Delta rumors......

[General Lee]

Pez,

I can understand your feelings--and you really don't want this to go to Chap 11 because then YOU will also give up some pay---probably a lot. (Mesa wages will be fun, right?)

As far as Grinstein wanting to bring it to Chap 11---I don't really think so. I could see him wanting to merge us with someone (like CO)---but he has said that he will avoid it if we give some concessions. Our boys at Dalpa have said that they will figure something out with him, and if he does not have a plan---then one will be required to exit Chap 11 if we go that route. I don't think Grinstein would enlist all of his buddies from Western to just go the Chap 11 route and then lose all power to a judge. But, since you seem to be an expert at what WILL happen---then maybe you are correct. Dalpa just served management notice about their little "We may have to go Chap 11 if the pilots don't cough up pay" media deal by stating that they know the SEC rules about manipulating stock prices--and Dalpa put them on notice that they have people watching.

As far as the recalls go----we would probably bring back 30-40 pilots a month---and you can probably do the math and figure out how long that might take. That probably won't hurt the company too much---and at the same time we will probably have 250-300 Capt retirements ALONE on June 1st---so we will be short. We just had a big bid posted yesterday for an initial 79 widebody Capts---and another bid is due in June. But you knew that.....

Overall, I don't know what will exactly happen--but Dalpa has stated that we will get something going soon---and management just announced yesterday a bunch of new company negotiators----so they will be coming to the table. Yes, fuel prices are huge--but so will our Summer loads and that should help squeeze out a small profit or break even. Most of our huge debt is due late next year---and that gives us time. American Airlines was down to nothing--and as soon as they received some concessions from their people---the capital markets opened up almost immediately. I think Dalpa knows what is going on---and they have hired people to watch this closely. But, atleast you know what is going on..... Please keep us updated.....

Bye Bye--General Lee


PS--From Dow Jones Newswire last week:

Delta spokesman Anthony Black said the airline"wouldn't comment on speculation."Chris Renkel, a Delta pilot and spokesman for the pilots' union, said he was"100% optimistic"that the union and Delta could come to an agreement that would help the airline to avoid Chapter 11."No one wants to let a (bankruptcy) judge run the company,"Renkel said.

 

[FlyBoeingJets]

Yes, fuel prices are huge--but so will our Summer loads and that should help squeeze out a small profit or break even.

General,

No sarcasm....If you guys can pull out a break even at the end of the summer I will buy you a beer at Malone's. I will be celebrating the turning point in the industry that we have all been waiting for.

In fact, if you do have huge retirements in the summer, I will spot you half the cost of the retirements. The bad part is I'm thinking the spike in fuel may have already spoiled Delta's chance at a profit (before retirment costs are factored in).

 

[General Lee]

flyboeingjets,

First of all, I know those fuel prices are really high and that doesn't help. Maybe a sticking fuel surcharge would, and I don't know if we have one or will put one in place. It can only help.

As far as "operating profits"---had we not voluntarily paid the pension payment that really wasn't due for two years (due to pension relief just granted by Congress)--we would have had a $116 million "operating profit" for the first quarter---and the first quarter is usually the worst---"worst is first" in Wall St. talk.... The second quarter and third quarters are supposed to be our best. And, then we get these high fuel prices and that could make a large dent in any possible profits. The over hanging problem we have here is the looming debt. That is what our huge obstacle is. Our next large debt payment is due in 2005---and at the end of the year. We need to take some cuts to give Wall St the impression that we can pull this thing out---and then our bond ratings will go up---allowing us to borrow cheaper money. That is the plan, and I hope it works. As far as the beer at Malones---you have yourself a deal. I am a Sam Adams type of guy.....

Bye Bye----General Lee

 

[Heavy Set]

Pez,

Chill out dude. What is Delta's plan regarding:

1. 100 seaters
2. Song expansion (out West?)
3. Long-haul fleet (more 777s?)
4. ACA replacement - will Skyway replace ACA
5. Better response to LCC domination...
6. Pilot recall rates
7. Pay rates for regional pilots
8. Anything beyond just cost-cutting (a la Siegel)
9. etc., etc., etc.

My eyes are open. I'd like to see an actual plan (a well-thought out strategy) vs. an aimless Siegel-like cost-chopping exercise.

 

[Pez D. Spencer]

Pez, I can understand your feelings--and you really don't want this to go to Chap 11 because then YOU will also give up some pay---probably a lot. (Mesa wages will be fun, right?)

Yes, and no -- more worried about being one of the many permanent furloughs from Delta/DCI than just a paycut.

I don't think Grinstein would enlist all of his buddies from Western to just go the Chap 11 route and then lose all power to a judge.

That's completely wrong -- are you thinking chapter 10?? (Business types could chip in here) In Chapter 11 Grinstein gets to retain, not lose, control with each step approved or disapproved by a judge. He might just enlist his buddies to HELP him orchestrate the chapter 11.

