Delta Rumor

[Meister Brau]

I received this email from a friend today. Is this just a rumor? Any Delta dudes know anything??

Maybe some of you can verify this, I just heard it from a friend last
> > night. He says that Delta will take up to 50 of their 757's and
> > make a "new" airline (probably like a Delta Lite), to compete with
> > Jet Blue. The only Delta employees that will be involved will
> > be the Pilots, as their scope clause prohibits Delta from operating
> > any jets without them with over 70 seats. The F/A's will be new
> > hires at a fraction of the pay of the current F/A's with little
> > or no benefits. Meanwhile, Delta is closing 5 F/A crew bases
> > and laying off about 2000 F/A's.

 

[dogg]

Might be the swift kick in the a!! that the Delta girls need next time they are up for a union vote. Just might be that good old uncle Leo ain't quite as friendly as he claims. It's just business you know!!!!

 

[dhampton]

I think this is the reason Delta was looking at National Airlines a couple of months ago.

 

[mach none]

I think this is the reason Delta was looking at National Airlines a couple of months ago.

I doubt that would have happened. Both are bleeding money and the last thing Delta needs to do is assume more debt by taking over National and all their problems.

Numerous airlines have already tried and failed at the shadow airline thing anyway. CAL Lite, UAL Shuttle, and DAL Express.

 

[General Lee]

Well, Delta is losing money, but they really aren't that worried about it yet. The have something like $7 Billion worth of assets they could sell if worse came to worse. And, remember---Sep and Oct are usually lite months when it comes to air travel anyways..(After Summer vacations over, before the holidays.....)

Delta hired some big wigs at a consulting firm to help them figure out a strategy. They figured that they could try to beat JetBlue and SouthWest at their own game. They plan to use single class
757's on point to point service (This is what i have heard anyway---it might not be exactly true) ---not through hubs. There will be a strong East Coast presence (JetBlue), and also coast to coast
like MCO---SNA or MCO to OAK. The 757's would have something like 198 seats, and they would charge the same as those guys, but they would make more money because they could spread the costs out with more seats. Also, they could offer a frequent flyer program that had more to offer than JetBlue's or Southwest's, and they would have new Flt Attendants (someone said they would start at $19K a year), and only 4 on each 757. (Not 5 like mainline). The pilots would be paid the same as mainline because the 757 pay in their current contract is still valid. The airline would be a new name (Like JetSun etc) on a new operating certificate. I don't know how many 757's, but I have heard between 30-50, taken from the mainline. Bases that I have heard were possibly LAS, NYC, and TPA. I don't think they would buy National airlines (Wrong type 757's---engines), but they might want their gates in LAS if they do go out of business.
Ofcourse---this is all speculation, and things that I have heard in ATL.

Bye Bye-----General Lee

 

[rjcap]

They figured that they could try to beat JetBlue and SouthWest at their own game. They plan to use single class

This reminds me of General Motors creating the new car company Saturn. GM was so screwed up that they figured they would start with a fresh sheet of paper. Saturn has never made its investment back and GM has continued to lose market share year after year.

I wonder if Leo has learned anything from history.

 

[G4G5]

National's 757's have R&R engines. DAL's have P&W's . Not something that DAL would be interesed in.

 

[F/O]

What's AA doing with the TWA 757s? Maybe they've already sold them off, but didn't they have Pratts as opposed to the AA RRs?

 

[md8pilot]

757s

11 of our 27 757s COULD be returned to the lessor in 2004, depending on economic conditions. The remaining 16 757s will enter AA service mid-2004-2005. If the 11 aren't returned, they'll enter AA service in the same time frame.

Former TWA.

 

[General Lee]

RJCAP,

I guess Leo should do nothing and let JetBlue and Southwest take more market share, right? Oh, I know! Let's get more RJ's, that's what we need. Let's be the largest "regional in the world" and have 2000 RJ's and nothing else. Sure, you'll see the new airline and it's 757's really soon, and remember---Caution Wake turbulence.

Bye Bye----General Lee

 

[Ty Webb]

I don't see this thing panning out. What, exactly, is going to be different about this than CAL Lite (Continental's attempt to compete with SWA) Shuttle (UAL), Metrojet (USAirway's contribution to this list of failures) or, (drumroll, please) . . . . Delta's own Express?

The only thing I see this doing is giving Mr. Mullin a very expensive opportunity to tell shareholders that he is "doing something".

Sometimes, it is better to do nothing than to do anything.

Their strategy to compete against AirTran is equally hare-brained: keep dumping seats on AirTran routes at a loss, trying to cause AIrTran pain.

The only problem is that AirTran is making money at those prices, while DAL continues to hemmorhage money.

