Delta CEO Says Transformation Plan Not Enough

chperplt

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Delta CEO Says Transformation Plan Not Enough
Stock Takes a Beating as CEO Warns Bankruptcy Threat Is Still Real
By HARRY R. WEBER, AP


ATLANTA (July 27) - Delta Air Lines Inc.'s current transformation plan, which includes cutting annual costs by $5 billion by the end of next year, is not enough to save the struggling carrier, its chief executive said in a memo to employees that addressed renewed concerns about bankruptcy. The airline's shares plunged.

CEO Gerald Grinstein said in Tuesday's memo, which was obtained Wednesday and first reported by The Associated Press, that the nation's third-largest airline is still working hard to avoid a Chapter 11 filing, but he reiterated there are risks affecting Delta's ability to do that.
''In light of what we have accomplished together so far, there can be no doubt that Delta's transformation plan is delivering results,'' Grinstein said. ''What is also clear is that is not enough.''

Grinstein, citing the impact of high fuel prices and the interest expense on the company's massive debt, said Delta plans to expand its initiatives to cut costs, improve efficiencies and raise cash.

''Given our financial situation, there is renewed speculation about bankruptcy,'' Grinstein told employees. ''We have been candid about the risk that a number of factors, some of which are beyond our control, will affect our ability to avoid a Chapter 11 filing. However, we are still working to pursue an out-of-court solution, even as we face increasing financial pressures.''

Delta shares fell 44 cents, or 13 percent, to close at $2.95 Wednesday on the New York Stock Exchange.

Airline analyst Ray Neidl said Grinstein's comments in the memo and during a conference call with investors last week suggest that Delta is preparing people for the worst, even as it tries to keep that from happening.

"The market is becoming more dubious of Delta's chances of avoiding bankruptcy."
-Ray Neidl
''The market is becoming more dubious of Delta's chances of avoiding bankruptcy,'' said Neidl, of Calyon Securities. ''I know I am.''

Last week, Atlanta-based Delta reported a $388 million second-quarter loss, pushing its red ink to nearly $10 billion since early 2001.

Some analysts have speculated that if Congress doesn't pass meaningful pension funding reform by the fall, Delta will be forced into bankruptcy. But Grinstein has noted that the airline has other equally pressing concerns, including hefty fuel costs.

In the memo, Grinstein acknowledged that it may be puzzling to Delta employees that, despite high fuel prices, several other legacy carriers who face the same problem as Delta were able to post modest profits in the second quarter.

''What's going on?'' Grinstein said. ''Simply put, it is in large part a matter of timing and competitive market challenges unique to Delta.''

Also Wednesday, Delta said it is now offering customers who buy their tickets on the airline's Web site the ability to cancel certain tickets within 24 hours of purchase without penalty if they find lower fares on another carrier or if their travel plans change.

Many airlines charge fees for ticket changes.
 

General Lee

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Thanks Chprplt. Must be great for you to be away from the DL family and now on with up and comer Aliegent. Good for you. You obviously know that Grinstein doesn't want to go into Chap 11 if at all possible, and that he knows he can try to get some more pay cuts (no contracts for everyone except pilots) to cover the high fuel costs. He is preparing our employees by giving this memo. We supposedly have a "plan" to save around $5 billion a year by 2006, but the problem is that we need to get to 2006 first. Word on the "street" is that ASA/Comair could be sold soon to provide some cash. Pension reform is almost here too. But, if there is a chance that we may go into bankruptcy, I hope they do it before Oct 17th for the less restrictive rules. Have fun in LAS.


Bye Bye---General Lee
 

chperplt

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GL,

Just posting what I thought was an interesting article. Has nothing to do with me no longer being a member of the "family."

I'm sure when all the smoke clears, you guys will be just fine. I have plenty of friends that work in the front of DAL airplanes.

Let's have a drink on your next LAS overnight.
 

General Lee

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Sounds good. Enjoy your new job. Must be nice living in the same town as your new job now.

I also think (hope) they know what they are doing in management. There is a plan out there I am sure.

Take care.


