Delta Future??--Crystal Ball Needed

[jetflyer]

I started a thread like this a year ago, asking about Delta's future. I asked what people thought Delta would look like 1, 3, and 5 years later.

Many people were right that Delta would avoid bankruptcy at the one year mark by getting paycuts from employees. Unfortunately almost EVERYONE said that after Delta got paycuts they would become stronger than ever and begin making profits again. One year later, I don't think anyone can argue that things are as scary as they've ever been for Delta.

Maybe all of our Crystal Balls were lying to us or maybe none of us are the NOSTRADAMUS we'd like to think we are.

Anyone want to try looking into the Crystal Ball again and make another prediction of Delta's future??
1)What will Delta look like 1,3, and 5 years in the future??
2)Also since I'm with Delta Connection, Comair, what will happen to Comair and ASA??


Any predictions, very positive or really grim, would be appreciated,
Jet

 

[michael707767]

Anyone want to try looking into the Crystal Ball again and make another prediction of Delta's future??
1)What will Delta look like 1,3, and 5 years in the future??
2)Also since I'm with Delta Connection, Comair, what will happen to Comair and ASA??


Any predictions, very positive or really grim, would be appreciated,
Jet

One year, mainline a bit smaller, ASA and/or CMR no longer wholly owned. Three to five years, merged with another carrier. My guess, either CAL or NWA. I think that will certainly mean some reductions on both ends to eliminate overlap and older aircraft.

 

[On Your Six]

Merged with NWA in a few years. Comair and ASA spun or sold off sooner than later.

 

[jetflyer]

One year, mainline a bit smaller, ASA and/or CMR no longer wholly owned. Three to five years, merged with another carrier. My guess, either CAL or NWA. I think that will certainly mean some reductions on both ends to eliminate overlap and older aircraft.

More paycuts first? Ch 11 before merger? What will happen to pensions? IPO or sale for ASA/Comair?

Slightly off topic, but with so much excess capacity in the airline market, even with the cost reductions from a merger, can a DAL/CAL or DAL/NWA make a profit?

Wouldn't CAL and NWA benefit more from letting DAL just go CH 7 one day, and let the market finally get rid of some of the excess capacity?

Jet

 

[Wheres the van?]

I think brass balls would fare better than crystal.

 

[General Lee]

This is classic, they don't want to give up control.

Delta eyes asset sales, sees fuel 'tipping point'
Fri May 13, 2005 10:43 AM ET
NEW YORK, May 13 (Reuters) - Delta Air Lines Inc. (DAL.N: Quote, Profile, Research) is eyeing asset sales and new ways of borrowing more money as it seeks to preserve cash, its chief financial officer said on Friday, as speculation about a bankruptcy dogs the airline.



"Delta is not failing to plan, and we are certainly not planning to fail," Michael Palumbo told an analyst conference. "We're looking at non-core assets and the overall efficiency of the leveraging of the collateral we have in place."

The No. 3 U.S. carrier is widely seen as the most likely to file for bankruptcy in an industry hurt by high fuel prices and competition from low-cost airlines, though it could sell assets including its Comair and Atlantic Southeast Airlines regional carriers.

Delta's shares were down 4 cents, or 1.4 percent, at $2.73 in morning trading on the New York Stock Exchange, just off all-time lows touched earlier this week. On Tuesday, the airline said it would not generate enough cash to meet its needs this year.

Brokerage Raymond James Friday cut its rating on shares in Delta regional partner Skywest Inc. (SWYW.O: Quote, Profile, Research) to "market perform" from "outperform," citing the increased risk of a Delta bankruptcy filing before the end of the year.

CFO Palumbo said Delta was striving to avoid bankruptcy by executing on a plan that aims for $5 billion in cost cuts and revenue enhancements by the end of next year, but did not rule out following rivals United Airlines Inc. (UALAQ.OB: Quote, Profile, Research) and US Airways Group Inc. (UAIRQ.OB: Quote, Profile, Research) into Chapter 11.

"We have a plan that is designed to be executed outside of the statutory process, and we are executing that plan," he said.

Commenting on the record fuel prices that have roiled the airline industry, Palumbo added that he believes there is a "tipping point" at about $45 a barrel, beyond which no airline including Delta could make money.

But Delta's business plan would allow it to eventually turn a profit at $40 to $45 a barrel, he said. U.S. crude oil futures on Friday fell 59 cents to just under $48 a barrel, a three-month low. Delta is not counting on lower fuel prices, though, and is "implementing plans to dig deeper" to find additional cost cuts, Palumbo said.


Bye Bye--General Lee

 

[Tomct]

I remember when the rumor was DL/CA merging. That was the reason for the similar paint jobs. However, Leo pissed off Bethune and put an end to the talks? Who knows!
ASA/COMAIR merged and spun off!
Delta smaller domestically and gain growth internationally.
I think that DL and CA would make the most sense. Their fleets are almost identical once DL loosed the Mad-dogs!
We shall soon see:]

 

[michael707767]

More paycuts first? Ch 11 before merger? What will happen to pensions? IPO or sale for ASA/Comair?

