On Your Six
Well-known member
- Joined
- Mar 8, 2004
- Posts
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Great job Delta management! By not working WITH the pilot union to find much-needed concessions, your credit rating has now been downgraded. It will now be more expensive for Delta to access credit - thus dragging down earnings even further. How about seeking concessions from other labor groups too? Not likely. Great job Grinchstein!!!!!!
S&P cuts Delta Air Lines ratings
Wednesday March 17, 12:17 pm ET
(The following statement was released by the ratings agency)
NEW YORK, March 17 - Standard & Poor's Ratings Services said today it lowered its ratings on Delta Air Lines Inc. (NYSE
AL - News), including lowering the corporate credit rating to 'B-' from 'B+', and removed all ratings from CreditWatch, where they had been placed on Nov. 24, 2003. The outlook is stable. Ratings on selected aircraft-backed debt were lowered to a greater extent, based on Standard & Poor's review of default risk and recovery prospects for individual obligations. Ratings on bond-insured, 'AAA' rated enhanced equipment trust certificates, which were not on CreditWatch, were affirmed.
"The downgrades are based on continuing delays in securing urgently needed cost concessions from the airline's pilots, and prospects for further heavy losses and weak cash generation in 2004 and possibly 2005," said Standard & Poor's credit analyst Philip Baggaley. "Negotiations with the pilots' union have not yet produced a hoped-for interim agreement, and it appears increasingly likely that the union will instead await the start of scheduled negotiations in August 2004 (the contract becomes amendable in May 2005). Accordingly, Delta will likely continue to report the heaviest losses among U.S. airlines, consuming cash and undermining its already weakened balance sheet," the credit analyst continued. Management is insisting on a contract that matches those achieved by airlines in or at the edge of bankruptcy, while the pilots' union is offering much more modest reductions from compensation that is about 60% higher than those in the restructured contracts.
Delta reported a fourth-quarter 2003 net loss of $327 million ($207 million before various unusual items). Delta's operating cost per available seat mile, even setting aside unusual items and holding fuel prices constant, and despite various cost-cutting initiatives, was slightly higher than in the fourth quarter of 2002, highlighting the cost challenge facing the airline. In addition, Delta took a $1.1 billion charge to equity due to continued underfunding of pension plans, an amount considerably above expectations due to revised actuarial assumptions. The company has warned that it is likely to lose around $400 million in the first quarter of 2004, revised from a previous estimate of $300 million to $350 million due to high fuel prices and the continued weak pricing environment.
Ratings on Delta, the third-largest airline in the U.S., reflect financial damage from heavy losses over the past several years; a high operating cost structure; substantial debt, lease, and postretirement liabilities; and ongoing risks associated with the company's participation in the cyclical and price-competitive airline industry. Positive factors are the company's solid market position in the U.S. domestic and trans-Atlantic markets and the work rule flexibility and productivity made possible by a mostly nonunion work force (only the pilots, among major employee groups, are organized). Delta, like other large airlines, is seeking to reduce expenses in response to the adverse revenue outlook, targeting a 15% cut, compared with year-end 2002 levels and before changes in fuel prices, in cost per available seat mile.
Ratings anticipate continued heavy, though gradually declining losses, and some reduction in cash balances ($2.7 billion at Dec. 31, 2003). A cost-saving contract with Delta's pilots is also expected, though the process of achieving that is likely to take an extended period and Standard & Poor's believes that achieving cost parity with airlines that have restructured in or at the edge of bankruptcy will prove difficult. Reasonable liquidity and gradually improving airline industry traffic provide support to the rating.
S&P cuts Delta Air Lines ratings
Wednesday March 17, 12:17 pm ET
(The following statement was released by the ratings agency)
NEW YORK, March 17 - Standard & Poor's Ratings Services said today it lowered its ratings on Delta Air Lines Inc. (NYSE
AL - News), including lowering the corporate credit rating to 'B-' from 'B+', and removed all ratings from CreditWatch, where they had been placed on Nov. 24, 2003. The outlook is stable. Ratings on selected aircraft-backed debt were lowered to a greater extent, based on Standard & Poor's review of default risk and recovery prospects for individual obligations. Ratings on bond-insured, 'AAA' rated enhanced equipment trust certificates, which were not on CreditWatch, were affirmed."The downgrades are based on continuing delays in securing urgently needed cost concessions from the airline's pilots, and prospects for further heavy losses and weak cash generation in 2004 and possibly 2005," said Standard & Poor's credit analyst Philip Baggaley. "Negotiations with the pilots' union have not yet produced a hoped-for interim agreement, and it appears increasingly likely that the union will instead await the start of scheduled negotiations in August 2004 (the contract becomes amendable in May 2005). Accordingly, Delta will likely continue to report the heaviest losses among U.S. airlines, consuming cash and undermining its already weakened balance sheet," the credit analyst continued. Management is insisting on a contract that matches those achieved by airlines in or at the edge of bankruptcy, while the pilots' union is offering much more modest reductions from compensation that is about 60% higher than those in the restructured contracts.
Delta reported a fourth-quarter 2003 net loss of $327 million ($207 million before various unusual items). Delta's operating cost per available seat mile, even setting aside unusual items and holding fuel prices constant, and despite various cost-cutting initiatives, was slightly higher than in the fourth quarter of 2002, highlighting the cost challenge facing the airline. In addition, Delta took a $1.1 billion charge to equity due to continued underfunding of pension plans, an amount considerably above expectations due to revised actuarial assumptions. The company has warned that it is likely to lose around $400 million in the first quarter of 2004, revised from a previous estimate of $300 million to $350 million due to high fuel prices and the continued weak pricing environment.
Ratings on Delta, the third-largest airline in the U.S., reflect financial damage from heavy losses over the past several years; a high operating cost structure; substantial debt, lease, and postretirement liabilities; and ongoing risks associated with the company's participation in the cyclical and price-competitive airline industry. Positive factors are the company's solid market position in the U.S. domestic and trans-Atlantic markets and the work rule flexibility and productivity made possible by a mostly nonunion work force (only the pilots, among major employee groups, are organized). Delta, like other large airlines, is seeking to reduce expenses in response to the adverse revenue outlook, targeting a 15% cut, compared with year-end 2002 levels and before changes in fuel prices, in cost per available seat mile.
Ratings anticipate continued heavy, though gradually declining losses, and some reduction in cash balances ($2.7 billion at Dec. 31, 2003). A cost-saving contract with Delta's pilots is also expected, though the process of achieving that is likely to take an extended period and Standard & Poor's believes that achieving cost parity with airlines that have restructured in or at the edge of bankruptcy will prove difficult. Reasonable liquidity and gradually improving airline industry traffic provide support to the rating.
