Delta on the hook for 275 million

[bike100k]

I just received my Delta Stockholder 2004 summary in the mail (yes, I do own some Delta stock) and was skimming through some of the notes. One item that cuaght my eye was on page 42. Did you know that while code sharing with FLYi (ACA) pre Novemeber 2004 that Delta would become the lease holder for 30 DO-328 jets if the code share was terminiated? According to the summary:

"Flyi exercised its right to require us to assume the leases on the 30 Fairchild Dornier FRJ-328 regional jet aircraft that it operated for us. We estimate that the total remaining lease payments on these 30 aircraft leases will be approximately 275 million. These lease payments will be made over the reamining terms of the aircraft leases, which are approximately 13 years. As of March 1, 2005 the purchase price for each aircraft was approximately 9 million which we estimate exceeds the current market value
by 3 million dollars"

 

[skykid]

More pressing than that, here's an excerpt from an AP article:

Looking ahead, Delta has significant financial obligations this year, according to regulatory filings. These include $1.1 billion in operating lease payments, $1 billion in interest payments, $835 million in maturing debt that must be repaid and $450 million in pension funding requirements.

Delta borrowed over 1 billion from American Express and GE in last year's 4th qtr and this year already, according to the same article. This will make a Ch11 filing tough. I'm hoping the price of jet fuel will drop significantly, like in half, that's what it's going to take. Even a liquidation of U, in my opinion, will provide only very temporary relief. Hope it turns around.

 

[michael707767]

"Flyi exercised its right to require us to assume the leases on the 30 Fairchild Dornier FRJ-328 regional jet aircraft that it operated for us. We estimate that the total remaining lease payments on these 30 aircraft leases will be approximately 275 million.

Hmm, lets see. Delta has to assume the leases on 30 aircraft. They also have roughly 600 furloughed pilots who need jobs. Wow, seems to me there is a solution here somewhere.

 

[PHXFLYR]

Do you really think they would fly those a/c at the going rates

required to operate them profitably? Out of 1800 USAir furloughees only 400 took positions at J4J regional carriers.


PHXFLYR

 

[michael707767]

Do you really think they would fly those a/c at the going rates

required to operate them profitably? Out of 1800 USAir furloughees only 400 took positions at J4J regional carriers.


PHXFLYR

I do, yes. And if our furloughed guys don't want it, then I would fly em with new guys. But I would try something, anything, rather than let them sit there doing nothing while I pay millions for them.

Of the 1800 USAir furloughs, how many have actually been offered J4J positions? All 1800?

 

[BLUE BAYOU]

Several remarkable things happen for FLYi, one of them was this transaction and also being able to get rid of 50 more RJs. These 30 328s I believe are destined for Skywest, aren't they?

 

[chperplt]

I read something recently that Delta was selling them (all or some) to a Chinese company.

 

[sleepy]

DAL will sell ASA and Comair for $270 million, then use the cash to pay the leases on the DO Jets, which they will park in the desert. That sounds about right for DAL management.

 

[MedFlyer]

I do, yes. And if our furloughed guys don't want it, then I would fly em with new guys. But I would try something, anything, rather than let them sit there doing nothing while I pay millions for them.

What if flying the planes meant losing even more money than just paying the leases? Given the high cost of fuel, the cost of training and maintenance, I'd imagine these planes would lose a boatload of money if they were operated by DL. Applying DL's bloated cost structure over such small planes would be a disaster....probably best to keep them grounded.

 

[blzr]

I do, yes. And if our furloughed guys don't want it, then I would fly em with new guys. But I would try something, anything, rather than let them sit there doing nothing while I pay millions for them.

Of the 1800 USAir furloughs, how many have actually been offered J4J positions? All 1800?

Yes, All 1800. Most of them twice. From what I understand, All the furloughees had to be given a chance to go to MDA or another J4J carrier before the jobs could go to any wholly owned pilot. A relatively small % of the furloughees accepted the offers.

