Delta to sell??

[thruthemurk]

[$$] Delta in Talks to Sell Subsidiaries
11:16 pm - at The Wall Street Journal Online


Anybody a subscriber??

 

[bayoubandit]

Delta in Talks to Sell Subsidiaries
By EVAN PEREZ
Staff Reporter of THE WALL STREET JOURNAL
March 7, 2005 11:09 p.m.

Delta Air Lines is in talks with contract carrier SkyWest Inc. to sell one or both of its regional airline subsidiaries, according to a SkyWest executive.

The third-largest U.S. airline in terms of traffic is still struggling to overcome huge financial losses as it pursues a turnaround strategy that includes a simplified fare structure, cost-cuts and efforts to improve customer service. After reporting a $2.2 billion loss in the fourth-quarter the airline startled investors by revealing it was planning to tap the last of a $1.1 billion cash infusion it received last fall, raising the prospect that, with fuel costs still high, it may have significant cash needs later this year.

Bradford Rich, chief financial officer of SkyWest said Monday at an investors conference said Delta had expressed "more than just an interest" to sell the two subsidiaries, Comair and Atlantic Southeast. SkyWest, based in St. George, Utah, operates regional feeder jets for Delta, mostly out of the carrier's Salt Lake City hub.

"We think we're in the best position of anyone to take advantage of this type of opportunity," Mr. Rich said at the Raymond James Institutional Investors Conference in Orlando, Fla. He didn't specify whether SkyWest was interested in one or both of the carriers and he noted that the discussions were in the early stages. But he said SkyWest's initial view is that it can cut about 5% of the costs of either carrier.

A Delta spokesman didn't return a call seeking comment. A SkyWest spokeswoman said she didn't have additional information to provide.

Delta spent $2.9 billion acquiring ASA and Comair about five years ago, back when the company was swimming in dot-com era profits. While producing badly-needed revenue, and some profitability, the two companies have been problematic for Delta, including a 2001 pilots strike at Comair, and operational and customer-service problems at ASA. Last quarter, the company recorded a $1.9 billion charge related to the estimated fair value of ASA and Comair.

 

[General Lee]

Delta in Talks to Sell Subsidiaries
By EVAN PEREZ
Staff Reporter of THE WALL STREET JOURNAL
March 7, 2005 11:09 p.m.

Delta Air Lines is in talks with contract carrier SkyWest Inc. to sell one or both of its regional airline subsidiaries, according to a SkyWest executive.

The third-largest U.S. airline in terms of traffic is still struggling to overcome huge financial losses as it pursues a turnaround strategy that includes a simplified fare structure, cost-cuts and efforts to improve customer service. After reporting a $2.2 billion loss in the fourth-quarter the airline startled investors by revealing it was planning to tap the last of a $1.1 billion cash infusion it received last fall, raising the prospect that, with fuel costs still high, it may have significant cash needs later this year.

Bradford Rich, chief financial officer of SkyWest said Monday at an investors conference said Delta had expressed "more than just an interest" to sell the two subsidiaries, Comair and Atlantic Southeast. SkyWest, based in St. George, Utah, operates regional feeder jets for Delta, mostly out of the carrier's Salt Lake City hub.

"We think we're in the best position of anyone to take advantage of this type of opportunity," Mr. Rich said at the Raymond James Institutional Investors Conference in Orlando, Fla. He didn't specify whether SkyWest was interested in one or both of the carriers and he noted that the discussions were in the early stages. But he said SkyWest's initial view is that it can cut about 5% of the costs of either carrier.

A Delta spokesman didn't return a call seeking comment. A SkyWest spokeswoman said she didn't have additional information to provide.

Delta spent $2.9 billion acquiring ASA and Comair about five years ago, back when the company was swimming in dot-com era profits. While producing badly-needed revenue, and some profitability, the two companies have been problematic for Delta, including a 2001 pilots strike at Comair, and operational and customer-service problems at ASA. Last quarter, the company recorded a $1.9 billion charge related to the estimated fair value of ASA and Comair.

OOOOOOOOOOOOOOOOOOOOhhhhhh SNAP! And SkyWest isn't an ALPA carrier..... What is the merger policy of a non-ALPA carrier? Looks like the Brasilia FOs could be CR7 captains really quick..... Oh Snap!


Bye Bye--General Lee

 

[FDJ2]

OOOOOOOOOOOOOOOOOOOOhhhhhh SNAP! And SkyWest isn't an ALPA carrier..... What is the merger policy of a non-ALPA carrier? Looks like the Brasilia FOs could be CR7 captains really quick..... Oh Snap!


Bye Bye--General Lee

If the ASA/CMR pilots have language that would require a list integration in such an event, my best guess is that the integration with a non union carrier or non ALPA carrier would be pursuant to sections 3 and 13 of the Allegheny-Mohawk Labor Protective Provisions.

