2004 21:07 | Last updated: October 17 2004 21:07

The shake-out in the US airline industry caused by high fuel prices and weak revenues is set to continue this week. Delta is seeking further concessions from its creditors and pilots to ward off bankruptcy, and ATA, the 10th-largest US airline, faces an imminent bankruptcy risk.

On Friday, Delta warned that its losses in the third quarter, typically one of its strongest, would be far higher than analysts' estimates. On Wednesday it expects to report a net loss of $625m-$675m. Moreover, its unrestricted cash levels have slumped to $1.45bn from $2bn at the end of June, a psychological level that most analysts see as the minimum to successfully finance a bankruptcy restructuring.

Analysts said bankruptcy was inevitable for the carrier, not least because it warned it would need up to $1.4bn in additional financing next year.

A capital raising is seen as impossible from the capital markets in this environment.

Jamie Baker, analyst at JPMorgan, also expressed surprise at Delta's revelation that it was only seeking $125m in annual savings from its debt discussions, far lower than the $700m he had been expecting, and lower than American obtained in its out-of-court restruc-turing.

ATA, which has warned since August of a liquidity crisis, is also understood to face a payment on Wednesday to Boeing, which could act as the trigger for a bankruptcy filing to conserve cash.

Delta and ATA's efforts to stave off bankruptcy come as United and US Airways have been forced by soaring fuel prices to more aggressively exploit some of the legal tools available in bankruptcy, in particularly section 1113, which enables them to impose labour cuts and amend collective bargaining agreements.

US Airways on Friday gained approval from the bankruptcy court to impose immediate 21 per cent pay cuts on its workers, slightly lower than the 23 per cent cut it had requested.

United Airlines also warned in a filing with the bankruptcy court that, given the urgency of its situation and the stark financial reality in the entire industry, it would most likely have no choice but to seek further non-pension labour-related savings. It said it would start another 1113 bargaining process in early November, and wanted to achieve cuts by mid-January.

If it cannot get the cuts consensually it will seek to impose them. It also warned again that it expected to have to terminate its pension plans.

 

[General Lee]

Thanks Storminpilot. Yes, times are bad at DL, but I wouldn't be surprised to see a TA with the pilots soon, and that may or may not help immediately, but will be done probably before any proceedings. There is a looming debt problem, and it may be possible to restructure the debt into payments in the future, like 2008, and give the debt holders stock in return. We all don't really know what is going on in the boardroom, but cash supply is obviously tight.



Bye Bye--General Lee

 

[Rhoid]

So, according to the above article Delta is in danger of going chapter 7 liquidation?

 

[satpak77]

no Ch.7

Ch.7 is outright ceased operation, sell the planes, gotta pay the light bills

Ch.11 is what DAL is facing now

 

[blzr]

The Sky is falling, the sky is falling.

I really thing there are a couple of other airlines that are WAY closer to Ch7 than DAL and ATA.

The next couple of weeks are going to be a rough ride until after the election anyway. Hang in there guys.

 

[General Lee]

Well, things aren't great to say the least, but as I remember, AA got down to $1 billion in cash and still pulled it out of the dive. We also own ASA/Comair that we could sell if needed to raise some cash. The key here is that we (the pilots) will be giving $1 billion or so a year, and the non-union people will also be giving around $850 million a year, and we are closing money losing DFW. Grinstein is trying to convince the creditors to restructure our debt---and now is giving them an option to include some stock---which could go up like AA's after a deal is made. (AA's stock went up 1100%----yes, 1100% from $1 to $11 in a couple months) But, it may not be enough with the high fuel costs, and it will be interesting to see how it all pans out.


Rhoid,

No, Chap 7 is not very close, but a Chap 11 may be. In Chap 11 the company can erase all of the unsecured debt owed and renegotiate contracts with employees, vendors, lenders, etc. The problem which results is bad credit for awhile, but Continental and America West have both gone Chap 11 twice, and things have turned out ok for them so far.....


