DAL CEO internal Q&A

[Medeco]

I thought this gave a little insite into his thinking that we could analyze on this board.

Let the games begin!


Q & A with Jerry
Prior Q & A: 1/29/04

Updated April 8, 2004


Topic: Strategic Review
Q. One of the cost advantages of LCCs is a more simplified fleet. Are we looking at fleet simplification as part of our Strategic Reassessment?
A. Yes. Will Rogers used to say he never met a man he didn’t like. Delta never met a plane it didn’t buy. We have 12 planes and 20 different cockpits. At one time, we flew three different wide-bodies. I wouldn’t brag about that. One of my goals is to get limited fleet types to limit training costs and maintenance costs.
TOP
Topic: Strategic Review
Q. Some have the impression that Delta is moving slowly when it comes to the Strategic Reassessment. It seems we’re waiting until at least this summer to begin implementing any changes.
A. We will be involved in making some huge decisions and it is necessary to understand everything. This is not a six-week process. Even six months is compressing it more than I would like to.
TOP
Topic: Leadership
Q. Executives are leaving. Will we see the company taking the same turn as Enron? Are we really pursuing some form of recovery, or covering up something beneath the skin?
A. Let me assure you up front: I am not fond of Martha Stewart’s cooking and I didn’t leave a life I was happy with to go to the slammer. We do not have one set of books for us, and another for Wall Street and ALPA. The numbers Michele and I signed to are absolutely accurate. The numbers are in the 2003 annual report on the 10-K and the summary annual report. Take time to read and understand them.
TOP
Topic: Leadership
Q. Why are senior executives leaving?
A. In some cases it is a personal decision based on what people want to do in their careers, and where they are in their lives. It could be in part because everyone will not like working with me. While I may be a delight to my family, we all have different work styles. I sent out a memo that senior executives would get no bonuses or rewards for 2003. As we go ahead their compensation is set about the 50th percentile of American industry--we're not paying at the top of the industry. As a result of that we will see some executives leaving the company. I consider saving this company as a crusade, and hope we’ll have a team of leaders really committed in their gut to turning this airline around.
TOP
Topic: Leadership
Q. Over the past 10 years we’ve had a proliferation of bureaucracy in the General Offices. Are we taking a look at that?
A. Yes. We have 20% more VPs than any other airline and a lot of people in headquarters. You have to size your executive staff to match the size of the company. We are looking at properly sizing that. Some of it will be self-correcting.
TOP
Topic: Song
Q. How committed are we to continuing Song?
A. Song is part of our Strategic Reassessment. We want to look at everything we do and why we do it. I do understand a fighter brand. It makes sense to have such a brand if you're willing to support it. Song has taught us about turns, loading and greater utilization. We have taken a lot of things from Song to mainline. In addition, Song has been receiving great reviews from sources like Business Week and the L.A. Times—and Song employees can rightly take great pride in that. As I’ve said, I’m keeping an open mind.
TOP
Topic: Leadership
Q. I heard in 1989 we were listed by magazines as one of the top 10 companies to work for. When we entered the late 90’s we had a strong balance sheet and employee loyalty. How can we squander all of that? What will you do to put in a management team we feel we can trust again?
A. We have to bring in a Delta team that has grown up here and knows what Delta is all about and is willing to make sacrifices that we’re asking others to take. We were the only company where the employees gave an airplane to the company. My goal is to rebuild that spirit.
TOP
Topic: Debt
Q. How will we handle our huge debt?
A. When I went to Burlington Northern we were 93% in debt and I thought that was stratospheric. We can get it down. We have to get costs down and use that to retire some of the debt. We cannot sustain this company at $20.8 billion in debt. If you sell assets, you sell your future. We have to earn our way out of it.
TOP
Topic: Future
Q. You’ve talked about the bad news. What’s the good news?
A. We have a challenge and we can make it. In the next five to six years, I think there will be just two network carriers. Delta can be one of the two. I believe the two will be international carriers flying bigger planes Trans-Pacific, Trans-Atlantic and to Latin America. We have to be a company that sets the pace and operates with a low seat mile cost. If we’re smart and agile enough to get in that position, we’ve got a terrific future ahead.
TOP
Topic: About Jerry
Q. How long do you plan on staying?
A. Not more than five years. I will be here as long as my health and energy and passion hold up. I want to get cost reductions in place, and to recruit people who will stay here a long time.
TOP
Topic: About Jerry
Q. How do you pronounce your name?
A. Like Einstein. That’s where the similarities stop.
TOP
Topic: About Jerry
Q. In the state Delta is in, why did you want to be CEO?
A. This is a terrific company. If we can get it turned around and headed in the right direction, it can be the best in the industry. I thought there was a chance to do it because of my track record with other companies. That’s why I’m here.
TOP
Topic: About Jerry
Q. What do you consider the most important asset of Delta?
A. The employees. Herb Kelleher has it right. Take care of your people and they’ll take care of the customer.
TOP
Topic: Network
Q. Are you going to continue to grow connection carriers and take mainline out?
A. I think connection carriers have a place in the market, but exactly where and how we use them is part of the Strategic Reassessment. We grew connection carriers because of the return. Connection carriers have a role, but mainline is where we have to make our living.