 

[General Lee]

If the ASA/CMR pilots have language that would require a list integration in such an event, my best guess is that the integration with a non union carrier or non ALPA carrier would be pursuant to sections 3 and 13 of the Allegheny-Mohawk Labor Protective Provisions.

You may be right there. As a side note, would this help our debt outlook? I think we would transfer some or all of the RJ debt, right? We have $9 billion in RJ debt. Thanks SkyWest, you can have it. But, we will still try to ask all future interviewees if they were ex-ASA pilots......


Bye Bye--General Lee

 

[P38JLightning]

wow

>>>>OOOOOOOOOOOOOOOOOOOOhhhhhh SNAP! And SkyWest isn't an ALPA carrier..... What is the merger policy of a non-ALPA carrier? Looks like the Brasilia FOs could be CR7 captains really quick..... Oh Snap!


>>>>Bye Bye--General Lee

Wow. Clearly taking delight in what you believe could be the possibility of a non union carrier destroying the CBAs and eliminating the seniority of one or two ALPA carriers with equal equipment and very similar (actually higher) earnings potential, while in the next breath looking forward to how it could help you personally.

Wow.

 

[General Lee]

>>>>OOOOOOOOOOOOOOOOOOOOhhhhhh SNAP! And SkyWest isn't an ALPA carrier..... What is the merger policy of a non-ALPA carrier? Looks like the Brasilia FOs could be CR7 captains really quick..... Oh Snap!


>>>>Bye Bye--General Lee

Wow. Clearly taking delight in what you believe could be the possibility of a non union carrier destroying the CBAs and eliminating the seniority of one or two ALPA carriers with equal equipment and very similar (actually higher) earnings potential, while in the next breath looking forward to how it could help you personally.

Wow.

No, FDJ2 put a stop to that. He is probably right, he does know that type of stuff. I just thought it would have been a huge deal----one never really seen before because most regionals have joined ALPA. That would have been HUGE----pronounced --"YOU---GE" (Donald Trump speak....) It was more dismay rather than a gloat. This is big news......


Bye Bye--General Lee

 

[Jeff Helgeson]

The golden rule.....

If the ASA/CMR pilots have language that would require a list integration in such an event, my best guess is that the integration with a non union carrier or non ALPA carrier would be pursuant to sections 3 and 13 of the Allegheny-Mohawk Labor Protective Provisions.

Those that have the gold make the rules!

I wouldn't count on that unless you have a pocket full of "E" tickets and admissio0n to fantasyland!

What is on paper doesn't mean squat when it comes down to brass tacks. Self interest almost always beats out public virtue and doing the "fair and equitable" thing!

 

[P38JLightning]

>>>>What is on paper doesn't mean squat when it comes down to brass tacks. Self interest almost always beats out public virtue and doing the "fair and equitable" thing!


What's on paper isn't beholden to "fair and equitable" in any case. Its a legally binding agreement. Of course, they could try to violate our contracts and do what they want, then have to deal with 4000 angry pilots, and thats before they lose the grievance. I don't think SkyWest management would risk waging this generations biggest angry union holy cause just to impress 2000 non union pilots by trying to score them a windfall. Just doesn't make sense.

 

[Jeff Helgeson]

Airline industry and making sense is like oil and water

I would look at past mergers through out the industry to see how things could go. My point is there is no safety net in this industry and if they tell there is, it is full of holes.

I wonder if there is a no furlough clause in the contract; that has always worked.....oh never mind!

>>>>What is on paper doesn't mean squat when it comes down to brass tacks. Self interest almost always beats out public virtue and doing the "fair and equitable" thing!


What's on paper isn't beholden to "fair and equitable" in any case. Its a legally binding agreement. Of course, they could try to violate our contracts and do what they want, then have to deal with 4000 angry pilots, and thats before they lose the grievance. I don't think SkyWest management would risk waging this generations biggest angry union holy cause just to impress 2000 non union pilots by trying to score them a windfall. Just doesn't make sense.

 

[FDJ2]

You may be right there. As a side note, would this help our debt outlook?

Yep, plus it would add liquidity to the bottom line at DAL, although not nearly as much as was squandered in the original purchase.

 

[FDJ2]

Those that have the gold make the rules!

Maybe so, but that wouldn't bode well for the Skywest pilots, since the ASA/CMR pilots have access to significantly more resources (GOLD) then the in house Skywest organization.

BTW, what's on paper is legally binding.

 

[FDJ2]

I would look at past mergers through out the industry to see how things could go.