Bye Bye--General Lee

 

[G4G5]

Hi General,

Any word on the concessions associated with the pay cut? Folks over on the APA web site claim to "know" somethings. Preferential bidding was one thing, that will no doubt lead to a 10% reduction in required staffing. The next thing would be the increase ability to fly more hours. Numbers like UALs current 95 hrs are being bantered around. This no doubt will allow for additional furloughs. I really feel for the guys who just got called back.

While I understand the current exodus of the sr folks will leave some empty seats but those seats in no way will equal the reduction created by preff bidding and an increase in work rules.

Good luck.

 

[General Lee]

G4G5,

How do you know that? Have you called our Crew Resources people? You have? They stated that we are so short that we could raise the cap to 83 hours(from the current 75) and still have the recall. That is before we lose another 500-700 Captains. And, you know of course how losing a senior Captain has the domino effect on people upgrading--right? You knew that...
Losing more than 1000 senior Captains won't have an effect on manning and will require a lot more furloughs?.......ok....

You are wrong on a couple counts. First, we are currently SHORT in almost every category, since we have lost 600 Captains since June.(United has lost 124 Captains this year) We are forcast to lose another 500-700 by Feb 1st, since the company allowed the lump sum portion of the pensions to be guaranteed until Feb 1st---and after that---the lump sum portion may be in jeopardy.(They guaranteed it even if a Chap 11 occurs in the mean time---which essentially FORCES most of the 25 year pilots OUT) This was all solved with a TA we just passed two weeks ago, which allows some (not all--a lottery type system was set up--thanks to the IRS) of the Captains to remain until Dec 31st of 2005---or until their replacement is trained.(they have to be GONE by December 31st, 2005)

The second point is that we are going to a "depeaked hub system" at ATL , which is adding 60 mainline flights a day there. That, combined with the addition of flights at CVG and SLC, and including the downsizing at DFW, will increase our normal fleet by 44 aircraft (thanks to quicker turn times of our own current aircraft fleet). So, we will have to keep our current pilots and probably continue recalling our furloughs---even if our cap is raised---which is rumored to be 83 hours from the current 75. (not 95 like United) With 60 new flights a day at ATL, more reserves will be needed also. We have also added quite a few new INTL routes, (Berlin, an extra flight to Bombay--making two daily, etc) requiring more pilots.

I am not saying that we will not furlough again, but with our new "plan"---it is an expansion plan, and with new pay scales and new efficiencies from everyone (including ground people--rampers etc)----our operation will become leaner. There is a good chance that if everything goes as planned (which might not happen)---there could be some real expansion in 2006 according to some management types---after all of the savings are realized.
Nobody knows what will happen if we go Chap 11, but we all know this---there will be a MASS EXODUS of guys trying to protect their hard earned pension (50% anyway).( as of September 1st---we had 1271 guys eligible (age 50 or higher) that could take their lump sums---and 99 left Sep 1st with 71 being early retirements) Sounds like a possible huge exodus to me, and the TA is in place to keep the planes flying.


Bye Bye--General Lee

 

[46Driver]

I keep hearing that the age of the RJ has passed, if so, who would want to buy ASA or Comair?

 

[General Lee]

That may be true, but for someone it may be an investment--as long as Delta has a contract with them. I think the days of 50 seat RJs may be coming to an end, but not 70 seaters. There are certain routes that can only support a 50 seater---and those are certainly on routes that are not competing directly with LCC mainline planes..... But that is for another thread.....


Bye Bye--General Lee

 

[46Driver]

Just curious, if somebody bought ASA or Comair would they have to fly for Delta exclusively or could they shop around? If it was for Delta exclusively, I can't see anybody buying them else they will get BAIN'ed just like UAL did to their regional providers.

 

[General Lee]

46driver,


You bring up interesting questions that unfortunately I have no answers for. All I know is that we bought ASA and Comair for about $1.8 billion dollars, and that we currently have between $7.5--9.0 billion worth of debt for 372 RJs. There are probably companies out there that would like to have an airline that works like Expressjet---which is profitable, even with it's own debt. I don't really know if ASA or Comair is for sale, but that would be brought up by creditors in a Chap 11 senario I am sure. Whether or not they would sell them off is up to them, not me. Could they fly for other airlines at the same time if they were sold to someone? Maybe......? I honestly don't know.