Slightly off topic, but with so much excess capacity in the airline market, even with the cost reductions from a merger, can a DAL/CAL or DAL/NWA make a profit?

Wouldn't CAL and NWA benefit more from letting DAL just go CH 7 one day, and let the market finally get rid of some of the excess capacity?

Jet

Jet,
here goes. Just my opinions. Yes, I would anticipate another pay cut first. CH11 before merger, yes, I would think so. Pensions.....I gave up on that already. Its gone and anyone who doesn't see it is kidding themselves. IPO or sale of CMR/ASA, 50-50, but I bet a sale to another regional.

Can a DAL/CAL or NWA make money? Who knows. I do tend to think a major needs to actually be bigger to make money vs smaller.

Benefit of letting DAL go CH7.....first no sure thing it will go CH7. I think more likely would wallow in CH11 for years like USAir and UAL. Add to that, if CAL or NWA would like to get DAL assets, there is no sure thing they would get them in a CH7 scenario, so more likely to get them before that happens. In CH7 you could see Branson come in and get them at firesale prices, for example.

Last but not least, excess capacity is a tricky thing. I mean, I read articles all the time where Airtran and Jetblue execs talk about excess capacity, yet they are the ones adding it, not the majors. And if DAL went under, do you think that capacity is gone forever, or will AT, JB, SW, etc, add it back....and more, before you can blink your eyes. And wouldn't CAL or NWA be better off getting that capacity for themselves vs letting the LCCs get that much bigger and control that much more of the market?

Last, I think the Bush administration has an agenda to lower labor costs in the airlines. If the majors were to fail and allow the remaining airlines to get stronger, labor would start to win back some of what they have given up. I think it more likely the goverment finds a way to let the majors keep operating weakly, further reducing labor costs and fares for the public, not to mention avoiding the political baggage of 65,000 people losing their job altogether.

Just some things to think about, I don't claim to have the answers, those are just my opinions and some things I have thought about.

 

[-9Capt]

I read articles all the time where Airtran and Jetblue execs talk about excess capacity, yet they are the ones adding it, not the majors. .

That is a true statement.

 

[Tim47SIP]

Who knows?

Same thing I said a year ago.

1) Delta will come back for more employee givebacks.
2) Delta files for CH11.
3) Delta liquidates the pension program and joins the rest of the industry.
4) Delta starts a slow reduction in the size of its fleet and continues to move to a 5000 pilot work force.
5) Delta expands DCI in the 70 seat and larger arena.
6) Delta will merge with NWA and Cont.

And something I did not say a year ago but I think will happen:
1) Delta tries to sell ASA and Comair.
2) ASA is sold to some S$it outfit while while Comair sits in the wind due to its militant work force. Comair will be the winners here.
3) I'll be on MLOA a little longer than I expected!

Man, I wish everyone luck! We will need it.

 

[On Your Six]

Same thing I said a year ago.

1) Delta will come back for more employee givebacks.
2) Delta files for CH11.
3) Delta liquidates the pension program and joins the rest of the industry.
4) Delta starts a slow reduction in the size of its fleet and continues to move to a 5000 pilot work force.
5) Delta expands DCI in the 70 seat and larger arena.
6) Delta will merge with NWA and Cont.

And something I did not say a year ago but I think will happen:
1) Delta tries to sell ASA and Comair.
2) ASA is sold to some S$it outfit while while Comair sits in the wind due to its militant work force. Comair will be the winners here.
3) I'll be on MLOA a little longer than I expected!

Man, I wish everyone luck! We will need it.

I doubt you will see many more furloughees because the pilot group is already quickly decreasing by the day with retirements - with a lot more expected in the coming months. DAL is short on pilots now due to retirements and resulting increased training needs (not enough sims to train the replacements).

 

[Tim47SIP]

Mr. Six!

Hey, I certainly hope my post did not imply that I was wishing for more furloughees. I fully agree that you will need to hire more guys (due to retirees and furloughees that have moved on, etc.), as a very good friend of mine has been called twice to go back. He is now leaving ASA and starting sim training. This must mean that the list is nearing its end with people still wanting to go back at this time. I am not sure if the list has been cycled once as I have not heard TK mention that he is back, so I am not sure why my friend was called twice. Once in Dec and the other just a few weeks ago. I will ask him what he is flying now and why two calls.My 5000 pilot remark is due to a conversation I had with an individual who works in marketing and planning at Delta two to three years ago. He stated that the overall plan was to reduce the size of Delta to 5000 pilots. I have also read this in a couple of aviation related news articles. That seems to be the number that the Delta financial planners seem to think is the best and has been moving in that direction.

 

[General Lee]

Yeah, I don't see any more furloughs, since we are losing a bunch (160 alone on May 1st) and we have more than 1000 still left over 50 that could leave with a lump sum. We had over 10,000 pilots pre-9-11, and now we have around 6800(?). That is a huge reduction in 4 years. Also, we may get rid of a few fleet types, but we are increasing productivity of the planes we have, and that can replace the planes that are leaving. But, never say never......



