Lowecur, I appreciate what you are saying, but don't get me wrong, I don't think the current situation is great, but I don't think it is as much doom and gloom as some would have us believe. We have a pretty sharp economic financial analysis team watching all these developments and there is no need to panic and give away the store.
As far as DAL increasing domestic capacity 8-10% (international capacity I believe will increase 13%) next year, I think much of that will probably be done by increasing the gauge on certain routes. IOW, replacing an 88 with a 757, or an RJ with an 88. By increasing the gauge they might get away with not recalling some of the furloughed pilots, since it takes just as many pilots to fly a 767 as it does to fly an 88. The increased gauge raises the segment cost of the flight but it decreases the CASM. DAL expects to realize a savings in the cost of operations (CASM) of approximately 5% by the end of 2004 with the increase in capacity. With a $14B annual operating cost, a 5% savings could equal $700M in savings, which is roughly equal to our losses of this year, losses which included approximately $1.4B in depreciation and asset writedowns. I believe our EBITDA will come out to over $800M in 2003.
Just for the record, when our contract becomes amendable on May 1, 2005, barring any mid contract agreement, it will not expire. Under the Railway Labor Act, our contract can only becomes amendable on that date and it will remain in place until we either reach and ratify a new PWA, or we are released for self help by the National Mediation Board. Under the RLA airline contracts can easily take two or more years to negotiate. Lately, it's taken longer.
Thanks for the good wishes.
As far as DAL increasing domestic capacity 8-10% (international capacity I believe will increase 13%) next year, I think much of that will probably be done by increasing the gauge on certain routes. IOW, replacing an 88 with a 757, or an RJ with an 88. By increasing the gauge they might get away with not recalling some of the furloughed pilots, since it takes just as many pilots to fly a 767 as it does to fly an 88. The increased gauge raises the segment cost of the flight but it decreases the CASM. DAL expects to realize a savings in the cost of operations (CASM) of approximately 5% by the end of 2004 with the increase in capacity. With a $14B annual operating cost, a 5% savings could equal $700M in savings, which is roughly equal to our losses of this year, losses which included approximately $1.4B in depreciation and asset writedowns. I believe our EBITDA will come out to over $800M in 2003.
Just for the record, when our contract becomes amendable on May 1, 2005, barring any mid contract agreement, it will not expire. Under the Railway Labor Act, our contract can only becomes amendable on that date and it will remain in place until we either reach and ratify a new PWA, or we are released for self help by the National Mediation Board. Under the RLA airline contracts can easily take two or more years to negotiate. Lately, it's taken longer.
Thanks for the good wishes.
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