Bye Bye--General Lee

 

[46Driver]

Best of Luck. Growing up in the South, Delta was always the hometown airline.

 

[dtfl]

we bought ASA and Comair for about $1.8 billion dollars, and that we currently have between $7.5--9.0 billion worth of debt for 372 RJs

Huh. Why is it I see some regional jet folks all over mainline guys for this J4J deal (possibility) when we are buying their **CENSORED****CENSORED****CENSORED****CENSORED** airplanes?
Kinda like saying..."hell no you can't ride in this car you bought and own.."
Not ALL regional guys..just a few - to save the flames.

PS after a 2.0 hour flight on a CRJ I have determined I really do hate them. GG has a point about flights being less then 2 hours..I say less than 1.5. It was the most uncomfortable flight I have ever been on. Add it wasn't just me -other folks were unhappy about a 2 hour flight...the entire US isn't full of SWA lovers. Some folks would pay a few bucks more for some room - at least these folks would have. I had no choice as the military booked it and all flights were full other than that. Wonder how much leg room the EMB 190 has? I saw it when I was at Farnborough this year - but they only let potential "buyers" into it. Now...the EMB I likey. More room- and I always book the A seat.

 

[Pez D. Spencer]

Just a question for you General, If Delta has "between $7.5--9.0 billion worth of debt for 372 RJs," where are the rest of them (which you attributed to Comair and ASA)?

Comair has 162, and ASA with the 25 orders will have close to that, if not a couple more. Needless to say, that doesn't add up to 372. So, where are the other 50 or so?

 

[Pez D. Spencer]

dtfl,
We pay Delta for the leases on our airplanes, so give it rest bud.

 

[dtfl]

OK....now I know..."BUD"
You must be part of the regional jets wives club too from that tone.
There is more hate on this board than I have ever seen. 90% form regional guys who HATE mainline..who HATE the military guys...who hate everything.

I guess this profession is just populated with asses. All of us included.

PS dont worry about me taking your seat at a regional either. Before I took a J4J I would fly with the reserves and serve my country. (And make more $)

 

[Pez D. Spencer]

dtfl, bud,
Good for you. Thanks for serving our country. And, I really don't care that your reply was as obnoxious as your original post. My sim partner at my regional was a military pilot -- we're great friends -- sorry, don't mean to burst your "anti-regional" bubble, but we have quite a lot of military folk currently active and recently returned. My roomate is military. We respect them all. I'm not worried about you or the General "taking my seat." It's not your's to take. I was just pointing out something you obviuosly did not know. And as for the populated with a-ses comment -- well, I guess you might be joining the right crowd. Good luck to you.

 

[FDJ2]

Just curious, if somebody bought ASA or Comair would they have to fly for Delta exclusively or could they shop around? If it was for Delta exclusively, I can't see anybody buying them else they will get BAIN'ed just like UAL did to their regional providers.

What do you mean by "somebody"? I very much doubt "somebody" will buy ASA/CMR. OTOH, I could very easily see a limited IPO for a percent ownership of ASA/CMR. Whether or not ASA/CMR can shop around is another deal. Perhaps ASA/CMR could shop around like Skywest and Chautauqua.

 

[G4G5]

G4G5,

How do you know that? Have you called our Crew Resources people? You have?

I was VERY clear, I told you that I read it on the APA web site and I was asking you a simple question. No need to get cute.

They stated that we are so short that we could raise the cap to 83 hours(from the current 75) and still have the recall.

Again, that was not the question, if DAL goes Ch11 then I would fully expect (and in the case of the DAL pilots be prepared for) 95 hours.
If you have any doubts, all you need to do is look at USAir and UAL. With 83 you may need to recall, with 95 hours things could be different. Just do the math, raising the monthly cap equal to the other ch 11 majors creates an instant 21% increase in man power utilization. Did you lose 21% of your pilots to retirement?