 

[dtfl]

The reason a lot of furloughes, like myself (although Delta not USAIR) did nto take regional jobs is that we can makre MORE $$ in other jobs. I am doing PART TIME work in the reserve and making almost as much as I did on active duty but making my own schedule...for the most part. Now..if the war on terror ends...and....money runs out....and.... then I will go for a J4J deal. But...why?
I understand some folks don't have that option, but there are a lot of factors as to WHY folks did not take those jobs. Michael 706 and Medflyer do have valid points though - there are probably SOME at Delta that don't have other options like myself.

 

[zeroline]

328 flying for Skyway.......I hope

Unless Delta dives into CH11 or sell the leases, they are stuck with them. They have been dangling the rabbit in front of us here at Skyway for a year or so. They paid for all of the new Jet FO, CA upgrades' training. We are currently overstaffed by about twice of what we need on the 328's (we need 40 crews and have 80), and Delta is PAYING THE SALARIES of the 40 extra crews who have been sitting around. It has not been uncommon for guys/gals to get called in just to get there 3 T/O's and LNDG's. I just hope to hear something soon, good or bad.

Not that it means too much, but we have had a few furloughed Delta guys here who kept their number. One just got called back and the other I know of, got sick of the Beech and just left for a corprate gig.

 

[SWAPoolie]

I just received my Delta Stockholder 2004 summary in the mail (yes, I do own some Delta stock) and was skimming through some of the notes. One item that cuaght my eye was on page 42. Did you know that while code sharing with FLYi (ACA) pre Novemeber 2004 that Delta would become the lease holder for 30 DO-328 jets if the code share was terminiated? According to the summary:

"Flyi exercised its right to require us to assume the leases on the 30 Fairchild Dornier FRJ-328 regional jet aircraft that it operated for us. We estimate that the total remaining lease payments on these 30 aircraft leases will be approximately 275 million. These lease payments will be made over the reamining terms of the aircraft leases, which are approximately 13 years. As of March 1, 2005 the purchase price for each aircraft was approximately 9 million which we estimate exceeds the current market value
by 3 million dollars"

When Independence started and ACA ceased to exist Delta had a problem with us flying A319s and still working as Delta Connection. Therefore, since Delta was terminating the contract they are liable for the aircraft. I believe our execs found a home for them to help Delta out. Some went to China. Some were supposed to go to "Skyway" (whatever they are called now) but they weren't ready for them for some reason. I know the Delta execs sat on their hands on this because our guys kept trying to work things out back in March 04. When June started to roll around we just dumped them on Delta because they weren't returning our calls.

 

[ilinipilot]

Also, Delta is leery of operating the a/c bc they did not have much success when they were operated by ACA. I.E. Low dispatch reliability rates etc. (this is just what I heard from our CEO during one of his chats)

I do think DAL is handcuffed with these things, and they only way to get out of it is to file BK. I dont think they would file for 30 airplanes but who knows.

I think you have some other things playing out:
1. sale/loss of DAL connection fleets, then you can figure out what to do with other airframes and where to place them
2. with the summer coming up I would guess money is better but what will happen come the fall and winter, costs become more closely watched.
3. The additional 10 50 seaters to comair

If I was a DAL shareholder I would want to know with a company losing millions why are you paying money for a plane to sit there and do nothing, and paying another competitor for crews to doing nothing. I would guess its over a few million a month with lease costs and all.
I would rather have DAL sell them even if its for cheap, at least you are rid of them and take the loss.

Some ideas:
Why not use them on the shuttle routes?
Why not use them in DFW, or in SLC for high-alt cities like aspen, vail, etc.

D

 

[HowlinMadMurdoc]

Why not use them in DFW, or in SLC for high-alt cities like aspen, vail, etc.

Here's a couple of rumors floating around. Delta wants to use the DoJets out of SLC in place of Skywest Brazilia's. Also, there's talk of the DoJets going to DFW since Delta may have determined that pulling out of DFW wasn't such a good idea after all and they've already moved ASA to SLC.

Have no clue how true this stuff is...just passing it along for thought. Of course, it's a moot point if Delta files Ch11 BK.

HMM