As far as the recalls go----we would probably bring back 30-40 pilots a month---and you can probably do the math and figure out how long that might take. That probably won't hurt the company too much---and at the same time we will probably have 250-300 Capt retirements ALONE on June 1st---so we will be short. We just had a big bid posted yesterday for an initial 79 widebody Capts---and another bid is due in June. But you knew that.....

Right you are -- still it will weight on the purse strings and, honestly, imagine that bankruptcy had already occurred... looking back, can you see the path?

I don't know, General, it might not be in your best interest to take cuts. It might just be the last decent paychecks.

Heavyset,
Those are good points. I think they probably are part of the plan.
100 seaters -- get a good rate from the WO's (scope goes out the window, right?)
Song - out west -- hel1 no, everywhere. it's a great idea.
Long haul ??? for what??? contract it.
ACA replacement? why? (scope goes out the window, right?)
Better response to LCC's - Song at reduced crew costs.
Pilot recall rates -- nope, you mean pilot furlough rates. (but, if it makes you happy, I'll probably get furloughed too)
Anything beyond cost cutting -- well, Delta tomorrow cannot compete as it is today. That is why they will reorganize. I'm not trying to burst your mainline, big airplane flying, bubble/ego, but it is going to happen. Pilot pay cuts or no -- the mere warning of it is STUPID, unless that is a serious intent. Get it????

 

[General Lee]

Pez,

Look at the Dalpa response....Is Chris Renkel wrong also? Read the last sentence....

Delta spokesman Anthony Black said the airline"wouldn't comment on speculation."Chris Renkel, a Delta pilot and spokesman for the pilots' union, said he was"100% optimistic"that the union and Delta could come to an agreement that would help the airline to avoid Chapter 11."No one wants to let a (bankruptcy) judge run the company,"Renkel said.


That was the actual quote in the Dow Jones article. I hope they do understand what is going on....

As far as you being a permanent furlough at DCI or whatever, I don't think that will happen. Remember, as long as Delta can get out of this mess---the probability of us all being around for some time gets better and better---that is until the next 9-11 happens. (I hope not) More and more people will be flying and the annual passengers are supposed to triple by 2010 and beyond. Even with lots of new LCCs out there, Delta will still have hubs and there will still be a need for feed---although I don't know if there will be as many 50 seat jets as there are now---probably more 100 seaters and larger aircraft due to gate and land constraints. I think and hope we will be just fine---this is a major bump in the road---but hopefully it will turn out ok.

Do I want to take pay cuts? Not really, but I know that we must help this company some how. I am not blind to the problems, and I think this should be a "team" effort---with us taking the lion's share of the cuts. I think Dalpa has our best interests at heart and will be fair to all of us. Malone has said that no one group will trump another. He is our MEC chair and he will be accountable.


When you stated that the recalls will hurt the company---I just read an article last week stating that the company said that the recall s will NOT hurt the company, since they will not be all at once and will trickle in. That is what the company stated---not Dalpa. I will try to find you that article.

Bye Bye--General Lee

Here it is:

Delta does not expect pilot recall to hurt results

May 10, 2004 13:38:37 (ET)

CHICAGO, May 10 (Reuters) - Delta Air Lines (DAL,Trade), which has already warned it faces a number of challenges to stop a flood of losses, on Monday said it did not expect the recall of as many as 1,000 pilots to affect its 2004 financial results.

The Atlanta-based No. 3 U.S. airline said it would begin recalling the furloughed pilots after data showed air traffic had rebounded to levels not seen since the Sept. 11 attacks. An arbitration ruling on the furloughs provided for the recalls when traffic reached certain levels.

The recalls are not expected to have a "material adverse effect" on Delta's results this year due to the limited number of pilots that will be recalled each month, the airline said in its quarterly filing with the U.S. Securities and Exchange Commission. It could not predict the impact beyond 2004.

Delta is also in the midst of talks with its 7,700 pilots on possible concessions. A 4.5 percent pilot pay raise that kicked in May 1 means about $85 million more in annual costs for Delta at a time when the company says it desperately needs cost savings.

 

[Pez D. Spencer]

Remember General, I didn't say recalls would hurt the company, I said it's more payroll. Really, when you get right down to it... I DON'T trust Grinstein. And, I do think he is doing things that will accelerate his/(DAL's) claim to bankruptcy.

I'm happy for the recalls.

 

[General Lee]

Pez,

I understand that the recalls would equal more payroll, but what about the 300 Capt retirements? That would create a lot less payroll. The possible outcome of 30% paycuts might equal 500-600 less Capts total--with guys bailing since they were really just riding the FAE wave until the possible pay cuts. 500 senior Captains probably make more than 1500 junior pilots. (yes, I know they are then eligible for a pension that costs the company each month---but not as much as they were making and you can throw out the medical insurance etc. if they go early) Then throw on a 25-30% pay cut---and payroll will be reduced quite a bit. We shall see---and I, too, am happy that we will recall. I would like to see a published recall rate, though.

