DALPA DFW LEC comments on ASA/CMR

[InclusiveScope]

This is from the DFW LEC newsletter. Sounds like DALPA is putting a large part
of the blame on ASA and CMR. Check you six!


"Delta Goes to Bankruptcy Court" - A fictional tale
[This article appeared in the last issue of the DFW Round Up, before Delta's pilots offered their latest concession package.]

Judge: Ok, let’s get these proceedings started. I understand you are the attorney representing Delta Air Lines, and that Delta Air Lines is seeking protection under the chapter 11 of the federal bankruptcy code. Is this correct sir?

Delta's attorney: Yes your honor. Here are the required documents and evidence.

JUDGE: As you are aware, in order to grant bankruptcy protection, the law requires that your company must have done everything reasonable in its power to prevent a declaration of bankruptcy. Furthermore, this court must be presented with a viable business plan to ensure this situation does not happen again. I must now review actions by Delta Air Lines leading up to this situation. Please state your case.

DL: Your honor, for the past three years, Delta has suffered major financial losses and a dramatic increase in debt. We are now in a position whereby we cannot pay the debt service given our current revenue and costs. We feel, the primary culprit of our financial situation is pilot salary costs and we seek relief from the pilot contract.

JUDGE: That's it? Just the pilots?

DL: Uh, yes your honor.

JUDGE: Well looking at your quarterly financial reports for the past 7 years, it appears you have let your debt level to swell up to around 20 billion dollars, which causes roughly an annual debt service of a billion dollars per year. So I'd like to see where all this debt came from. First, I see that your company engaged in a 2.5 billion dollar stock buyback program. How much is this worth now?

DL: Um, virtually nothing.

JUDGE: You also spent over 2.5 billion dollars purchasing Comair and ASA?

DL: Yes. Both these companies were subcontractors of ours previously. In the case of ASA, there was quality control issues we felt could be better managed if we owned them. As for Comair, by outsourcing to them so much work, we allowed to become a monopoly in our Cincinnati hub. We were afraid they could become a competitor, or be purchased by one of our competitors.

JUDGE: OK, I also see that your management then went on an aircraft spending spree, buying hundreds of regional jets for your Comair and ASA Delta Connection division at a cost of an additional few billion dollars. I hope these planes are a wise investment. Are they are cheaper to operate?

DL: Well not exactly. These regional jets have a seat cost of around 16 to19 cents per seat mile whereas our existing mainline jets cost about 9.5cents.

JUDGE: So then I hope they attract more passengers. They are more comfortable, right?

DL: No, they are smaller, offer no first class, no overhead storage, and you have to be a contortionist to use the lavatory. But they sure beat flying a turboprop. We believe we can we create greater demand due to higher frequency when we replace mainline flying with these jets.

JUDGE: So you offer more of a product your customer doesn’t truly prefer?

DL: Yes, but they are profitable.

JUDGE: Well how can that be when they cost almost twice as much to operate?

DL: Oh that's easy. Delta mainline subsidizes them by purchasing their airplanes, paying for their facilities, providing marketing, as well as reservations, distribution, etc. etc. Basically, we pay all their fixed costs.

JUDGE: Well how would Delta mainline be doing if Delta Connection was actually paying their own expenses?

DL: Well it doesn’t matter, we are all one big company and all the money goes into one big pot, so to speak.

JUDGE: Then how do you know if the regional jets are truly profitable?

DL: Um, I'll have to get back to you in about four to six weeks on that one.

JUDGE: And if all your money goes into one big pot, how is it you figure that your mainline pilot costs are your problem?

DL: Look, we need to get our costs down and this is the easiest expense to go after, OK!

 

[strega7]

It should have started, "Once upon a time......."

 

[FDJ2]

It should have started, "Once upon a time......."

It was a satiracle piece, written by a pilot and is not the position of the DFW LEC. You are right not to take it too seriously.

 

[ASADriver]

It was a satiracle piece, written by a pilot and is not the position of the DFW LEC. You are right not to take it too seriously.

We know it was a satiracle piece, but that doesn't alter the fact that it is widely accepted by the Delta pilots. Many of us are starting to wonder if the RJDC might have a point. Message received loud and clear. Is this how we are thanked for hiring furloughed Delta pilots?

 

[General Lee]

A lot of the Delta stews blame us--the pilots--for everything that is wrong at Delta. We know that isn't true. Now we just have to get our own drinks before the flight....(forget about any left over first class meals---they are gone before you can blink an eye. Hey, that is one benefit those girls haven't realized---free food)

Bye Bye--General Lee

 

[bvt1151]

That just goes to show how much the author (and those who buy into it) know about airline and RJ economics.

