Delta reports 4Q loss

[General Lee]

Continued...

Fuel Hedging
During the December 2007 quarter, Delta hedged 21% of its fuel consumption, resulting in an average fuel price of $2.61 per gallon. Delta realized approximately $40 million in cash gains on fuel hedge contracts settled during the quarter.
As of Jan. 22, 2008, Delta has the following fuel hedges in place for estimated 2008 consumption: Jet Fuel Percent Equivalent Hedged Cap ------------------------- Q1 2008 26% $2.77 Q2 2008 31% $2.72 Q3 2008 15% $2.70 Q4 2008 10% $2.69

2007 Highlights

In 2007, Delta continued the positive momentum in its business, demonstrating its ongoing commitment to providing the best products and services to its customers while creating value for shareholders. Highlights include, Delta: * Successfully emerged from bankruptcy on April 30, positioning itself to compete aggressively with a best-in-class cost structure and balance sheet, a diversified global network, a renewed focus on the customer experience, and a dedicated and committed workforce; * Invested significantly in Delta people worldwide through a comprehensive compensation program, including a stock distribution and cash lump sum payment to employees upon emergence from bankruptcy, an increase in base pay, an enhanced annual profit sharing program, a monthly Shared Rewards program, and a new defined contribution benefit; * Earned, for the second consecutive year, a ranking in the top two among network carriers in the JD Power Customer Satisfaction Survey; * Signed a joint venture agreement with Air France, to be implemented in April 2008, to share revenues and costs on certain trans-Atlantic routes, expanding the existing partnership that has resulted in new routes and choices to customers on both sides of the Atlantic since its inception. As part of this agreement, Delta customers will the have option of four daily Heathrow flights beginning March 30, 2008: twice daily from New York-JFK, and once daily from Atlanta, operated by Delta; and once daily from Los Angeles, operated by Air France; * Won the rights to offer nonstop flights between the world's largest airline hub in Atlanta and Shanghai, China, effective March 30, 2008, filling a critical void in air travel by providing 65 million residents of the Southeast direct access to the world's fastest growing economy; * Completed the conversion of 11 B767-400 aircraft from domestic to international service, with three remaining B767-400 aircraft to be converted by spring 2008. These aircraft support Delta's international expansion strategy. In 2007, Delta launched 16 new international routes, including service from Atlanta to Dubai, Lagos, Prague, Seoul, and Vienna and from New York-JFK to Bucharest and Pisa; * Confirmed orders for a total of eight B777-LR aircraft, and announced the planned installation of winglets on more than 60 B737-NG, B757-200 and B767-300ER aircraft over the next two years; added more two-class regional jets featuring first class cabins; and introduced into trans-Atlantic service Delta's first long-range B757-200 aircraft featuring on-demand digital entertainment in every seat; * Invested in facilities and on-board products to improve the customer's travel experience including a redesigned, state-of-the-art lobby at Hartsfield-Jackson Atlanta International Airport, a dedicated premium customer check-in facility at Terminal 2 at New York-JFK, and enhanced food offerings with new domestic First Class and international BusinessElite(r) entrees from Chef Michelle Bernstein and new food-for-sale options from Chef Todd English in U.S. Coach Class.
Emergence Related Items For the December 2007 quarter, emergence related items resulted in a $65 million increase to pre-tax income. Fresh start reporting increased pre-tax income by $94 million, and share-based compensation expense for emergence equity awards decreased pre-tax income by $29 million. In total, emergence related items increased consolidated PRASM by 0.15 cents and increased mainline non-fuel CASM by 0.14 cents.


Bye Bye--General Lee

 

[John Pennekamp]

Have not heard a word from D-ALPA on the subject. But it is pretty common knowledge that many 40 & 50 seat operations are not profitable and you have been seeing those go away. There will always be a place for the RJ, but fuel makes a small jet an expensive operation that only works if really good revenue can be pulled out of those seat miles.
Delta has every right to micro manage its' brand. It is Delta's money. I'm surprised Delta does not clamp down further to bring its' contractors' operations in line with the rest of the company.

You go to Chick Fil A, or Wendy's, your product is predictably good. Even though the store might be owned an operated by Mohammed the Rug Merchant of Tehran the careful supervision, supply chain and procedures are carefully managed by the brand. When it comes to outsourcing, no one has anything on Mickey D's.

If anything, the airlines have not reaped much benefit from outsourcing. The "profit plus" contracts place the risk on the branded mainline carrier and there is not sufficient incentive for the contractor to take care of customers, or operate efficiently.