You are wrong on a couple counts. First, we are currently SHORT in almost every category, since we have lost 600 Captains since June.(United has lost 124 Captains this year) We are forcast to lose another 500-700 by Feb 1st, since the company allowed the lump sum portion of the pensions to be guaranteed until Feb 1st---and after that---the lump sum portion may be in jeopardy.(They guaranteed it even if a Chap 11 occurs in the mean time---which essentially FORCES most of the 25 year pilots OUT) This was all solved with a TA we just passed two weeks ago, which allows some (not all--a lottery type system was set up--thanks to the IRS) of the Captains to remain until Dec 31st of 2005---or until their replacement is trained.(they have to be GONE by December 31st, 2005)

I think that you are missing the point. An increase of 21% utilization will cover current staffing shortages. To think that Greenjeans will accept anything other then what UAL and USAir has provided is naive. If he intends on taking DAL ch 11, he will want and get 95 hrs. That comes instantly, no training required. Now couple that with another 10-15% increase in utilization with the implementation of preferential bidding, which also creates instanious scheduling relief and you can't possibly have enough retirements that equal the newly created personal efficiencies. What would pref bidding to current reserve requirements? 700-1000 less pilots less is a number that comes up when I talk to our union folks. For AA that number increases to 1200-1500. Ouch. To think that everyone wil take the retirement is a little absurd. Those close to 50 or just a few years past will no doubt be talking to thier financial planners to have them calculate the additional income created by an FAA increase to age 63-65.

The second point is that we are going to a "depeaked hub system" at ATL , which is adding 60 mainline flights a day there. That, combined with the addition of flights at CVG and SLC, and including the downsizing at DFW, will increase our normal fleet by 44 aircraft (thanks to quicker turn times of our own current aircraft fleet). So, we will have to keep our current pilots and probably continue recalling our furloughs---even if our cap is raised---which is rumored to be 83 hours from the current 75. (not 95 like United) With 60 new flights a day at ATL, more reserves will be needed also. We have also added quite a few new INTL routes, (Berlin, an extra flight to Bombay--making two daily, etc) requiring more pilots.

Are you trying to tell me that Ch11 won't bring along an expedited parking of inefficient aircraft like the 737-200 (The loss of AA 74-F100's comes to mind) What about the parking of costly older aircraft, not fleet related. AA parked all the high time close to heavy maintenance aircraft until they could afford to do the heavy checks. Or a possible parking of aircraft leased with unwanted costly leases (AA's TWA 757's, MD 80's or UAL 747's come to mind). What about the inevitable transfer of a certian percentage of domestic routes to Comair/Asa (all you need to do is look at what has happend domesticly at AA, UAL and USAir). If I remember correctly AA transfered close to 16% of the domestic flying to Eagle in the 12 callender months following our new ch11 filing.

I am not saying that we will not furlough again, but with our new "plan"---it is an expansion plan, and with new pay scales and new efficiencies from everyone (including ground people--rampers etc)----our operation will become leaner. There is a good chance that if everything goes as planned (which might not happen)---there could be some real expansion in 2006 according to some management types---after all of the savings are realized.
Nobody knows what will happen if we go Chap 11, but we all know this---there will be a MASS EXODUS of guys trying to protect their hard earned pension (50% anyway).( as of September 1st---we had 1271 guys eligible (age 50 or higher) that could take their lump sums---and 99 left Sep 1st with 71 being early retirements) Sounds like a possible huge exodus to me, and the TA is in place to keep the planes flying.

Expansion? Please provide me with one example of a CH 11 carrier that has actually expanded. It never happens. One quick question, do you think that the TA is the last time that DAL mgt will come knocking for concessions? Or could a ch11 filing bring additional concessions?

Now I hope I am wrong. Nothing could/would be worse. I was only asking because you seem to have some insite as to what could happen. All I was trying to do was compare it to what I have heard/read.

The picture that you just painted seems a bit rosy for me.