Comair runs at 11 CASM, ASA near 12 (not 16-19 as the author states), and the RJ's are cheaper to operate than a 737 and even an MD-88 (14.1 and 12.6 CASM respectively).

RJ's have the same seat pitch as most Delta jets and more than some.

RJ's do attract more customers through added frequencies and more non-stop flights.
"There is a psychological resistance by many passengers to flying on small aircrat, as well as to flying on airlines other than the large, well-known ones. On the other hand, some communities have found that business travelers are better accommodated since flight departures and arrivals now tend to correspond with morning and evening rush hours... Pleasure travel may also be accommodated better int he sense that early morning departures to a hub airport may enable good connections for long-distance travel. The growing trend of commuter systems coordinated with a parent major airline at a hub... offer a small community improved acces to the whole national airline network."

William E. O'Connor An Introduction to Airline Economics, Sixth Edition 2001, Praeger Publishing


The RJ's are still profitable even with all fixed costs figured in (this includes financing charges, reservations fees, ground handling, and depreciation). I've explained this many times, but nobody seems to understand when it ruins their only argument. Funny how that works. Do a search.

The costs are separated and are required to be correct under penalty of law.

 

[DDpaysoff]

The casm debate. The argument that RJ costs are too high per seat mile assume that every flight is full. Example.
I don't know exaclty how many seats an MD-88 have, I will guess 120.
If an MD-88 goes out at 50% capacity at 9.5 cents per mile then the empty seats on the a/c loses $5.70 per mile. If a fifty seat RJ operates the same route at 50% capacity assuming a 12.9 cent a mile casm (which comair has posted to the DOT in the past), then the empty seats lose $3.22 per mile the a/c flies. If anyone wants to contribute 70 seat casms to support my point feel free, I don't know what the casm is but I know it will blow away the 50 seat rj.
My point is the breakeven capacity is lower on an rj than on the md-88.
Having a larger number of RJ's allows delta to maintain a market presence in smaller markets, maintain limited departure slots at airports like DCA with limited downside cost pressure, and increase frequency at popular business travel destinations, as well as add an entire bank of flying at ATL and CVG after the 11:00p.m. hour which sells more seats on mainline a/c.
I welcome rebuttle.

 

[General Lee]

DDpaysoff,


120 seats on an MD-88? There are 105 seats on a 737-200. I think there are closer to 150 seats on an MD-88---but then again, I have never flown it, and I hope not to. And, as of late---we are not empty or 50% full on the MD-88s---closer to 80-85% full--more on Weekends. You theory is flawed right now because in reality--we should have more airplanes (mainline) to reep as much revenue as we can--but instead we leave people behind by having many RJs fly routes that once were mainline. To try to squeeze any operating revenue out of this--we need as many people coming in and out of our hubs as we can get--and we have many cities that have only RJs and could actually bring in more via larger planes---but we don't have them anymore. Obviously there is one reason for this-----MAINLINE PILOT COSTS. Your examples of how RJs are used is partly correct. But, as soon as you throw a LCC and their mainline sized jets into the equation---then your RJs lose. The LCCs are growing--and we will have more direct competition with them as time goes by. How about Jetblue's 100 EMB-190s with TVs? Can your RJs compete with that? Our Song 757s are doing a good job so far--and we know that the TV buzz is enjoyed by the pax. Doubtful that your RJs will get them too. What about Airtran and their 737-700s---which will allieviate their 717s and cause them to fly to more smaller cities from ATL and DFW. Can your CRJs compete with 717s on the same routes? That is what we are up against. Sure, RJs are great when flying to cities that don't have any LCC competition---but throw them into the mix and your RJs are going to lose.


Bye Bye--General Lee

 

[DDpaysoff]

DDpaysoff,


120 seats on an MD-88? There are 105 seats on a 737-200. I think there are closer to 150 seats on an MD-88---but then again, I have never flown it, and I hope not to.


Ok let me revise my math, 75 empty seats cost $14.25 per mile to fly.


And, as of late---we are not empty or 50% full on the MD-88s---closer to 80-85% full--more on Weekends. You theory is flawed right now because in reality--we should have more airplanes (mainline) to reep as much revenue as we can--but instead we leave people behind by having many RJs fly routes that once were mainline. To try to squeeze any operating revenue out of this--we need as many people coming in and out of our hubs as we can get--and we have many cities that have only RJs and could actually bring in more via larger planes---but we don't have them anymore. Obviously there is one reason for this-----MAINLINE PILOT COSTS.

