Delta Loses 1.1 Billion This Quarter

[WWEfan]

Another record loss. WTF? Everyone takes concessions and the hole gets deeper. This can't be all about the fuel either. Raise the **CENSORED****CENSORED****CENSORED****CENSORED**ing ticket prices already!!!

 

[sleepy]

Don't worry, the General will be here soon to explain how they are really making money on Song. It's all of those RJ's at ASA and Comair that caused this loss.

 

[Heavy Set]

Another record loss. WTF? Everyone takes concessions and the hole gets deeper. This can't be all about the fuel either. Raise the **CENSORED****CENSORED****CENSORED****CENSORED**ing ticket prices already!!!

I haven't seen the official number, but I know that a large chunk was a "write off" of an extraordinary item (restructuring related). This is a non-cash item (paper loss). Like everyone else, Delta is bleeding with the high gas prices - but every airline is impacted (including SWA to some degree). It is also good to remember that many of Delta's restructuring items from the end of last year are slowly going into affect and are not reflected in these numbers. Regardless, these number are pretty scary but don't tell the full story...

 

[~~~^~~~]

An operational loss of 680 million is not sustainable for long. Right now Delta is spending $1.34 for every $1.00 in revenue coming in the door. Delta has 1.8 billion in cash remaining.

Hopefully spring and summer bookings will remain strong and we can get a little cash positive. The increasing losses, not counting fuel and unusual charges is alarming.

My crystal ball is getting clearer :
1> Another round of mainline negotiations is coming
2> Comair will end up with 90 to 110 seat RJ's, then make a commitment for the Embraer, or perhaps the Airbus, product
3> The "Blended" seniority list idea may be floated by ALPA with more determination this time around
4> Delta will desperately want to raise cash by selling anything, but this is a buyer's market and there may be no buyers for small jet operators who feed 85% of their passengers to Delta.

 

[Heavy Set]

An operational loss of 680 million is not sustainable for long. Right now Delta is spending $1.34 for every $1.00 in revenue coming in the door. Delta has 1.8 billion in cash remaining.

Hopefully spring and summer bookings will remain strong and we can get a little cash positive. The increasing losses, not counting fuel and unusual charges is alarming.

My crystal ball is getting clearer :
1> Another round of mainline negotiations is coming
2> Comair will end up with 90 to 110 seat RJ's, then make a commitment for the Embraer, or perhaps the Airbus, product
3> The "Blended" seniority list idea may be floated by ALPA with more determination this time around
4> Delta will desperately want to raise cash by selling anything, but this is a buyer's market and there may be no buyers for small jet operators who feed 85% of their passengers to Delta.

My crystal ball is also getting clearer:

1. ASA (and potentially Comair) will be sold off to Skywest or Wexford or another with a revenue or %-of-feeder flying guarantee over a 5-10 year term. The acquisition value will be based on the net present value of the 5-10 year contract and it will free up considerable cash for Delta and yet retain the same operational benefits

2. All DAL employees will be subjected to further wage cuts - including regional employees (so long as they are members of the Delta "family")

3. Mainline Delta pilots will agree to 90-110 seat rates and the E190 will be ordered to complement the eventual Comair E170s (shared training and maintenance, etc.)

4. McKinsey, PwC and other consultants will be paid a TON OF CASH to correct (if they can) the mistakes made by DAL's own Harvard MBAs

5. Long, long term (if Delta survives the liquidity crunch and escalating fuel costs), Delta will reduce fleet types to three - 737NG (700, 800, 900), 777 and 787

Although, at this point, who knows what the industry will look like going forward. Just guessing...

 

[michael707767]

3. Mainline Delta pilots will agree to 90-110 seat rates and the E190 will be ordered to complement the eventual Comair E170s (shared training and maintenance, etc.)

I tend to agree with him. The Delta pilots would probably cave on really low pay rates for the E-190 before the allow them to be outsourced.

 

[Flechas]

I have an idea, Simplifares!!!

 

[TooBad]

Another record loss. WTF? Everyone takes concessions and the hole gets deeper. This can't be all about the fuel either. Raise the **CENSORED****CENSORED****CENSORED****CENSORED**ing ticket prices already!!!