Funny thing is that DAL would probably do better by focusing on what it can deliver- premier service, a huge network and more convenient frequency- and charge a reasonable price for it. Leave the most fare-conscious travelers to AirTran, and deliver a premium product to those willing to pay for it, but at a fair price.

But that would be too simple, right?

 

[rjcap]

Gen Lee,

Let's get more RJ's, that's what we need. Let's be the largest "regional in the world" and have 2000 RJ's and nothing else.

Those are your words not mine.

Take a chill pill.

 

[General Lee]

Ty Webb,

Delta will leave ATL alone and do what it does best there---hub and spoke. But, the difference will be what we do point to point. Airtran is doing this also, and very well I might add. What we need to do is leave more open seats in ATL and CVG for people who are connecting on RJ's. Someone in South Bend or Peoria will pay more to go to Fort Lauderdale or San Juan because they can't go nonstop. So, if we fly people point to point from Big cities to other big cities (like NYC to PBI, or MCO to OAK), that leaves more open seats on the big planes out of ATL or CVG to fill with more expensive tickets to people in smaller cities (like Peoria). Our LCC, whatever the name will be, will never fly to Des Moines, Grand Rapids, or Newport News----so if those people want sunshine in the Winter, they either drive for hours to a larger city and catch Southwest or Airtran (yes, Airtran goes to Newport News)---or they fly direct to ATL on an RJ and connect to a 757 to St. Thomas or CR7 to Key West. And, the LCC will probably fly the 757 more hours in the day-----probably doing allnighters from Vegas to add extra hours each day. I don't know the daily lease rates, but our 737-300's are $8000 a day. So, if the 757's are $12,000 a day----we need to fly them more each day to recover that. The flight attendants will be new (or from the furloughed ones) will get lower pay (that does suck---they need a union), and the pilots will probably renegotiate for the
LCC only eventually. (Who Knows? I would) This whole thing will
not only flood the market with seats ( especially for Jetblue), but also help us use our seats wisely---and offer more expensive ones to people in smaller communities. It's a harsh business.

RJCAP,

I didn't mean to snap at you, but I get frustrated sometimes with people who don't SEEM to want us guys at Mainline to do well. If you read the above, I like our RJ's and think they are a valuable tool to our success as a whole---you and me. I think Leo is doing a good job with the business, but needs to be more labor friendly sometimes----not giving in to labor, but compromising. I know, this is a harsh business. You and I know that we can't only have RJ's to compete, and a LCC might be beneficial. United said they might re-start the Shuttle, and AA is considering the same. It might be the wave of the future, but we also need a strong mainline to do International flying, and a strong Delta Connection.

Bye Bye----General Lee

 

[Ty Webb]

Gen Lee:

Thanks for an interesting post. Something to chew on for a while.

I am not familiar with typical lease terms for air carriers- my background was corporate prior to AirTran. I would have thought, though, that a lease would be by the flight hour, with a certain minimum per month (or quarter, or year).

Normally, in addition to fixed costs, such as interest, insurance, and rent, you will be paying some rather substantial charges on a per-hour basis, such as maintenance, engine MSP, fuel, labor, etc., all large, incremental costs- a substantial amount per added flight hour . . .

Can you elaborate. and help me understand a little more about this crazy business?

 

[General Lee]

TYWEBB,

Well, I don't know much about the lease business. But, I do know about our 9 737-300's that we had in the desert. We were
told in the crew lounge in ATL by our VP of Flt Ops that those 9 airplanes in the desert were costing us $72,000 a day in lease costs----which equates to $8000 a day each. I don't know about the other charges---but that was just for the leases. (Those 9 737-300's are now going to replace 737-800's on the NY Shuttle, and the 737-800's are going to replace some 757 flying that will be taken for the LCC--whatever it is called)
This really is an interesting business, and I am glad I drive the planes and not do the financial stuff associated with it. But, flying the airplanes more throughout the day would help cover those costs. That is why I believe they are going to utilize the 757's on the LCC as much as they can-----probably flying them thru Vegas for all nighters---just to keep the planes moving. And, we'll see how National Airlines is doing in LAS. If they cannot get additional investors they may liquidate, and that would give Delta
and it's LCC a lot of gates right next to their current LAS gates.
It will be interesting.

Bye bye-----General Lee

 

[Publishers]

Aircraft Leases

Aircraft Leases for the most part are fixed monthly rates.

There are two main kinds:

Operating and Finance

In an operating lease, you usually have a shorter term and the only limits are usually related to hour cycle ratio.

A finance lease is really like you bought the aircraft but utilizing a lease agreement where someone else owns it at the end.

When someone says it is costing us XXX a day, they are just dividing the lease rate across the month.