Bye Bye--General Lee

Have a nice day

 

[General Lee]

G4G5,


You OBVIOUSLY haven't been paying attention. We actually HAVE an expansion plan in the computers(RES), and that will NOT change. We are already selling seats for Feburary with 60 more flights a day from ATL alone. If we actually go Chap 11---even more of those 1270 or so pilots eligible for early retirement WILL TAKE IT OR LOSE THEIR CASH. That will cause huge ripples. Yes, we could still go Chap 11, but with a TA on the books and cuts from non-union people as well, most of any clean up will be with unsecured debt. Sure, other things could be changed, but according to an SEC filing Delta just made---it stated that should the pilots ratify at possible TA---some of the understandings will be made binding (meaning will not change unless a certain cash level is hit---most likely) (I will find it for you---look at bottom of page) I do not know what these are, but you can bet that certain points will stand and that with the finacial books in order---the company will grow again. We actually can take away an extra $2 billion a year from the employees and compete better, and still have pretty good wages that could be used again if necessary.(hopefully NOT, but possible)

95 hours, huh? You are sure of that one, eh? Sick call will be at an all time high, and the carrier will soon figure out that 95 hours a month is not dooable---which United has already learned.


The 737-200s are currently our 100 seater and still used on certain markets. Do you think they will park them immediately? They parked them right after 9-11 because they chose to furlough the bottem 400 guys, and they were all at Delta Express flying 737-200s as FOs. They had to park them. The only planes we have scheduled to go by May of next year are 4 737-200s and 4 737-300s from SLC. The talk from Dean Bloom (Sys Chief Pilot) and Kolshack (VP of Flt Ops) is that we are looking at new 100 seaters to eventually replace the 737-200s---and this is with our bad credit. You OBVIOUSLY don't know what is going on in the inner circles over here.


Have we lost 21% of our manpower due to retirements you ask? Well, we have lost about 1000 Captains since last September (2003), and that is about equal to 20% of our total Captains, and about 13% of our total pilots. Add atleast 500 more, and that is a huge chunk. (It could be 700 more, or if all go 1200 more) Figured it out yet? How long does it take to train new Captains on new equipment? Got anymore questions? What you are not seeing here is that according to our "depeaked hub" plan, we are adding the equivalent of 44 new aircraft by just using our current ones more efficiently. Adding 44 new aircraft to the fleet would require more pilots, or if we increased the cap---probably the same amount or more if needed. If we increased the cap and did NOT increase the flying---then a furlough might be in order. The current plan, even with a Chap 11, is to increase the flying by depeaking the hubs and making the operation mroe efficient without buying new aircraft YET. That is the CURRENT plan---according to Grinstein, and that would probably be the plan if we had to exit a Chap 11 too---so we could make enough revenue to get profitable again someday.

It seemed to me that you were not looking for insight, but rather intent on insiting a riot.


Bye Bye--General Lee

PS--Here is the SEC filing, please read the last paragraph.

" Pilot Cost Reduction

Our cost reduction plans include a target of reducing our pilot costs by $1 billion annually by 2006 through a combination of changes in wages, pension and other benefits and work rules. We expect that at least two-thirds of the $1 billion will be attributable to pay reductions.

We are currently in negotiations with ALPA representatives with respect to restructuring pilot costs. To date, ALPA’s counter-proposals have been for substantially less than $1 billion of annual savings and for approximately two-thirds of the savings to come from pay reductions. In addition, to date, ALPA is proposing for pilots a stock option program that involves substantially more equity, and profit sharing and incentive programs that are substantially more generous, than the corresponding programs we have proposed. See “Employee Incentive Programs” below. The Exchange Offer is conditioned on our entering into, and the ALPA membership ratifying, a new contract with ALPA that provides, in our judgment, at least $1 billion of annual cost reduction by 2006 (before employee incentive programs as described below). If we are successful in negotiating a new contract with ALPA, the components of the savings may vary materially from our proposal.

We expect that any final agreement with the pilots will contain certain limitations on our seeking to modify the collective bargaining agreement if we subsequently file for reorganization under Chapter 11 of the United States Bankruptcy Code, as amended (the “Bankruptcy Code&#82210 ).

 

[FDJ2]

95 hours, huh? You are sure of that one, eh?

General, I don't think that he's figured it out that 95x12=1140hr/year. While perhaps some lines can be built to 95 hours, it's just not sustainable over a year.