 

[General Lee]

Interesting indeed, and I think we have already cut back on many fleet types. I think eventually we will have 4 or 5 fleet types total---maybe 757/767, 764, 777, 738, and a 100 seater. Other things I have heard about Grinstein is that he wants to compete again in the West, and he doesn't think RJs are the "answer" to everyone's prayers. (like Fred Reid) We shall see......But don't expect the pilots to pay for all of this new change.

Bye Bye--General Lee

 

[FDJ2]

he doesn't think RJs are the "answer" to everyone's prayers. (like Fred Reid)

Connection carriers have a role, but mainline is where we have to make our living.

G. Grinstein

General, I think you're right. It's interesting that Fred Reid left shortly after GG took over.

 

[General Lee]

No wonder the RJDC wants a "piece." They are browning their shorts over there.

Bye Bye--General Lee

 

[Medeco]

I dont think that is so regarding the RJDC. I am not a supporter but they do have some very good arguments that may come to get ALPA.

This does not need to that kind of thread anyway.

Fred Reid was getting out of town a long time ago, especially when he was passed over for the top job.

Fred Reid conviced DAL to purchase ASA and Comair and brokered the deals, even if you dont like it, history may show that was what saved DAL in the long run through all of this mess, by having so many RJ's operated by lower cost labor.

I am glad he has a vision of mainline still offering a premium product, but they better hire an entire new marketing department if they are going to convince the public that Delta is where it is at. The LCC's have a lot of Hype and momentum(free) from the press and Delta needs to be very aggressive to get this kinda thing on their side.

I think the uniform thing is a good idea, but DAL mainline only has senior mama's left working, how are they going to look "hip"? Maybe by the time this uniform thing comes online they will have brought back more of the youger ladies? Lets hope so. Maybe they could hire Skywest hiring dept for inflight, at ASA and Comair and feed those up to mainline?

He actually admits that they have to many VP's, to me that is huge in terms of what kind ship he is going to command.

General you often say that the non union employees need to take more of a cut, right? I realize mgt. could do more, but what is your answer to the fact that they have not recieved a yearly pay increase for a few years now? Isnt that a pay cut? And I realize mgt. could make more cuts, but at some point the GO employees moral has to be considered, or they will jump ship too. I know you dont think this airline revolves around the pilots.

Look, I have read as mush as anyone about this whole problem and wish that the Pilots were not used in the press like they are to be the reason that DAL is going down the tube.

I have grown up in Deltoid land all my life and saw many of my friends fathers lose their job at Eastern as they held out against the viscious Lorenzo, but I can see the righting on the wall my brother.

If you guys dont concede now, it will be worse for you in BK recovery mode, and it will defianatly take longer to get it back if ever.

As for the furloughs, and I know a few personally, they pretty mush agree with the fact that their jobs are gone, if you guys concede, they lose, if you guys dont concede , they lose in BK.

I know I wont win any friends on this board, by talking this doom and gloom, but you guys might as well take what you can and ride it out.

This industry has changed forever, we all know this. The revenue profits of the late 90's are gone forever in the domestic market. It is time that DAL has it's hands untied. Yes I know Mgt. tied its own hands, but that doesnt change the facts.

Concede 30% plus workrules, and require that in return they build back resonable returns in pay over time. Force them to admit in a very public manner that the pilots did not create this problem, yet they are being asked to fix it by giving up money that previous leadership wasted away in numorous ways. Many other things could be added that could help you guys save face.

Those who resist change and fail to adapt to new evolving markets will fail, it sucks but it is true.

Medeco

 

[General Lee]

Medeco,

The reason the pilots are paid more is because they have paid more to a union that has fought for them. It isn't cheap----union dues that is. We are only worth what we negotiate. We are also willing to take cuts--you sound like a lot of other people who think we are standing here with our fists out and saying "No!" That is wrong---we are actually willing to sit down and negotiate in good faith---but the managment side---who is used to getting what they want with the other groups---is demanding a 40% cut on our total contract. That is the truth, and when you are dealing with a unionized group that is willing to sit down for MID-CONTRACT talks that are early on the schedule--you need to sit down also and negotiate fairly. If Grinstein is willing to let this whole thing fall down due his stubborness---that is his fault and he must not be the "knight in shiny armor" that he claims to be. This is a Delta company wide problem that everyone has a stake in---and the whole company should be a part of the solution. Just because the others failed to unionize and get what they really deserved is not my fault. I hope they come together and figure this out fairly.

Bye Bye--General Lee

 

[Medeco]

NO,NO,NO

Look,

Iknow for a fact that your union is not sitting with it fist up it a$$, as you say. The problem is your union is losing the battle and I am convinced that they will lose because Grinstein is going take it to BK if you dont concede.

The fact that you guys are in mid-contract talks says alot, to people who pay attention.