Bye Bye--General Lee

 

[FDJ2]

Then throw on a 25-30% pay cut

General, do you know whether or not our MEC would go along with that? I tend to doubt it. Our tabled position is 13.5%, plus some work rule productivity phased in with an increase in block hours and some increases in medical costs, but no where near a 25%-30% paycut. At our last LEC meeting, John Malone said we were willing to go slightly higher, but not too much higher, depending of course on what the company is willing to negotiate in return. I certainly didn't get the impression that we would chase a deal and double our offer. Pilot costs are a factor, but the business model does not revolve around pilot costs. If that were the case Vanguard and US would be profitable and SWA would be looking at BKII, since SWA pilots made more than Vanguard and are more highly compensated than US pilots.

 

[General Lee]

FDJ2,

No, I don't know if that 25-30% figure would be correct----and I was flying during the last LEC meeting. A lot of this is speculation and I wonder what the final % will be. You are right--this needs to be a "team" effort. But, there is no doubt that we do need to contribute something.... I hope you are right......

Bye Bye--General Lee

 

[MedFlyer]

General, do you know whether or not our MEC would go along with that? I tend to doubt it. Our tabled position is 13.5%, plus some work rule productivity phased in with an increase in block hours and some increases in medical costs, but no where near a 25%-30% paycut. At our last LEC meeting, John Malone said we were willing to go slightly higher, but not too much higher, depending of course on what the company is willing to negotiate in return. I certainly didn't get the impression that we would chase a deal and double our offer. Pilot costs are a factor, but the business model does not revolve around pilot costs. If that were the case Vanguard and US would be profitable and SWA would be looking at BKII, since SWA pilots made more than Vanguard and are more highly compensated than US pilots.

Your MEC may not publicly want to go along with it...but faced with the alternative options they may have no choice.

Outside of BK, DALPA still has a chance to negotiate and get something in return. For example (and this is purely an example), DALPA might give 25-30% in pay and some other benies, but be able to keep the scope clause, keep the no furlough clause, get an equity stake in the company (stock options/profit sharing) and get some snapback clauses.

If DALPA stands firm on the pay at 13.5-15% and DL goes BK, the ability to get anything in return dramatically fades. Under the pressure of a BK judge, it's likely DALPA would still take 25-30% pay cuts (if not more), plus the company would move to void the scope/no furlough clauses.


You are right, the business model doesn't revolve solely around pilot costs. However, your comparison to WN isn't applicable. The business models are completely different and pilot pay comparisons don't work.

The problem for DL is this: DL (of the six traditional legacy carriers) has the lowest unit revenue per passenger (stage length adjusted). Simultaneously, DL is at the top of the industry in unit cost. This is NOT a sustainable business model and it doesn't even take into consideration the LCCs.

In terms of the pilots, every time a DL pilot takes off, he brings in LESS money for the company than a similar AMR pilot. BUT, he costs the the company MORE than a similar AMR pilot. Something's gotta give......

 

[General Lee]

Medflyer,

Your analogy about AMR pilots making less and thus Delta pilots making more and bringing in less--can also be applied to you guys and Mesa. I think that Dalpa will go higher than the 13.5%---and there will be other benies that will be beneficial to the company. Dalpa has the "numbers" and is monitoring this closely.

Bye Bye--General Lee

PS: From an article in a Tennessee paper:

"On Monday, Delta Air Lines warned that it might have to file for
bankruptcy if its pilots' union didn't make certain salary
concessions.

A few months ago, someone related an experience to me.
She was in a meeting with Delta executives discussing
distribution systems. The Delta executives warned that they
would likely issue a bankruptcy warning this summer, but no one
should worry; it was all part of their negotiation strategy with the
pilots' union."

 

[Heavy Set]

"BUT, he costs the the company MORE than a similar AMR pilot. Something's gotta give......"

Great job. Medflyer, if that isn't an invitation to DAL management to cut your wages to Mesa levels then I don't know what is.... Everyone is so focused on the mainline pilots - but don't doubt that management isn't ALREADY considering how to lower your wages to "industry average." Otherwise, they would be leaving money ON THE TABLE and they cetainly don't want a repeat of the Comair strike...

 

[MedFlyer]

"BUT, he costs the the company MORE than a similar AMR pilot. Something's gotta give......"

Great job. Medflyer, if that isn't an invitation to DAL management to cut your wages to Mesa levels then I don't know what is.... Everyone is so focused on the mainline pilots - but don't doubt that management isn't ALREADY considering how to lower your wages to "industry average." Otherwise, they would be leaving money ON THE TABLE and they cetainly don't want a repeat of the Comair strike...