Although not a perfect analogy, the unionized Pan Am flight attendants did very well relative to the non unionized Delta flight attendants when they came over to DAL. While certainly DAL had the gold at the time, the non unionized employees had no national union supporting their interests, whereas the Pan Am flight attendants did.

 

[MedFlyer]

I don't see why this is surprising. DL is getting desperate for cash. They are burning through cash far faster than management had expected. Loss projections for 2005 are being increased and the hope of profits in 2006 are fading fast.

From the other perspective, Skywest management knows that consolidation is coming...both for the majors and the regionals. I think they want to get ahead in the game.

 

[lowecur]

Similar move as AW investing in UAIR. SKYW has made the determination that their future is tied at the hip with DL. I assume the Allegheny/Mohawk deal was about integration seniority, and not the contract per say. SKYW contract includes the ability to fly the 100 seater, no?

This can't be so much about Cash as it is about the contract. Those two carriers can't be worth more than $200M at the most, maybe less. Money can definitely be saved through consolidation, as duplication will cease.

Problem for SKYW is dealing with a hornets nest of unhappy pilots at DCI. It may be more trouble than it's worth.

 

[FurloughedAgain]

The only successful merger is when both sides are equally pissed off.

 

[Mexicankingair]

You can listen to the actual comments made by the SKYW executive at http://www.wsw.com/webcast/rjii05/skyw/ you have to register but its free.
His comments come at the end of the broadcast and he specifically says the offer has been on the table for a while and they are NOT really interested. He basically implies that if they wanted 300 RJ's they could simply go out and buy them, but also that they are NOT interested in growing their 50 seat fleet.

So it sounds like the WSJ may be sensationalizing this story just a bit....

 

[trip]

What mexi said above right-on. This was on the table over a year ago and was told to us in a re-current class by a mgt type. They said we are looking at it but not really interested because of the problems that go along with this type of growth. Im sure with Delta burning through there $$ reserves and looking at the pile of cash SKYW is sitting on they must be putting the pressure on SKYW to make an offer. I hope they dont do it.

 

[FDJ2]

You can listen to the actual comments made by the SKYW executive at http://www.wsw.com/webcast/rjii05/skyw/ you have to register but its free.
His comments come at the end of the broadcast and he specifically says the offer has been on the table for a while and they are NOT really interested. He basically implies that if they wanted 300 RJ's they could simply go out and buy them, but also that they are NOT interested in growing their 50 seat fleet.

When did he say they weren't interested in growing the 50 seat fleet? In the first 2 minutes of the presentation they stated there will probably be consolidation in the regional industry and that Skywest was well positioned in that regard to take advantage of acquisition opportunities. In the 22nd minute he stated that one of the opportunities for growth beyond '05 was acquisitions and that they were actively looking at opportunities. At the end of the presentation he reiterated that Skywest was in the best position of anyone to take advantage of the acquisition of one or both of DAL's subsidiaries. I never heard him imply that if they wanted 300 RJ's they could simply go out and buy them, on the contrary, on several occassions he mentioned consolidation and acquisition as possibilities for growth as well as internal growth. He never ruled out acquisitions, and frankly he can't. The subsidiaries will be sold, and the growth will go to the entity that acquires them. If Skywest wants to bid for that growth they'll have to play ball and Skywest management understands that.

 

[uba757]

Even when listening to the same recording we all hear different things!!!!!!!!!!!!!

Uba757

 

[av8tor4239]

I don't see why this is surprising. DL is getting desperate for cash. They are burning through cash far faster than management had expected. Loss projections for 2005 are being increased and the hope of profits in 2006 are fading fast.

What the He!! do you expect when a company is run by a bunch of greedy APES, is still paying OLE LEO MULLINS Millions of dollars annually in severance and golden parachute money... and you sell Tickets from west coast to the east coast for less than Greyhound (i am not kidding www.greyhound.com ) ($174 RT from LAX to Norfolk VA on Delta, 178 RT with a 2 day ride on Grayhound)...

At what point to the employees stop giving? There was an article in the AJC Saturday about the Delta Execs getting their bonuses back and getting extra bonuses for ontime performance... What incentive do you (labor) have to be ontime?

If ASA gets sucked into a NON UNION skywest situation I might have to leave aviation... If you don't vote to be a whore (comair) they will sell you into Whorism...

 

[FDJ2]

Even when listening to the same recording we all hear different things!!!!!!!!!!!!!

Uba757

So true.

 

[Hobiehawker]

This whole issue is about "buying" not "merging".

I would suppose whatever ALPA clauses there are about mergers wouldn't apply here.

 

[surplus1]

Whether they merge or simply buy and operate, whether it's one or both, SkyWest management will be taking on a lot more than the chorus of the tabernacle choir that they're accustomed to dealing with.