Where do I apply for the CEO job? I know I can do as good as that. Is the application on the Web Site?

 

[Heavy Set]

I tend to agree with him. The Delta pilots would probably cave on really low pay rates for the E-190 before the allow them to be outsourced.

From what I hear from Delta buddies, there is NO WAY they would give up that flying. Look, they already fly the 737-200 - although those rates will likely be pared a bit I would guess. But I am sure that from an operating cost basis (excluding financing costs), the E190 would outperform the gas guzzling 737-200. Let's hope that Delta does not pick up any CRJ-900s - those tubes are passenger unfriendly compared to the E170/190...

 

[DLslug]

Won't give up any more RJ's

Dear All:

Interesting comments by all...hard to say what is really happening now regardless of what we think will happen.

One thing I know, I will not give up any more flying regardless of the aircraft. I'm so tired of shrinking our flying to expand/outsource our job.

I would be happy to fly the E 170/190 or E whatever, just don't send it out (Sorry ASA/Comair/Chataqua), it is just going to require a living wage. Wages like JB is paying are a joke and really bring our industry down.

I'm not saying that to disrespect anyone, we all want to fly for a living, but to keep costs down with rediculous wages is a shame. Everyone in a airline cockpit deserves the pay of a professional.

Airline management are the one's that should be taking huge paycuts for the lousy job they are doing.

Keep the guessing coming, it makes for good reading.

All for now,

DLslug

 

[NTS ALL 4]

Dear All:

I would be happy to fly the E 170/190 or E whatever, just don't send it out (Sorry ASA/Comair/Chataqua), it is just going to require a living wage. Wages like JB is paying are a joke and really bring our industry down.

I'm not saying that to disrespect anyone, we all want to fly for a living, but to keep costs down with rediculous wages is a shame. Everyone in a airline cockpit deserves the pay of a professional.

Airline management are the one's that should be taking huge paycuts for the lousy job they are doing.

Keep the guessing coming, it makes for good reading.

All for now,

DLslug

Good luck, Slug. May the force be with you, because you must live in a different galaxy. All pilot pay rates are coming down. The last big major to continue the spiraling downward pilot pay, as someone just said, " I don't want to disrespect anyone", Slug, was Delta. I believe Delta management will set what they think will make the company money. I would expect it to be just above what ASA/CMR make for RJ flying. If DALPA doesn't like it, then ASA/CMR will likely get additional flying, thanks to DALPA.

"Keep the guessing coming, it makes for good reading." And keep the disrespecting coming for all us pilots. You know we just don't get enough of that good disrespecting, especially from Delta.

 

[FDJ2]

While a $1.1B loss in the first quarter is grim, we need to understand the amount of restructuring DAL accomplished in the last few months. According to Delta's CFO, DAL's 1Q results were apparently consistent with what management expected with $45/bbl fuel and better then could have been expected at our current record high fuel prices. Two points he emphasizes are that Delta mainline achieved a 12.7% fuel nuetralized cost reduction and Delta maintained its December 31st cash position of $1.8B in unrestricted cash. IMO, as long as DAL can maintain addequate liquidity as it completes it's transformation, DAL is on track to achieve an additional $2.7b in anualized savings this year, and fuel prices come down to a more rational level, DAL should be able to complete its transformation.


Excerpt from CFO memo to employees:

"even including fuel expense, our net loss excluding special items was very close to our expectations and excluding fuel expense and special items, our results were better than expected.
During the March 2005 quarter, we launched SimpliFares, dehubbed our Dallas/Ft. Worth operations, implemented Operation Clockwork, completed our Corporate Overhead Review, and announced plans to outsource certain human resources, payroll and heavy maintenance functions. Including these accomplishments, as of the end of the March 2005 quarter, we had implemented initiatives intended to achieve over 80 percent of our transformation plan targets. Additionally, we expect to implement actions by the end of September 2005 to realize materially all of our targeted benefits.