Bye Bye--General Lee
 

737 Pylt

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chperplt said:
GL,

Just posting what I thought was an interesting article. Has nothing to do with me no longer being a member of the "family."

I'm sure when all the smoke clears, you guys will be just fine. I have plenty of friends that work in the front of DAL airplanes.

Let's have a drink on your next LAS overnight.

Chper:
Trust me, this is one dysfunctional family you should be happy to be away from. Our managment has no clue what they are doing, and I am now convinced more than ever there will be a chp 11 filing. My belief is it will come sometime next month before the law changes. While I like what the General has to say being very optomistic, I am more of a realist. GG is in way over his head. As a BOD member, he was the one who allowed Leo & Ron the theives to do what they did. And to think he could rescue the airline from this situation is beyond imagination. Our future is in a 74 year old has been!
God help us all!
737
working ever so diligintly on plan "B"
 

DL_Infidel

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My favorite quote:

''What's going on?'' Grinstein said. ''Simply put, it is in large part a matter of timing and competitive market challenges unique to Delta.''

How about: "Simply put, we're pricing our product well below what it costs to produce it."

I'm sorry, but blame fuel, security costs, labor costs, LCC competition, internet pricing etc. (BTW, these things are not unique to DL, nor is inept management) all you want GG, but that fact of the matter is that you're in a lose-lose situation if you don't even attempt to make a profit or break-even. If you're going to lose your ar$e you might as well lose it trying to price your product so you can, at a minimum, cover your costs. Rant over...g'nite all.

chperplt...congrats on Allegiant, lets do lunch soon.
 

LearLove

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You are starting to sound like the "original dysfunctional" family over here at U.
 

Boeingman

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Did you mention Ron Allen?

737 Pylt said:
As a BOD member, he was the one who allowed Leo & Ron the theives to do what they did.

The pilots should consider this before they give up another nickel.

By RUSSELL GRANTHAM
The Atlanta Journal-Constitution
Published on: 07/27/05

One of the highest-paid people at Delta Air Lines is finally leaving the payroll — eight years after he left the company.

Ronald Allen was forced out as chairman and chief executive in 1997 but has continued to draw $500,000 a year from Delta for consulting services, although neither the company nor Allen will say whether he has provided any.
File

That fee has made Allen one of the top-paid people at the airline during its financial crisis. Current Chairman and CEO Gerald Grinstein draws a $450,000 salary, and last year he cut it to $250,000.

Now Allen's deal apparently ends. His multimillion-dollar early retirement package called for the consulting fee to last seven years, with an automatic extension to eight. Sunday marks eight years since Allen left.

Delta won't say whether it ever sought, or Allen ever offered, to shrink or curtail the fee to help fight the grinding slump that has forced job and pay cuts throughout the airline.

"The agreement with Mr. Allen ... has been honored and in no way amended or altered," said Delta spokesman Anthony Black, declining further comment.

RONALD ALLEN'S 'GOLDEN PARACHUTE'

Elements of the 1997 severance package:

• $500,000-per-year consulting contract for up to eight years, paid quarterly in advance ($4 million total).

• $4,586,515 lump-sum cash for severance payment, health benefits and incentive awards that were to be paid for 1997.

• $765,600-per-year pension, starting in 1997.

• Vesting of 298,000 stock options and restricted stock. He netted $6.3 million in the 1997 fiscal year after acquiring 89,000 shares, with remaining stock options then valued at $13 million.

• $210,000 in legal fees to prepare his retirement agreement.

• $25,000 per year fee as "advisory director" on Delta's board.

• Flight privileges for life for Allen and his family.

• An office and a full-time secretary in Buckhead's 24-floor Monarch Tower for 10 years. First-year cost was $91,099.

• $408,766 initial cost to design, construct and furnish the office.

• Membership for 10 years in the Commerce Club of Atlanta.

• Membership for 10 years in the East Lake Golf Club, as long as Delta maintains a corporate membership.

• Company car.

• $25,565 for residential security systems
 

Boeingman

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FlyDeltasJets

If you are lurking ....remember what I told you before you got furloughed. "Never throw stones in glass houses".