Unfortunately, we do not have franchise agreements which serve the same customers. We have outsourcing to the lowest cost provider, largely as an end run around organized labor.
I'm not sure, but rumors are that Delta called SkyWest and told them to fix the problem. At least that is how it worked in 99.
I've observed the complete opposite. Pretty amazing when you consider how much many of these people gave up in pay and benefits.

I think a lot has to do with attitude. When someone comes up asking "hey, why you running the APU? What do you need?" realize that they are trying to help, trying to save the Company a buck and doing their job. ... that's a good thing, not overbearing.... We all should want mother Delta to make a profit, puts food on the table.

Heck, it is better than flying for Northwest - oh - nevermind.....

I's just amazing how different the view is from Concourse A behind a Double Breasted Jasket. The view from the trenches on Concourse D is very different. Guess we'll have to agree to disagree.

 

[General Lee]

That's rich. Delta NEEDED the loss for a merger. Nicely done sir. I was wondering how we can make a loss look good. I hope you guys don't "need" more losses, because the Ch 11 rules have changed and it's not exactly the good deal it once was. I am sure that you company welcomed the loss in some respect. It allowed them to stick you with another pay cut (1.5% "raise" vs 4.4% inflation).

I can't wait to see what the 1st quarter will bring.

You think I came up with that idea? Are you saying managements do not throw numbers out there for their own reasons? Your management (the Gov't) does it all of the time, but you can't see it! You must be watching a lot of FOX NEWS while at your desk.

And, since you are new to Airlines and this industry (you may never get into this industry anyway), certain quarters are more profitable than others. Please look at the Delta numbers for 2007 (I just posted them), and you will get a better understanding. There is SOOOOO much for you to learn....

Bye Bye--General Lee

 

[Tanker Clown]

A combined airline (DL and NWA), according to Goldman Sachs, would produce an annual savings of $890 million, and extra INTL routes would add a lot of extra revenue that is free from our Recession here. We have to ask for part of that, and we will. For the year of 2007, we actually did fairly well. Here are the numbers.


Apparently, for 2007, you didn't do well enough. You only got 1.5% of a "raise" and lost $70 million dollars for the quarter.

 

[Tanker Clown]

You think I came up with that idea? Are you saying managements do not throw numbers out there for their own reasons? Your management (the Gov't) does it all of the time, but you can't see it! You must be watching a lot of FOX NEWS while at your desk.

And, since you are new to Airlines and this industry (you may never get into this industry anyway), certain quarters are more profitable than others. Please look at the Delta numbers for 2007 (I just posted them), and you will get a better understanding. There is SOOOOO much for you to learn....

Bye Bye--General Lee

I guess Southwest took this quarter off. They seemed to not lose $70 million. CAL must have not participated in the 4th quarter either.

My "guess" to your quarterly loss is this: You guys don't have a strong business model like CAL, your costs are too high, and your scratching at a merger to bail yourselves out. But that's just a guess. I tend to think that companies try to make money.

 

[jke406]

A combined airline (DL and NWA), according to Goldman Sachs, would produce an annual savings of $890 million, and extra INTL routes would add a lot of extra revenue that is free from our Recession here. We have to ask for part of that, and we will. For the year of 2007, we actually did fairly well. Here are the numbers.


Apparently, for 2007, you didn't do well enough. You only got 1.5% of a "raise" and lost $70 million dollars for the quarter.

I hate to admit it, but I might actually agree with the gayest military pilot ever, Tanker Clown.

How can a pay adjustment that doesn't even cover cost of living increases be considered a "raise?"

it's really just less of an a$$ pounding.

 

[800Dog]

I guess Southwest took this quarter off. They seemed to not lose $70 million. CAL must have not participated in the 4th quarter either.

My "guess" to your quarterly loss is this: You guys don't have a strong business model like CAL, your costs are too high, and your scratching at a merger to bail yourselves out. But that's just a guess. I tend to think that companies try to make money.

Delta's costs are too high. The business model is not very strong. Why? My opinion is an overreliance on rjs. They have a high casm and the cos. that operate them provide a very poor product. No consistency to the Delta product. I place the blame on management and those who have continually voted in favor of relaxing scope as they have enabled managements poor decisions.

 

[General Lee]

Delta's costs are too high. The business model is not very strong. Why? My opinion is an overreliance on rjs. They have a high casm and the cos. that operate them provide a very poor product. No consistency to the Delta product. I place the blame on management and those who have continually voted in favor of relaxing scope as they have enabled managements poor decisions.