 

[mt2]

A cap can be raised to 95 hours, but that doesn't mean all (or even most) line pilots will bump up against that. We have a 100 hr pay cap at ATA yet I very rarely come close to it. I probably average @ 80 hrs a month, and that's pretty much what the lines are built to. Also, when you take training and vacation months into account you don't have to worry about the yearly FAR limit.

 

[DrunkIrishman]

Amazing-

Another "Delta's in trouble" style thread that turns into an rj bash by some.

Uhuh, the rj is the cause of Delta's trouble. It has nothing to do with ridiculously priced fuel, outrageous taxes, and diluted ticket prices. I won't even discuss Leo and company for getting Delta where they are today. Yup, it was all the rj.

 

[G4G5]

General,
You kill me I come back from training only to read this


You OBVIOUSLY haven't been paying attention. We actually HAVE an expansion plan in the computers(RES), and that will NOT change. We are already selling seats for Feburary with 60 more flights a day from ATL alone.

I ask you to supply me the name of One airline that has EVER expanded after filing Ch11 and all you come up with is, It's in our computer system so it must be true. If that's what you want to hang your hat on so be it but I would sooner for reality. USAir, United and American have all reduced their schedule following their Ch11 or near Ch11 experiences.


If we actually go Chap 11---
Take a close look at last Wednesdays WSJ. The first caption on the front page. "Delta Chapter 11 imminent" or Thurs USA Today, Nidel stating, "it will happen in about a month" . The time has passed for DAL to avoid CH11.
IMHO, a behind the scenes deal has already been cut guranteeing DAL mgt favorable treatment if the wait until after the election.


even more of those 1270 or so pilots eligible for early retirement WILL TAKE IT OR LOSE THEIR CASH. That will cause huge ripples. Yes, we could still go Chap 11, but with a TA on the books and cuts from non-union people as well, most of any clean up will be with unsecured debt. Sure, other things could be changed, but according to an SEC filing Delta just made---it stated that should the pilots ratify at possible TA---some of the understandings will be made binding (meaning will not change unless a certain cash level is hit---most likely) (I will find it for you---look at bottom of page) I do not know what these are, but you can bet that certain points will stand and that with the finacial books in order---the company will grow again. We actually can take away an extra $2 billion a year from the employees and compete better, and still have pretty good wages that could be used again if necessary.(hopefully NOT, but possible)

95 hours, huh? You are sure of that one, eh? Sick call will be at an all time high, and the carrier will soon figure out that 95 hours a month is not dooable---which United has already learned.

Yes I am sure and you may want to get prepared for it. Lets talk fact. Both CH11 airlines are flying 90+ hours and AA in negotiations with the APA for a "soft 90"(voluntary pickup to 90 hours) and you come on here telling me that Greenjeans will be happy with 85. Not when his chief competition has 90 and above.


The 737-200s are currently our 100 seater and still used on certain markets. Do you think they will park them immediately? They parked them right after 9-11 because they chose to furlough the bottem 400 guys, and they were all at Delta Express flying 737-200s as FOs. They had to park them. The only planes we have scheduled to go by May of next year are 4 737-200s and 4 737-300s from SLC. The talk from Dean Bloom (Sys Chief Pilot) and Kolshack (VP of Flt Ops) is that we are looking at new 100 seaters to eventually replace the 737-200s---and this is with our bad credit. You OBVIOUSLY don't know what is going on in the inner circles over here.

I just don't chose to believe the crew room rumors. I live in reality. Things like the non CH11 AA coming out yesterday and announcing the parking of 15 MD80's tend to me take notice. If you think that the mgt is actually going to tips it hand prior to CH 11 you are naive. They are in negotiations with DAL ALPA. They are trying to paint the best picture that they can in an effort to get the union to lower the bar prior to CH11. This way they have a lower point to start from when they go and sit down with the judge but feel free to believe everything that the VP and the computer reservation system tell you. I'll go with reality instead.

Have we lost 21% of our manpower due to retirements you ask? Well, we have lost about 1000 Captains since last September (2003), and that is about equal to 20% of our total Captains, and about 13% of our total pilots. Add atleast 500 more, and that is a huge chunk. (It could be 700 more, or if all go 1200 more) Figured it out yet?