Delta back in early 2001 had the money and the power to take a 600 million dollar strike. Anything close would bury SkyWest at the bottom of the great salt lake. Their attempts to mormonize either ASA or CMR, let alone both, would likey lead to the lot of them becoming catholics. SLC ain't ATL and it sure isn't CVG.

It may be a good idea for Delta to sell, but it may be a far better idea for SkyWest to find another way to grow. They could pick up the assets of AWAC for a lot less thus firming up their marriage to UAL, than a shotgun wedding with the subsidiaries of Delta. Of course it wouldn't be the frst time that management egos have resulted in their demise.

On the other hand it would be interesting to watch DAL deal with putting nearly all of its food into the hands of a 5500 pilot airline dominated by its rejected lovers.

XJT is more likely to be the only regional in the game that could swing something like this without risking its own apple cart. Then DAL & CAL both would have their feed in one place. Whoopie!

 

[lowecur]

There is another option for DL, and it's called 11. One way to quickly jettison yourself of unwanted baggage is BK. I wonder if the employees of DCI knew if their choice was SKYW or no job, which would they choose? I think mgt for DL would like nothing better than to flush wholly owned DCI and deal with contract carriers. With oil prices continuing to skyrocket, can 11 be too far off?

 

[FL000]

This whole issue is about "buying" not "merging".

I would suppose whatever ALPA clauses there are about mergers wouldn't apply here.

The clause at ASA refers to purchases, mergers and all other "transactions."

 

[surplus1]

There is another option for DL, and it's called 11. One way to quickly jettison yourself of unwanted baggage is BK. I wonder if the employees of DCI knew if their choice was SKYW or no job, which would they choose? I think mgt for DL would like nothing better than to flush wholly owned DCI and deal with contract carriers. With oil prices continuing to skyrocket, can 11 be too far off?

I think maybe you misunderstood what I was trying to say. Management is obviously free to exercise whichever of its "options" it may deem appropriate. Employees can't stop a sale and they can't stop a BK filing.

Employees also can't stop a buyer from purchasing anything that's for sale.

You might also note that there is no such thing as "DCI employees". Delta can sell both of its subsidiaries if it wants to and SKYW is free to buy one of them or both of them if it wants to. That is not in question nor is it the issue.

While I don't know, my guess would be that all of ASA's and Comair's employees would prefer to be acquired by SKYW than to have no jobs. That's not the issue. The question is how SKYW deals with them after they're acquired.

My point is that unless SKYW deals in a way that the "acquired" feel is acceptable to them, SKYW is likely to bite off more than it can chew. Buyer's remorse won't take long to set in once SKYW discovers that dealing with 2000 - 3600 pilots that don't belong to their present choir can render the music flat.

Delta may well be eager to get rid of its subsidiaries, but that doesn't change Delta's need for feed. If Delta chooses to put all or nearly all of its feed into the hands of a single carrier (or 2) that's up to them. But, it may well lead to a severe case of ulcers in the future. Given that Delta is already suffering from acute indegestion, a dose of Pepto Bismol might be a better remedy.

I'm not against anything, and it would not matter one iota if I was. Both Delta and SkyWest can do as they please. We'll then see what happens after the fact.

Just remember, for every action there's and equal and opposite reaction.

 

[Jeff Helgeson]

Just make it as "ironclad as possible...

BTW, what's on paper is legally binding.

...but they often change what is on paper before the deal goes down. Plus, different carriers have different clauses and compromises have to be made.

I am not trying to be a wet blanket hear. I am just suggesting use caution. Some of the posts seem a little over confident and matter-of-fact we have it all wrapped-upish.

 

[General Lee]

There is another option for DL, and it's called 11. One way to quickly jettison yourself of unwanted baggage is BK. I wonder if the employees of DCI knew if their choice was SKYW or no job, which would they choose? I think mgt for DL would like nothing better than to flush wholly owned DCI and deal with contract carriers. With oil prices continuing to skyrocket, can 11 be too far off?

With a cash infusion, probably not. We also would get rid of some debt, which would help. I think a lot of this is a waiting game to see who outlasts eachother. USAir is obviously on a hit list, and if they were to fold, DL would do very well, primarily is the South and the connection cities from CLT---cities that Airtran and Jetblue wouldn't fly to like FAY, Wilmington NC, New Bern, Hickory, Kinston, etc. Prices would be raised there immediately. This sale is ONLY A GOOD THING for Delta, giving us extra cash needed to fight the fuel prices, and a debt reliever. Also, if fuel does go to $60 a barrel, expect more fuel surcharges to stick. NW just approved of a $20 a roundtrip raise, and it will go higher if fuel rises. No doubt there, even Southwest will probably join in.(they have done $2 surcharges before, and will probably go a little higher)


Bye Bye--General Lee