No one is safe in this industry.
 

~~~^~~~

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737 Pylt said:
Trust me, this is one dysfunctional family you should be happy to be away from. Our managment has no clue what they are doing, and I am now convinced more than ever there will be a chp 11 filing. My belief is it will come sometime next month before the law changes. While I like what the General has to say being very optomistic, I am more of a realist. GG is in way over his head. As a BOD member, he was the one who allowed Leo & Ron the theives to do what they did. ...... God help us all!
737
working ever so diligintly on plan "B"
True....

There are no buyers for ASA / Comair. Delta shot themselves in the foot here also. After spending 3 Billion dollars to buy & modernize Comair and ASA, Delta then awarded the growth aircraft type to Chautauqua. If ASA and Comair were getting E170's and growing it would be fairly easy to attract cash on Wall Street ( just like Republic / Chautauqua is doing ) but with a bunch of 50 seat RJ's approaching their first C checks the investors are a lot less likely to get excited.

If Delta is going to spin off ASA & Comair they have to make them sexy. But, thanks to poor management and ALPA, the "sexy" airplanes are going outside the Delta family to be operated by non-ALPA pilots.

Oh well, plan "B" has been up and running for two years now, but like most of you, "I would rather be Flying." I still look up and see airplanes flying overhead. Maybe "plan B" will continue to grow and a few of the great guys over at Delta would want to come work for our little company.
 
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Buckaroo

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DL_Infidel said:
My favorite quote:

''What's going on?'' Grinstein said. ''Simply put, it is in large part a matter of timing and competitive market challenges unique to Delta.''

How about: "Simply put, we're pricing our product well below what it costs to produce it."

I'm sorry, but blame fuel, security costs, labor costs, LCC competition, internet pricing etc. (BTW, these things are not unique to DL, nor is inept management) all you want GG, but that fact of the matter is that you're in a lose-lose situation if you don't even attempt to make a profit or break-even. If you're going to lose your ar$e you might as well lose it trying to price your product so you can, at a minimum, cover your costs. Rant over...g'nite all.

chperplt...congrats on Allegiant, lets do lunch soon.

You're right 737pylt. Don't you wish you were flying 737's for Southwest?
 

GuppyPuppy

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Boeingman said:
The pilots should consider this before they give up another nickel.

RONALD ALLEN'S 'GOLDEN PARACHUTE'

Elements of the 1997 severance package:

• $500,000-per-year consulting contract for up to eight years, paid quarterly in advance ($4 million total).

• $4,586,515 lump-sum cash for severance payment, health benefits and incentive awards that were to be paid for 1997.

• $765,600-per-year pension, starting in 1997.

• Vesting of 298,000 stock options and restricted stock. He netted $6.3 million in the 1997 fiscal year after acquiring 89,000 shares, with remaining stock options then valued at $13 million.

• $210,000 in legal fees to prepare his retirement agreement.

• $25,000 per year fee as "advisory director" on Delta's board.

• Flight privileges for life for Allen and his family.

• An office and a full-time secretary in Buckhead's 24-floor Monarch Tower for 10 years. First-year cost was $91,099.

• $408,766 initial cost to design, construct and furnish the office.

• Membership for 10 years in the Commerce Club of Atlanta.

• Membership for 10 years in the East Lake Golf Club, as long as Delta maintains a corporate membership.

• Company car.

• $25,565 for residential security systems

What a pimp.

All this to "attract top talent"??? There is no incentive for a CEO to see the company prosper when they know they'll get the golden parachute.

GP
 

Well-hung Start

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Boeingman said:
RONALD ALLEN'S 'GOLDEN PARACHUTE'

Elements of the 1997 severance package:

• $500,000-per-year consulting contract for up to eight years, paid quarterly in advance ($4 million total).

• $4,586,515 lump-sum cash for severance payment, health benefits and incentive awards that were to be paid for 1997.

• $765,600-per-year pension, starting in 1997.

• Vesting of 298,000 stock options and restricted stock. He netted $6.3 million in the 1997 fiscal year after acquiring 89,000 shares, with remaining stock options then valued at $13 million.

• $210,000 in legal fees to prepare his retirement agreement.

• $25,000 per year fee as "advisory director" on Delta's board.

• Flight privileges for life for Allen and his family.