I'm sure DL management is looking at ways to lower Comair wages. That's what management is always doing....

It's funny that whenever someone brings up DL pilot pay, you automatically start crying about Comair pay. Why not provide a reasonable, business-minded argument for why DL pilots should make 40-50% more than their peers? Instead, you immediately jump on Comair....pointing fingers isn't going to solve the problem.

I'm not against DL pilots making industry leading pay. If DL was an industry leader in unit revenues, then by all means the pilots should be industry leaders in pay. Even with DL's lagging revenues, I still think that if both sides negotiate seriously, DL pilots can still come out above AMR, UAL, etc. However, the DL pilots are going to have to get serious about being a more productive group if they want to keep that pay.

 

[michael707767]

General Lee, I too have heard rumors about a deal.

The company is asking for a 34% pay cut, which with work rules changes amounts to about 40-45% of the value of our contract. The rumor I heard is that a deal is in the works that with a combo of pay and work rules amounts to about 30% of the value of our contract. So my guess would be roughly 22% on the pay rates, the rest to come from work rules.

 

[General Lee]

Michael707767,

I don't know about those rumors---even the one I posted on this thread--because since then they have announced new negotiators on the company's side. Why would they just announce new ones? That doesn't make sense.

As far as work rule changes, I think there will be some---but I don't think they will a large amount because they are the hardest thing to get back eventually. Most guys would rather give up a little more pay than more days off. I don't really know---since I am NOT a negotiator----and also I wonder how the recall of the furloughs would play into this? Dalpa has gone public with their intention to have a recall schedule---and the company agreed. I doubt they would rescind that---which would be bad publicity for Dalpa and ALPA in general. Yeah, I hear it all the time---"They don't care about the junior guys...." But those junior guys will eventually turn out to be a large voting block---and Dalpa knows it. I don't see the cap of hours being increased too much--maybe 80 hours etc....and I can still see some sort of recall schedule---atleast to cover retirements. I don't really know, and I want the furloughs back as soon as possible---but that will have to be negotiated too, and the large upswing in early retirements should help with that.

Bye Bye--General Lee

 

[FDJ2]

The problem for DL is this: DL (of the six traditional legacy carriers) has the lowest unit revenue per passenger (stage length adjusted).

Medflyer, the average DAL pilot flies more passengers than any of the other network carriers. So although that passenger may pay less, the DAL pilots fly more of those passengers every year, with fewer pilots, than any of the other network carriers. So your analogy is off the mark.

You might want to consider that DAL has a higher CASM, because DAL is the only carrier with nearly a third of its block hours being flown with high cost RJs, which are factored into the DAL CASM as well as the largest RJ debt, which is also paid by DAL. No other carrier has nearly as many high cost RJs, and they don't incorporate the high RJ CASM into their network CASM.

You suggest that somehow BK is a walk in the park for management, as if all they have to do is move to void contracts and scope language. Luckily it doesn't quite work that way.

BK is corporate failure. The CEO works for the BODs and the BODs work for the shareholders. If Grinstein were to take DAL into BK he will have failed his employer absolutely, since no one loses more in BK than the investor. Entering BK is not a negotiating strategy in order to rid ones self of pesky union contracts.

Somehow I doubt that the determining factor between BK and solvency is a 15% difference in pay between the DALPA position and DAL's.

 

[ATR-DRIVR]

So FD
Your assertion is the RJ's is the main reason that Delta is looking at BK? Somehow I figured that was going to in somewhere....
"BK is Corporate failure"....Ok....Which is it?

 

[michael707767]

Gen Lee,
put me in the group that would rather give pay cuts than change work rules. Changes in work rules by and large sell out the junior pilots. Anything we do should be spread evenly among the entire seniorty list, and the only way to do that is with pay cuts only. I say give em the entire 34% in pay rates, but keep the rest of the contract intact.
Michael

 

[General Lee]

ATR-Drivr,

Man alive, FDJ2 seems to be making you mad. Don't take it personally----I think he means that the RJ strategy born by Leo and Fred was the wrong one---and now Grinstein will have to correct it. Just when Leo and Fred thought RJ frequency was the ticket to heaven----the fares took a dump and a lot of our old lift (727s and L1011s etc) was parked in Arizona. Then Leo and Fred thought we could do ok by waiting for other carriers to die---which none did completely. Those were bad decisions, and Leo then took his medicine and left with $16 million. Sucks for him, right????? Anyways, I think we at mainline can see that we need some sort of a pay cut to help reign in some costs, and then we need a plan that addresses today's problems---which are lower fares---needing more seats per plane to squeeze a profit and spread out the costs. RJs are great planes for certain markets--but not those markets with direct LCC competition----and those LCCs are growing and will compete more and more with us directly. That is what we need to focus on after pay cuts.....

Bye Bye--General Lee