Things look great now as far as load factors, but Delta does not have the ability to adjust equipment say from a 737-200 to an RJ or vice versa when bookings dictate without at least a month and a half notice. One seniority list would solve this problem, but that won't happen. The other nine months a year revenue is harder to generate especially with the continued pricing pressure from LCC's.

Your examples of how RJs are used is partly correct. But, as soon as you throw a LCC and their mainline sized jets into the equation---then your RJs lose. The LCCs are growing--and we will have more direct competition with them as time goes by. How about Jetblue's 100 EMB-190s with TVs? Can your RJs compete with that? Our Song 757s are doing a good job so far--and we know that the TV buzz is enjoyed by the pax. Doubtful that your RJs will get them too. What about Airtran and their 737-700s---which will allieviate their 717s and cause them to fly to more smaller cities from ATL and DFW. Can your CRJs compete with 717s on the same routes? That is what we are up against. Sure, RJs are great when flying to cities that don't have any LCC competition---but throw them into the mix and your RJs are going to lose.
Bye Bye--General Lee

I think Delta has already forfeit in some of these markets and that is why RJ's are on them. Delta can use the mainline a/c it has in other domestic markets where they are the dominant carrier. No, specifics here, we know we are talking about east coast and Florida.
There is also the opposite going on, look at Moline or Flint for example; Delta went after LCC's there and did a great job, at least loads were nice when I flew them.
The problem for DCI now is the amount of market share they are giving up because of their ability to purchase 70 seat jets and having those dorniers. Dorneirs are flying a lot of routes comair used to have in CVG that demand larger a/c GRB, ERI, TRI, TYS, ATW. DCI would love to replace these flights with 50 seat jets again, and put 70 seat jets on the routes that the 50 seat jets are flying now. I am a pretty firm beliver that DCI is not going to take delivery of all of those 50 seat jets promised in the RFP. That was a hoax to entice comair pilots to take a paycut, sure a few will trickle in but I doubt they will recieve all 45 or whatever the number was.
I think we are in agreement that the whole network needs to be re-evaluated and right sized. Again. But, in all honesty 70 seat jets are not as much of a threat to you as you guys seem to think. They are needed for DCI routes more than mainline routes. But as we have seen with DAL managment before what they need to do and what they really do can be two different things due to their love for whipsawing pilot groups.
I believe the 73-200 is a dog and needs to be replaced, find a 120 seat jet and start training your guys to fly them, Give CMR and ASA more 70 seaters to replace current 50 seat routes, and CMR and ASA will find new markets to generate revenue with 50 seaters.
Paycuts without a plan do your group no good, my question is how can scope be negotiated when nobody on your side of the table has any idea what GG's new plan for Delta is? That is what concerns me.

Ooops, I said the five letter word, here comes the RJDC. I hear surplus, typing already, we will see his post in about 5 hours when he is done. Of course I have no right to talk after the length of this post. Sorry.

 

[General Lee]

DDpaysoff,


I like your response---it was very well thought out. There is some truth in what you say---and if our furloughs were somehow "guaranteed" a seat in a new 100 seater (like an A318---I have heard that floating around....I know, I know--not a Boeing----but the A318/19/20/21's have the same cockpit and type ratings...) and they would all be able to come back in a reasonable time--then sure--I wouldn't be opposed to you guys getting more 70 seaters (it isn't up to me...). The main thing I am concerned with is getting our guys back into some cockpit seats so they can be paid to fly. A lot of them have been out too long---and it is time for them to get back into the saddle. I know the wages won't be the same as before for YEARS to come--but it would be nice to offer them a class and get them back if they so chose. I don't think that is unreasonable? That is where the 70 seater deal came up---I was trying to think of which new aircraft Delta might get first--and the fact that we have around 960 furloughs still out.

Yes, I agree---our 737-200s are old and probably are mx hogs----and that is why I have heard from people in "training" (who are often wrong) that an Airbus deal could eventually occur....They said we were "desperate" for a 100 seater.
I also know that they want more 70 seaters---since in their latest proposal they wanted "unlimited 70 seaters." Who would fly them would have to be negotiated---and you can bet that it would be a lower than current Comair wages---unfortunately. Well, NW ALPA doesn't seem to care---and that will probably flow over to Dalpa---to save jobs. I don't know the plan--so a lot of this is just my opinion and what I hear in the lounge and in training.....

Bye Bye--General Lee