The progress we have made in implementing our transformation plan is clearly demonstrated by the 12.7 percent year over year reduction in mainline unit costs, excluding fuel expense and special items, reported in today's press release. We also maintained our cash position since December 31, ending the quarter with $1.8 billion in unrestricted cash and cash equivalents and short-term investments."

 

[DLslug]

NTS:

What, talk about disrespecting.

All our jobs are being destroyed by poor management, not exorbidant pay rates.

If you think the cost per seat mile is greatly affected by $20 or $40/hour, do some budgeting for an aircraft. The problem is a poor business plan that is poorly executed.

Come on, I don't know where you are at, but I'm tired of watching my job sold down the river because of management mistakes.

I agree, we are all being disrespected by Delta.

All for now,

DLslug

 

[On Your Six]

While a $1.1B loss in the first quarter is grim, we need to understand the amount of restructuring DAL accomplished in the last few months. According to Delta's CFO, DAL's 1Q results were apparently consistent with what management expected with $45/bbl fuel and better then could have been expected at our current record high fuel prices. Two points he emphasizes are that Delta mainline achieved a 12.7% fuel nuetralized cost reduction and Delta maintained its December 31st cash position of $1.8B in unrestricted cash. IMO, as long as DAL can maintain addequate liquidity as it completes it's transformation, DAL is on track to achieve an additional $2.7b in anualized savings this year, and fuel prices come down to a more rational level, DAL should be able to complete its transformation.


Excerpt from CFO memo to employees:

"even including fuel expense, our net loss excluding special items was very close to our expectations and excluding fuel expense and special items, our results were better than expected.
During the March 2005 quarter, we launched SimpliFares, dehubbed our Dallas/Ft. Worth operations, implemented Operation Clockwork, completed our Corporate Overhead Review, and announced plans to outsource certain human resources, payroll and heavy maintenance functions. Including these accomplishments, as of the end of the March 2005 quarter, we had implemented initiatives intended to achieve over 80 percent of our transformation plan targets. Additionally, we expect to implement actions by the end of September 2005 to realize materially all of our targeted benefits.

The progress we have made in implementing our transformation plan is clearly demonstrated by the 12.7 percent year over year reduction in mainline unit costs, excluding fuel expense and special items, reported in today's press release. We also maintained our cash position since December 31, ending the quarter with $1.8 billion in unrestricted cash and cash equivalents and short-term investments."

FDJ2,

I thought you'd know by now that nobody highlights positives anymore. It's always the gloom and doom - and they play right in the hands of management...

 

[MedFlyer]

While I would agree that the 90-110 seater should be flown by mainline, I wouldn't be surprised if it ends up at the regionals. Imagine if management comes to the table and offers these two options:

1) We'll buy you a few extra 777's (or 7E7's) and give all DL pilots a 10% raise, in return the E190 goes to a regional.

OR

2) The E190 goes to mainline, but everyone has to take an additional paycut of 10%.

I have a feeling a lot of mainline pilots would chose number 1. Of course, there is a third option. No E190, no 777 and DL mainline just stagnates (or shrinks). Right now, this seems to be the path DL is currently headed down.

 

[sleepy]

"I'm not saying that to disrespect anyone, we all want to fly for a living, but to keep costs down with rediculous wages is a shame. Everyone in a airline cockpit deserves the pay of a professional."

I am sorry DLslug, but I do believe that pilots in the airline industry are getting what they deserve. I am not being mean, it is just a fact that when airlines are losing money (be it from high fuel prices, poor management, high labour costs, or an out-dated business model, or a combination of all), they have to cut costs to remain in the marketplace. You can blame it on your lower cost competition, but in reality you should blame it on a flying public that want's to pay the lowest amount possible for an airline ticket.

At some point pilot wages may get so low that individual pilots will make the decision to leave the industry for better paying jobs, or to not become pilots at all. But I take issue with this idea that JB or Airtran pilots are that poorly paid. Go look at what many people in other professions make; teachers, law enforcement, military officers, nurses, etc.... There are plenty of people out there who spend an entire career working and never come close to making over $100K per year, while you can make that after only a few years at JB or AirTran.

Oh, and DAL has just borrowed the last $250 million that they can easily get. I just don't see how they will be able to stay in businees without drastic new cost cutting measures.