Yes, I did. You are still in a dream world. Just stop and look at AA or USAir. We have 3500 on furlough limit still has over 800 to go. The union is telling us 800 more is not a matter of if but when( not to forget the additional 123 that went out on 10/1). The soft 90 cap and yesterday's announced reduction of 15 aircraft, have not yet determined the total numbers to get furloughed. Yet you seem to think that a Ch11 filing, pref bidding, parking aircraft and an increase to a 90+ cap will equate to nobody getting furloughed. We have a better ballence sheet, concessions already in place yet we continue to park aircraft and furlough pilots.
Ok, I give up.

It seemed to me that you were not looking for insight, but rather intent on insiting a riot.

Take a look at miy original post and you tell me how it equates to a "riot"? Prior to your recent post I was under the assumption that you had some contact within DAl. Now I realize that you are (like myself) just a line pilot offering his opinion. My mistake.
Look be VERY clear on this. Having gone through a potential CH11, I do not with this upon anyone and only with you the very best.
I honestly hope that things go as you suggest but history has shown that one should be prepared for the worst.

Good Luck.

 

[General Lee]

G4G5,


Look, I know we are in dire straits, no doubt about that. But, why haven't we pulled the Chap 11 trigger yet? Those analysts you talk about have said we are under our comfort cushion of $1.5 billion in cash. What is the deal? Maybe it is because we are still "dealing." You and I both don't know if that is true or not.


As far as comparing USAir and AA to Delta----you really cannot. Sure, they are all airlines having problems, but not all of the same problems. AA bought TWA just before 9-11 and is now wishing they had not. A lot of AA's furloughs are ex-TWA people, and almost all of the TWA planes are parked or will be. Your STL hub is shrunk to the max, and it will probably continue. Had AA not bought TWA, the furlough numbers would be a lot less----it's true....

USAir had DCA (one of it's hubs) shut down for a long time after 9-11. They also never had an answer for the LCC invasion, and even though our Song has been a modest success (even those analysts agree to that and we are expanding it)--USAir has been paralyzed. Now Southwest is moving in to their pHL hub because there was an opening and they took it. They also have been in Chap 11 twice now, and we are teetering on the first entry. We will outlast them, primarily because we can still give up a lot of cash---which will benefit us as an airline (not my wallet).



And to top it off, something that you are failing to recognize again and again, is that we have a retirement problem. Yup, we have a mountain full of guys waiting to bail, and if we do hit Chap 11---more of them will. We have 1271 guys who are eligible to take their lump sums----and 450 of those have more than 25 years---or at least $1 million in lump sum alone. Would they risk that? I wouldn't. What would happen to AA if the top 400 Captains decided to leave? Thanks to the last TA--we won't park planes, but that would cause a huge ripple, even with an increased cap. Now throw in anoother 250 more Captains that have a large lump sum but not 25 years----and that would even cause more of a ripple. We also have had more than 600 Captains ALREADY LEAVE---we are very short in almost every ccategory right now, and we have already loaded the reservation system for FEB 1st with our new "super hub plan" for ATL and also increased flying in CVG and SLC---which equates to a 6% increase overall.


You came up with an interesting statement---"Tell me an airline that has increased it's flying after Chap 11.." Continental? America West? Both of those were in Chap 11 protection twice. Also, why don't you tell me a carrier that has "shrunk to profitability?" We could get the leases down to reasonable payments in or out of Chap 11, and then tweak the pay roll numbers for the employees, and trim some fat. We could move some debt payments around(restructure the debt---we are trying that now--trying to move the 2005/2006 payments to 2008) and fly more to cities that are not served by LCCs. (INTL) We could still have efficient hubs (like the super hub) and fly our own airplanes more throughout the day---using our equipment more efficiently. All of these things are being looked at by people that are smarter than you and I. Dalpa also has been watching this carefully---and I will follow them.