 

[sleepy]

TYWEBB,

Well, I don't know much about the lease business. But, I do know about our 9 737-300's that we had in the desert. We were
told in the crew lounge in ATL by our VP of Flt Ops that those 9 airplanes in the desert were costing us $72,000 a day in lease costs----which equates to $8000 a day each. I don't know about the other charges---but that was just for the leases. (Those 9 737-300's are now going to replace 737-800's on the NY Shuttle, and the 737-800's are going to replace some 757 flying that will be taken for the LCC--whatever it is called)
This really is an interesting business, and I am glad I drive the planes and not do the financial stuff associated with it. But, flying the airplanes more throughout the day would help cover those costs. That is why I believe they are going to utilize the 757's on the LCC as much as they can-----probably flying them thru Vegas for all nighters---just to keep the planes moving. And, we'll see how National Airlines is doing in LAS. If they cannot get additional investors they may liquidate, and that would give Delta
and it's LCC a lot of gates right next to their current LAS gates.
It will be interesting.

Bye bye-----General Lee

I hope you are right about the LCC. I am a DCI guy that wants the whole company (mainline included) to do well. I am wondering if your pilots are going to allow changes in the work rules from your PWA for the new LCC. I would think that the LCC would need more flexible work rules to compete against SWA and JB. What do you think?

 

[General Lee]

Sleepy,

I would think so, but there is a problem---and that is that we now have about 1000 pilots on furlough, and we HAD a No Furlough clause. To be more productive---like the Jetblue and Southwest guys/gals----we would have to fly more each month. Right now we have a max of 75 hours per month, with a minimum pay of 70 hours. Pre 9-11 we had minimums of 80 or so hours, and Express
had no limit (upto 100 hours a month)---some guys flew 95 hours a month. That is productivity, and some guys loved to fly a lot. But now----with lots of guys/gals out of work---would it seem fair to them to up the hours? It would seem right to do that for the business, but how would you feel looking from the outside? I want Delta to do well, and I think we should be more productive and maybe relax some of the pay for the LCC, but we need to atleast start a small recall eventually (let's say starting in June
of next year---etc) and get back the furloughs. There needs to be a light at the end of the tunnel----otherwise most of our guys would not budge at all. Our contract sets the max at 75 hours a month while there any guysout on furlough for a reason---Protection. DALPA will not renegotiate until there is something for our furloughed people----give them 90 seat RJ's or whatever, just do something to get them back in the air.

Sleepy, I also want all of us to do well. I think the LCC will be interesting, and according to one of our roadshows in CVG last
week---we should know something about it before Thanksgiving.

Bye Bye---General Lee

 

[sleepy]

I agree that concessions to allow more flying at the LCC would not go over too well with 1000 on the street. I just don't see how they can make the LCC work with both mainline pay and work rules. I would hope that you will be able to use this as leverage to end the furloughs and get everybody back to work.

 

[General Lee]

Sleepy,

You would think so, but who knows these days? You would think that Dalpa would have the upper hand with this code share deal with NW and CO, since our MEC Chair has the final say-----you would think he would say,"Do you want the code share? Then no more furloughs...." Why hasn't he? I don't know. I personally think there should be different rates for the LCC, and allow the pilots to work 5-10 more hours per month and that makes up the difference. (Like Delta Express) I think junior guys/gals should fly the LCC until they can bid something on mainline. (more $$)
But the thing is that the 757 is not a small plane. It will have 198 seats on the LCC, and the pay rate will always be more than an
MD88, or 737. So, it probably won't go very junior unless it's
rates are a lot lower---and Dalpa won't allow that. They might allow something like a 10-15% rate cut, but that will still be fairly high. So, Delta also has to bring in something that is not on the current pay scale----like the A318 or A319----and use that too on the LCC. The rates will be lower and therefore junior.
Remember, everyone else (besides the pilots with a union and a contract) will be new with the LCC. Flt Attend will start at 19K a
year (most of the Flt Attend who fly on Delta Express 737-200's
are very senior (30 year plus) because it has only one drink service in the 3 hour flt and they sit in back and do crossword puzzles----they usually make $60K a year) The mechanics will come from other airlines---like USAir etc who are looking for work.
So, most of the people will be working at discount rates. And, the 757's will have 198 seats----more seats to spread out the costs. So, the LCC will have a cost advantage. (Even the fuel
burn on the 757 will equal the 737-200, but have 79 more seats)

I was also looking at the DCI operation. Wow, it has grown. (not sarcasticly) The new DCA operations and Comair in LGA---that is impressive. I absolutely believe that we need a strong DCI, but also a strong mainline and this new LCC. I think we will thrive
when all of this is over.

Bye Bye----General Lee