You bet, we have too many RJs. No doubt there. But we are parking some, and a possible merger with NWA will get rid of a lot more in CVG. We have 56 daily mainline flights in CVG, vs Comair's 200+. Let's see how Lee Moak handles any future negotiations regarding scope. I would hope he and management have learned something with RJs and higher fuel.

Bye Bye--General Lee

 

[General Lee]

I hate to admit it, but I might actually agree with the gayest military pilot ever, Tanker Clown.

How can a pay adjustment that doesn't even cover cost of living increases be considered a "raise?"

it's really just less of an a$$ pounding.

You and tanky agreeing? Next you will go to the prom together and hold hands after the dance.

Remember, we went to BK, and lost a total of 47% of our old pay scale. It is hard to cover COLA when that happens. We are aiming for more pay in the future, and if this merger is attempted, then we will ask for more, and it is likely we will get a raise. How much? Good question.

Bye Bye--General Lee

 

[On Your Six]

You bet, we have too many RJs. No doubt there. But we are parking some, and a possible merger with NWA will get rid of a lot more in CVG. We have 56 daily mainline flights in CVG, vs Comair's 200+. Let's see how Lee Moak handles any future negotiations regarding scope. I would hope he and management have learned something with RJs and higher fuel.

Bye Bye--General Lee

50-seaters are an anachronism in this age of high oil prices. 70+ seat jets or props (Q400) are the only way to go unless you have longer/thinner routes with virtually no competition so that you can preserve your margin. Otherwise, 50 seaters just won't cut it. I agree, time for Delta to cut more dead weight 50-seat RJs...

I don't know how regionals like Eagle and Comair do it here in the Northeast on competitive routes (BOS-LGA or LGA-DCA) with their E135s and CRJ-200s. Or Eagle ERJs out in SoCal competing against Southwest and UAL. Their load factors have got to be very high for every flight to break even... Feed is important, but you need profitable feed to survive.

 

[General Lee]

I guess Southwest took this quarter off. They seemed to not lose $70 million. CAL must have not participated in the 4th quarter either.

My "guess" to your quarterly loss is this: You guys don't have a strong business model like CAL, your costs are too high, and your scratching at a merger to bail yourselves out. But that's just a guess. I tend to think that companies try to make money.

I don't think Southwest could lose $70 million in a quarter if they tried. (too bad they won't hire you) CAL also did well. This is not a conspircay theory but, anyone actively persuing a potential merger seemed to have a loss thanks to gas. CAL never said it wanted to merge with anyone, unless they HAD to. Southwest has now said the same. Everyone else wants to merge now.

As far as how a merger would affect us---the right one will keep us in the game for the long run. A good fit will make us a formitable competitior to anyone in the World--offering Asia, Europe, North America, South America, and Africa. That seems to be the idea, anyway, and it could become a great thing. Competing on global scale will produce more profits than being a domestic only carrier. No doubt there.

And can you please read the 2007 report for Delta. You may learn something.


Bye Bye--General Lee

 

[John Pennekamp]

50-seaters are an anachronism in this age of high oil prices. 70+ seat jets or props (Q400) are the only way to go unless you have longer/thinner routes with virtually no competition so that you can preserve your margin. Otherwise, 50 seaters just won't cut it. I agree, time for Delta to cut more dead weight 50-seat RJs...

Why do you mention the Q400? If your theory is correct, you would want the more efficient airplanes. The Q400 burns 75% the fuel of a CRJ-200 on a given route. The ATR-72 burns about 25%.

 

[~~~^~~~]

General: Listen to the conference call before making any more "RJ getting parked" predictions.... pick up the recording around 38:30

 

[737 Pylt]

Why do you mention the Q400? If your theory is correct, you would want the more efficient airplanes. The Q400 burns 75% the fuel of a CRJ-200 on a given route. The ATR-72 burns about 25%.

Just wondering.....
Who wants the ATR parked? Sky or DAL?
It would seem that the ATR is weight restricted a lot less then the rj is!?

737

 

[On Your Six]

Why do you mention the Q400? If your theory is correct, you would want the more efficient airplanes. The Q400 burns 75% the fuel of a CRJ-200 on a given route. The ATR-72 burns about 25%.

Fair enough, the lastest versions of the ATR-72 would work too. I would look at acquisition cost as well - which manufacturer (ATR or Bombardier) could provide the best volume-discount deal. We always forget the financing cost in the equation vs. operating cost.