Bye Bye--General Lee

 

[G4G5]

G4G5,


Look, I know we are in dire straits, no doubt about that. But, why haven't we pulled the Chap 11 trigger yet? Those analysts you talk about have said we are under our comfort cushion of $1.5 billion in cash. What is the deal? Maybe it is because we are still "dealing." You and I both don't know if that is true or not.


As far as comparing USAir and AA to Delta----you really cannot. Sure, they are all airlines having problems, but not all of the same problems. AA bought TWA just before 9-11 and is now wishing they had not. A lot of AA's furloughs are ex-TWA people, and almost all of the TWA planes are parked or will be. Your STL hub is shrunk to the max, and it will probably continue. Had AA not bought TWA, the furlough numbers would be a lot less----it's true....

I agree the furloughs at AA would have been less. I guess what I am trying to say is. CH11's bring furloughs. This is where we differ, so be it. I hope you are correct but history has shown that I am not.


And to top it off, something that you are failing to recognize again and again, is that we have a retirement problem. Yup, we have a mountain full of guys waiting to bail, and if we do hit Chap 11---more of them will. We have 1271 guys who are eligible to take their lump sums----and 450 of those have more than 25 years---or at least $1 million in lump sum alone. Would they risk that? I wouldn't. What would happen to AA if the top 400 Captains decided to leave?

Again this is where you and I differ. The 1271 you mention will NOT all retire. Correct me if I am wrong but to be part of that 1271 you need to be over 50 and have 25 years of service. Alot of those pilots will be looking at income potential outside DAL, many will be going to their financial planners and asking very important questions like.
Can I afford to retire?
Many pilots are not in a financial position to retire, college, divorces, mortgages, whatever it is. Many will chose to work for and additional 10 years because they can not replace the paycheck even with the cutbacks.

What happens when the FAA increases the retirement age?
If you are 50-55 and the FAA increases the age to 63-65 these pilots are now losing $180k-200k jobs for an additional 3 -5 years. Odds are they can not replace that income. So the situtation for a 50 year old is, can I replace a $200k income for 15 years?

Then their are the groups of guys who just want to keep flying. You know who they are. "Sure I'll take the pay cut if I can keep wearing the hat"

The reality is plenty of guys would love to retire but many for whatever reason can't. So it's a bit optomistic to think that a huge percentage of the 1271 will retire. The run on the bank has already occured, the smart ones who are in a position to retire, already have.
While many will retire because they hoped that things would change or they needed a little more time get things in order, the numbers vacating will hardly be enough to compensate for the future furlough losses. Heck pref bidding will account for 10-15% with a pilot list around 7000 that equates to 700+ pilots. My guess is that's going to be approx the same number that retire early. Which still leaves parked aircraft, cutbacks, increased flying to 90+ hours.

Thanks to the last TA--we won't park planes, but that would cause a huge ripple, even with an increased cap.
"we won't park aircraft" is a bit optomistic, I hope you are correct but at AA we continue to announced parked aircraft, 15 more yesterday. Every CH11 airline has parked aircraft. Competition is only going to increase.

You came up with an interesting statement---"Tell me an airline that has increased it's flying after Chap 11.." Continental? America West? Both of those were in Chap 11 protection twice. Also, why don't you tell me a carrier that has "shrunk to profitability?"
Maybe you misunderstood me, even the above mentioned airlines did not expand after their ch11 filings. A ch11 by its very nature states that you can not pay your bills with your current business plan. You are telling you creditors you can't pay them.
While I agree you can not shrink to profitability BUT you can shrink to reduce losses which is what CH11 dictates you do. Take a very close look at what every major has ever done after they file. They contract to cut loses, cut wages and renegotiate leases/contracts with vendors and suppliers. No one has ever expanded. Once the company turns around, comes up with a viable business plan (like CAL and AWA) then they expand BUT that takes years.

Good Luck and enjoy, I am through.

 

[thruthemurk]

You came up with an interesting statement---"Tell me an airline that has increased it's flying after Chap 11.." Continental? America West? Both of those were in Chap 11 protection twice. Bye Bye--General Lee

Thats the second time you've said that. Incorrect. America West has only been in Chapter 11 once. On another note, expansion came Looong after chapter 11. Both carriers contracted significantly after filing.

Murk