Delta Future: Crystal Ball Needed

[jetflyer]

Just wanted to see what people thought about Delta's FUTURE:

1) What do you guys think Delta will look like TWO and FIVE years from now?

2) Has Delta averted BANKRUPTCY for the next five years?

3) When will Delta have it's first BREAK EVEN quarter?? Will it ever?


Two months ago, I thought Delta would be in BK court by now. So I was way wrong in that assumption.
I NOW think Delta has averted BK for atleast the next five years. I see oil prices coming down to $40 a barrel in 3 months and staying there for a while. They got below $46 for a while today! Lower oil prices will help Delta and the whole industry.


My Bold PREDICTION: I see Delta breaking even by the 3rd Q of 2005 if oil prices are $40 or less.

Delta has received $2 BILLION in concessions from the Pilots and other employees. That alone is $500 MILLION a Quarter.

The third quarter of 2004 would have only seen a $146 million dollar loss with the new pay rates that will be effective in 2005.
$646-$500 MILLION= $146 million dollar LOSS

Lower fuel prices alone could probably close that $146 million dollar gap per quarter to breaking even.

Delta will have 7000 less employees. This will save money. Let's say they make $25,000 average AFTER benefits are accounted for. This makes for $175 million in savings a year or about $44 million a quarter.

Delta is going to get a lot more utilization from their aircraft by having quicker turn times. This may mean a decrease in the performance numbers but can only be good for the bottom line.

The money losing Dallas base will be closed which will have to help Delta's bottom line as well.

None of my predictions would be possible if it weren't for the great sacrifices of the Delta pilots and other employees.
Thank you Delta pilots. You guys have proven that you are class acts. Your sacrifices today have made it possible for all of us associated with Delta to have hope again. Not only my family but many others owe you guys a lot of thanks.

What are the rest of your predictions for the future of Delta?

Jet

 

[SWAdude]

This will provide all your answers.

www.mattelgames.com/magic8/flash_index.asp

 

[lowecur]

It's a complicated question. DL can certainly skate along with smaller loses/profits in the next few years, but both companies long-term viability will hinge on what happens with the pensions in the next 6 months. If UAL receives a reprieve and is allowed to disengage itself from it's obligations, then you will see DL go directly to Chapt 11 for the same relief. The judges decision will make or break UAL in the short-term, but either way DAL should be viable.

It may be cheaper for the PBGC to request that the BK judge refuse to let UAL off the hook. This would quash the flood of companies that would follow UAL to Chapt 11 to divest themselves of pension obligations. Remember, it's not just the airlines that have pension obligations to meet. The overall cost of giving in to UAL could be hundreds of billions to the taxpayers for a PBGC bailout. UAL would then probably liquidate, thus freeing up tons of overcapcity in the marketplace. This in turn could lead to exceptional short-term profits for DAL and AMR, who are both in need of dollars to fund their respective liabilities and fleet improvement.

 

[Publishers]

Pilot pay gives them a chance to keep going. It does not solve the base problem. Having a market they can defend, other labor costs that are higher than the competition, and , getting their debt load under control.

If all you are doing is making a buck for the bank (debt), you are not really getting anywhere. They are still too concentrated market wise. That makes you vulnerable.

 

[jetflyer]

Pension to 401k?

Lowecur,

You mention the pilot pension plan as a future hurdle.

I thought the DAL pension plan was being changed over time to a DEFINED CONTRIBUTION PLAN (401k)????

I've heard rumors of this but haven't seen how it is going to be implemented.

Anyone know any details on the PENSION changes?
Is it changing!??

Jet

 

[lowecur]

Lowecur,

You mention the pilot pension plan as a future hurdle.

I thought the DAL pension plan was being changed over time to a DEFINED CONTRIBUTION PLAN (401k)????

I've heard rumors of this but haven't seen how it is going to be implemented.

Anyone know any details on the PENSION changes?
Is it changing!??

Jet

Those employees that cannot retire and stay with the company would find themselves with reduced pension benefits since the existing pension would be retired, and a 401k would be substituted. In other words the DBP would be frozen, and a DCP(401k) would be picked up thereafter. So, the frozen DBP obligations must still be paid and thus are a heavy obligation for DL. This is only a guess on my part, so any DL people could explain it more thoroughly.

 

[General Lee]

The pension deal is a problem, but it really isn't just the pilot's plan, it is the whole plan. The problem here is "if they do it, we should do it" mentality----if United terminates their pension plan, Grinstein says he may try to do the same to "stay competitive". I think that would have to take a Chap 11 filing to do it and try to distress terminate it, because no employee group would voluntarily do it. But, I don't think they would ruin the stock to do it, thanks to fiduciary responsibility. So, the pension plan is up in the air......


Other than that, I think we pilots have given them a great savings plan---$1 billion a year for 5 years minimum, and then tack on 2 more years to negotiate a new contract, and they have saved $7 billion in 7 years. Then add the non-union and management give backs, and they have a savings plan. If oil goes down below $40 for a long time, I think we have a pretty good shot to be competitive. Our INTL flights will always be profitable, and we then will have to work on the domestic side, and I wouldn't be surprised if we saw more of Song, since people really do like fun stews and Direct TV which is live.

To top it off, we also have to have some help from the creditors side, and that would really help turn this boat around. Our short term debt commitments are the large patches of turbulence in our immediate future. If we could get extensions on when we have to pay that back, it would help out a lot. Also, we need some breaks from our vendors, and I think that has been accomplished somewhat. Anything right now helps.

Also, we hopefully won't have any terrorist bumps upcoming. Anything that scares away passengers will kill this industry. If oil hits higher than $55 a barrel again, that will kill off a few of us. And, I would expect some mergers coming up. I have heard a bunch of suggestions, but with all of the debt laying around right now, that may prevent mergers for a year or two.

As far as future growth, I don't see us backing down since we now have our costs in line, and I see our 737-200s being replaced gradually by 737-700s. Apparently Boeing and Delta have been talking, but you can also add Embraer and the EMB-190 also being looked at. I am sure there would have to be some sort of deals made, since we don't have the cash to put a lot down right now for new birds. (except for new CR7s?) (They are self financing.....oh.... right!)


Bye Bye--General Lee