Bye Bye--General Lee

 

[michael707767]

Yeah, I don't see any more furloughs, since we are losing a bunch (160 alone on May 1st) and we have more than 1000 still left over 50 that could leave with a lump sum.

Spoke with a base Chief pilot the other day. He said they expect 20-30 a month to retire over the summer, then another big wave (100-200) in the early fall. Add that to the 158 that went May 1 and the 30 or so that went April 1. Maybe no more furloughs, but I would not expect the recall rate to increase unfortunately.

 

[General Lee]

Spoke with a base Chief pilot the other day. He said they expect 20-30 a month to retire over the summer, then another big wave (100-200) in the early fall. Add that to the 158 that went May 1 and the 30 or so that went April 1. Maybe no more furloughs, but I would not expect the recall rate to increase unfortunately.

Would it stop? I hope not.


Bye Bye--General Lee

 

[michael707767]

Would it stop? I hope not.


Bye Bye--General Lee

Gen,
I don't think the recalls will stop. But I think best case they stick to what they have already announced, maybe a few more. I honestly think they are trying to avoid a situation where they recall someone only the furlough them again a short time later.

 

[General Lee]

Gen,
I don't think the recalls will stop. But I think best case they stick to what they have already announced, maybe a few more. I honestly think they are trying to avoid a situation where they recall someone only the furlough them again a short time later.

That makes sense. Thanks.


Bye Bye--General Lee

 

[MedFlyer]

A lot depends on pension relief. So here's my two scenarios:

A) DL doesn't get major legislation to provide pension relief

1) DL will be forced to file CH11...can't fund 3 Billion.
2) DL will rapidly shrink dumping all remaining 732's, 733's and 762's over the course of a year.
3) Mainline furloughs would still be minimal as early retirements would accelerate....virtually every pilot over 50 would be gone.
4) ASA is sold off to someone to provide cash flow while DL sits in BK.
5) After two years of lingering in BK (and a lot of cost cutting/streamlining), DL is bought in a two-way bid by CO and NW. NW takes JFK, LGA, ATL (dumping MEM) and DL's MD88's as replacements for the DC9. CO takes CVG (reducing CLE to a focus city), BOS and SLC (giving CO a much needed Western presence), plus DL's 738's, 764's and 777's. Song is done away with as neither CO or NW have any interest in operating the failed carrier-within-a-carrier business model.

B) DL gets pension relief

1) DL stays out of CH11, but continues to struggle. Another round of furloughs for non-union staff and DL continues to outsource more. No paycuts, but major cuts to healthcare and other benefits.
2) ASA is sold off to provide cash flow
3) Mainline continues to shrink as 732's, 733's and 762's are retired. Mainline deliveries in '06 are deferred as are some '07 deliveries. However a small number of mainline deliveries occurs in 07's with more in '08-'09.
4) Recalls of mainline continue.
5) DL stays afloat, but profits are very small.
6) Economic recession in 09'-10' sends DL plunging into CH11 very quickly.
7) After lingering in BK for a while, DL is bought in a joint CO/NW bid (see above for the rest).

That's my guess...either way it's going to be a rough ride.

 

[jetflyer]

I agree with all of your posts. Nothing is looking rosy about Delta's future.

If you notice Grinstein keeps saying Delta can avoid Chapter 11 this year. He never mentions next year.

The only thing I could see keeping Delta out of Chapter 11 and all of the scenarios mentioned is oil prices plummeting to $30.00 a barrel. But with China and India growing like mad that would be hard to see happening.

GOOD NEWS FOR OIL PRICES THOUGH: The Strategic Petroleum Reserve should be completely filled by early July!!
That will surely bring down oil prices some FOR A SHORT WHILE, as this will increase global supplies by 1 million barrels a week.

Good luck and I hope not too many more of us lose our jobs in the coming future super storm at Delta and ASA/Comair,

Jet

 

[General Lee]

Medflyer,

Some of what you are guessing is far fetched in my opinion. If we don't get pension relief, we will probably go Chap 11, and the pensions will be gone (GG alluded to that in "In command" last week---he said to attract lenders). I am sure that would also allow some debt reduction, and lease reductions. As far as aircraft reduction, there could be some--probably some 732s and some 733s. The 762s will be the last to go probably. Also, Dalpa stated we still have over 1000 Captains over 50 that could take their lump sum, and I would suspect many would go that route. Some pay cuts would also come along, primarily from creditors asking for them.

If we do get pension relief, I think we may still go Chap 11 to get the debt problem reduced somewhat, and then a merger would ensue. Those debt payments are really high and it would be tough to make enough revenue to pay those off in this low fare environment. That is just a guess, though. Maybe GG and Palumbo have a plan that solves everything. They did say they "plan not to fail......."


Any guess on your future at Comair? I never see you guess about that. I have a guess though. If we merge with CAL, you guys will be squeezed out by Expressjet (unless they purchase you). If NW merges with us, Pinnacle and or Mesaba squeeze you out (unless they purchase you). Highly doubtful NW and CAL split us in half. Nah. What is your prediction about Comair?


Bye Bye--General Lee