The only way Grinstein gives in to 20% is if you guys start making him look like the one who is the one running it into the ground. So far that is not happening and probably wont unless your MEC gets alot more aggressive and goes on a PR campaign.

That is exactly what he is doing, taking it to the people, why doesnt ALPA do the same? Educate the people to the other side in a public manner, otherwise one side of the story is being told and right now he is doing a good job of shaping the employees thoughts.

If the union really wants to win they need to sit down with media types who will publish the side that isnt being told

I do know that he is doing one thing and saying another in terms of negotiating/Demanding, but the fact is he is getting the train going and you guys are about to be crushed.

Sad, and it sucks, but is true.

 

[FlyingSig]

history may show that was what saved DAL in the long run through all of this mess, by having so many RJ's operated by lower cost labor.

Maybe, but I doubt that's what will be remembered. You guys are giving yourself way too much credit. Are you profitable? Yes. Is mainline? Right now I'd say about breakeven... if you guys were "saving" the airline our numbers would be better then CAL and NWA who have fewer RJ's and haven't taken pay cuts yet either (yes lower costs, but still higher then UAL and AMR)

I am glad he has a vision of mainline still offering a premium product, but they better hire an entire new marketing department if they are going to convince the public that Delta is where it is at. The LCC's have a lot of Hype and momentum(free) from the press and Delta needs to be very aggressive to get this kinda thing on their side.

Agree 100%... Hopefully Vicki is the next SERP to take the money and run.... (top retention and all...isn't that what Fred said)

I think the uniform thing is a good idea, but DAL mainline only has senior mama's left working, how are they going to look "hip"? Maybe by the time this uniform thing comes online they will have brought back more of the youger ladies? Lets hope so. Maybe they could hire Skywest hiring dept for inflight, at ASA and Comair and feed those up to mainline?

While there are certainly alot of older gals still working, rest assured (and I fly as a pax a few times a month) there are still plenty of 20 and 30 somethings left too. Perhaps you should try flying out of New York or Boston and see if the sterotype fits vs. ATL or DFW.

He actually admits that they have to many VP's, to me that is huge in terms of what kind ship he is going to command.

Yes and no... if he were serious, Fred would've had to forfited his SERP instead of "retiring" as all the SERP's had a no-compete clause in them. The board (GG) waived that and let all these folks keep their good ole boy money that Jerry helped get them in the first place (he was on the board for 17 years)

General you often say that the non union employees need to take more of a cut, right? I realize mgt. could do more, but what is your answer to the fact that they have not recieved a yearly pay increase for a few years now? Isnt that a pay cut? .

Not getting a raise is NOT a paycut.

I have grown up in Deltoid land all my life and saw many of my friends fathers lose their job at Eastern as they held out against the viscious Lorenzo, but I can see the righting on the wall my brother.

Me too... I've had a PPR number for over 30 years now, but I'm reading something different then you. I absolutely agree that Delta's costs need to be more competative, especially in regards to labor costs... but when ALPA offers 14% and the company flat out says no and then asks for even more...that sends a strong message.

If you guys dont concede now, it will be worse for you in BK recovery mode, and it will defianatly take longer to get it back if ever.

Maybe, maybe not. I know the mood of the pilot group right now and they are more then willing to do the right thing.... however they also know that their ALPA reps have seen the big picture too and they trust that they will do the right thing.

As for the furloughs, and I know a few personally, they pretty mush agree with the fact that their jobs are gone, if you guys concede, they lose, if you guys dont concede , they lose in BK.

Me, I know a lot of the furloughs... and not one of them things their jobs are gone. The majority think ALPA will do the right thing in regards to concessions (ie what's on the table...tie in productivity concessions to block hour increases all while keeping the no furlough clause).

I know I wont win any friends on this board, by talking this doom and gloom, but you guys might as well take what you can and ride it out.

This industry has changed forever, we all know this. The revenue profits of the late 90's are gone forever in the domestic market. It is time that DAL has it's hands untied. Yes I know Mgt. tied its own hands, but that doesnt change the facts.

Pretty strong words from a newhire ASA FO who was just dang glad to be getting a call to work for $18K/year last year.

Concede 30% plus workrules, and require that in return they build back resonable returns in pay over time. Force them to admit in a very public manner that the pilots did not create this problem, yet they are being asked to fix it by giving up money that previous leadership wasted away in numorous ways. Many other things could be added that could help you guys save face.

Those who resist change and fail to adapt to new evolving markets will fail, it sucks but it is true.

Or, give 20% in pay, productivity changes that are on the table, all new RJ jobs for the planes on order go to Delta pilots and raise the rest of the money by selling off ASA and Comair in a IPO.

 

[FlyComAirJets]

Why just stop there? Perhaps they should sell Song, Delta Express and the Shuttle. How much do you think the JFK hub would fetch on Ebay?

 

[DDpaysoff]

Why just stop there? Perhaps they should sell Song, Delta Express and the Shuttle. How much do you think the JFK hub would fetch on Ebay?

I don't know but we just bought 30 more daily departures there starting june. So much for that Atlanta flying...CYA!