• An office and a full-time secretary in Buckhead's 24-floor Monarch Tower for 10 years. First-year cost was $91,099.

• $408,766 initial cost to design, construct and furnish the office.

• Membership for 10 years in the Commerce Club of Atlanta.

• Membership for 10 years in the East Lake Golf Club, as long as Delta maintains a corporate membership.

• Company car.

• $25,565 for residential security systems

This is just a form of corruption.

Corruption is the flaw of capitalism, according to Karl Marx.

Corruption eventually puts such a load on the economy as to make businesses fail.

Then the government steps in to support/regulate critical industries.

Eventually we have a socialist society.

Isn't this where this is all going?

In Capitalism, if an airline cannot survive by charging $79 for a ticket, then it should fail. If subsidies keep the prices low (United and USAir are now basically government subsidies) so that air travel is priced lower than cost, then we are NOT a capitalist society.

The government has determined by its behavior that it considers air travel a staple like bread, milk, and eggs.
 

spanky2

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GG played poker with the pilots last year and won ...

Maybe his next / current opponent is the creditors ... and he just declared "all in."
 

scopeCMRandASA

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~~~^~~~ said:
True....

There are no buyers for ASA / Comair. Delta shot themselves in the foot here also. After spending 3 Billion dollars to buy & modernize Comair and ASA, Delta then awarded the growth aircraft type to Chautauqua. If ASA and Comair were getting E170's and growing it would be fairly easy to attract cash on Wall Street ( just like Republic / Chautauqua is doing ) but with a bunch of 50 seat RJ's approaching their first C checks the investors are a lot less likely to get excited.

If Delta is going to spin off ASA & Comair they have to make them sexy. But, thanks to poor management and ALPA, the "sexy" airplanes are going outside the Delta family to be operated by non-ALPA pilots.

Oh well, plan "B" has been up and running for two years now, but like most of you, "I would rather be Flying." I still look up and see airplanes flying overhead. Maybe "plan B" will continue to grow and a few of the great guys over at Delta would want to come work for our little company.

Investors don't give a crap what you look like as long as you are making money. Methinks that Comair and ASA are not "sexy" because the investors see how much ASA and Comair's "profitability" is propped up by the Delta operation.

Of course I could be wrong, but I doubt it. To think that some people actually would sue to increase the unprofitable flying.

--glad to be gone
 

capt. megadeth

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Boeingman said:
• $500,000-per-year consulting contract for up to eight years, paid quarterly in advance ($4 million total).

• $4,586,515 lump-sum cash for severance payment, health benefits and incentive awards that were to be paid for 1997.

• $765,600-per-year pension, starting in 1997.

• Vesting of 298,000 stock options and restricted stock. He netted $6.3 million in the 1997 fiscal year after acquiring 89,000 shares, with remaining stock options then valued at $13 million.

• $210,000 in legal fees to prepare his retirement agreement.



• $25,565 for residential security systems

Consulting of what? To tell management to force paycuts on workers? That seems to be the only answer management has to stop the bleeding.

$210,000 legal fees? That is FUBAR

A security system for what? So someone that got hosed by these s doesn't break into his house and go postal?

Unreal.
 

wms

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.....
 
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chperplt

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They say BK is not the solution, I bet BK has been in the plans from the beginning, they're just waiting for the right time

Forgive me for being ignorant.. If the right time to file BK wasn't sometime over the last 3+ years to today, what/when will be the right time?
 

wms

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I'm not an accountant, but it may be they think they'll get more for their assets, ie ASA/CA if they're not in BK. Who would want to buy a regional contractually locked to another carrier in a bad position. If we do get sold I think they will file pretty quick. They would also get more money for us outside of a fire sale. I think BK would have been a better help long ago, but like I said, I'm not an accountant.
 

DL_Infidel

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Buckaroo said:
You're right 737pylt. Don't you wish you were flying 737's for Southwest?

I think you were addressing me. No, not really. I enjoy flying wide bodies...but that's just me.
 
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