P.S. The General's wife tells me that he will be back from his trip in a few days.

 

[~~~^~~~]

My crystal ball is also getting clearer:

1. ASA (and potentially Comair) will be sold off ....

2. All DAL employees will be subjected to further wage cuts - including regional employees ....

3. Mainline Delta pilots will agree to 90-110 seat rates and the E190 will be ordered to complement the eventual Comair E170s (shared training and maintenance, etc.)

4. McKinsey, PwC and other consultants will be paid a TON OF CASH to correct (if they can) the mistakes made by DAL's own Harvard MBAs

5. Long, long term (if Delta survives the liquidity crunch and escalating fuel costs), Delta will reduce fleet types to three - 737NG (700, 800, 900), 777 and 787

Although, at this point, who knows what the industry will look like going forward. Just guessing...

1> We can hope, but the fire sale might not raise enough cash to even fund a month of Delta's current losses. Delta has been burning through the furniture in the winter, now they are eating their seed corn. More likely is some sort of a Delta buy out. Anyone want to start the Continental rumor again?

2> I agree

3> ALPA & the Delta MEC does not have a good track record on effective scope. How do we expect them to get it right this time around?

ALPA National is already hedging their bets, saying the 90 - 100 seaters will not be flown by regionals, unless the Courts force the issue.

4> We already had McKenzie & Co. leadership. Where do you think Mullin came from? If McKenzie comes back to Delta ( the first time they were retained by Ron Allen ) this Company is truly had it. Just look at United.

5> Delta needs those airplanes - lets hope they can get them. A 20% reduction in operating costs would be most welcome and will be a requirement as Continental and other competitors re-fleet. Delta needs fewer 50 seaters, no 40 seaters and a bunch of 100 seat aircraft.

 

[DLslug]

Sleepy:

Good point..when I think about it. When you can go to Wal-Mart and buy a DVD player for $89 or buy a ticket across the country, it doesn't make sense. People are just paying too low of prices for too many seats.

By the way though, this job should pay better than most...I don't know many teachers or other professionals that can kill themselves and 200 others all at once if they have a bad day.

I am not blaming anything on the LLC's, they are just filling a need and doing a hell of a job at it.

All for now,

DLslug

 

[skykid]

At some point pilot wages may get so low that individual pilots will make the decision to leave the industry for better paying jobs, or to not become pilots at all. But I take issue with this idea that JB or Airtran pilots are that poorly paid. Go look at what many people in other professions make; teachers, law enforcement, military officers, nurses, etc.... There are plenty of people out there who spend an entire career working and never come close to making over $100K per year, while you can make that after only a few years at JB or AirTran.

Take it a step further - the median income in the US is in the $40K range at least according to one source I just read. I'm sure $80K sounds like a great deal of money to a lot of people. Why would VirginUS or whoever else is next pay more than that for a Captain? I'm not saying start at $80K, people will start in the left seat for half that, max out at $80K. Compared to most jobs, that's a lot of money.

 

[sleepy]

Sleepy:

Good point..when I think about it. When you can go to Wal-Mart and buy a DVD player for $89 or buy a ticket across the country, it doesn't make sense. People are just paying too low of prices for too many seats.

By the way though, this job should pay better than most...I don't know many teachers or other professionals that can kill themselves and 200 others all at once if they have a bad day.

I am not blaming anything on the LLC's, they are just filling a need and doing a hell of a job at it.

All for now,

DLslug

Slug, I often think about all of the fire fighters and law enforcement professionals who's salary would make a regional FO's look over-paid. While very few airline pilots actually give their lives in the line of duty, many of these people are killed or injured every day just doing their low paying jobs. And it is criminal what our military pays a Lance Corporal in the USMC to risk his life fighting for our country in Iraq. It kind of makes an airline pilot complaining about making $100K per year (with 18 days off to boot) seem kind of silly doesn't it?

I wish we could all be paid what we deserve, and I am not advocating paying anyone less. It is just that no business can survive if it pays more than the market demands. We are all being squeezed, and I fear that it will only get worse when the Bush Recession arrives later this year.