Delta to use cash to outlast competitors

[General Lee]

Spinup,

I am not saying that Delta's demise could never happen or that our Sh!t don't stink, but Delta is not in the same position as UAL or AA. We actually had an operating PROFIT last quarter, and the losses came from one time charges---in other words those charges will never be seen again. When UAL and AA were losing big bucks at the beginning of this quarter (UAL losing $10 mil a day and AA losing $5-7 mill a day) Delta was losing $340,000 a day. Even with a war, which will hurt everyone I am sure, Delta will still capitalize on it's strengths---the Spring Breakers. Delta flies the most people to Florida, period. Even with war looming, Delta will fill planes and probably break even--which is better than losses. Our CRAF commitment is huge, with our 767ER's being used for med-evac and the MD-11's and 777's used for troop charters. Michael Boyd (Yeah, I know he gets paid by the airlines....etc) thinks Song has a good chance of doing well, even with the dumb name. Atleast we have a plan against the LCC's, and it is already in place and going forward. We have more RJ's than anyone else, which means flexibility. We have $5 billion worth of mortgagable assets and borrowing power----according to our CFO Michele Burns. We are probably going to give back some pay---and we only have one union. We hedge better than anyone except Southwest---over 65% of our fuel is pre-bought at 77-75 cents, and UAL is paying a $1.25 per gallon. We have given a stock dividend each quarter---even through 9-11, which proves that Leo loves the stock holders. This all may sound like a dumb commercial or like I am bragging, but I am trying to say that Delta is NOT in the same position as the other two. Things might get worse and the Moon might explode, but right now we are doing OK. Let's hope this war is over quick and the economy gets better sooner than later. Sure, Delta might get hurt by the War etc... but other airlines will be dead in the water, and then Delta will expand again. Thanks for your concern.

Bye Bye---General Lee

 

[Ty Webb]

I agree with the General here . . . in fact, DAL would be making money right now, if they didn't insist on losing their shirt to keep a few stragglers off our airplanes.

Funny thing is, people used to think that the LCC's set the prices low, but from what I'm seeing right now, DAL, in their attempt to win marketshare during the downtime, is keeping the prices lower by dumping seats a a loss in our markets.

In other words, they could probably at least break even right now, if they stopped charging our prices down to the last seat, but they are willing to lose money to keep people off of our airplanes. Funny thing is, we are still making money at these prices . . . we could go on like this forever. SOemday, DAL will come out of their cave, rubbing their eyes and scratching their collective behinds, and realize that if they stopped fighting us tooth and nail for the bottom customers, they'd probably be making money . . . . and maybe someone will shake Leo's hand, and welcome him to the Millenium . . . . . . .

 

[spinup]

I guess you missed this one. Note that Leo's comments assume no BK at AA. Stop hitting the snooze alarm and wake up.




02/26 00:11
Delta's Mullin Comments on United Bankruptcy, Labor Costs
By Lynne Marek

Chicago, Feb. 25 (Bloomberg) -- Delta Air Lines Inc. Chief Executive Officer and Chairman Leo Mullin comments on the bankruptcy proceedings at UAL Corp.'s United Airlines, the need to reduce industry labor costs and other issues. The comments came in a speech to the Economic Club of Chicago and in questions following the speech.

On United's situation:

``United has got the greatest network of any airline company in the world, it's a company whose brand is recognized worldwide and, in my judgment, it simply has to succeed in some light,'' he said. United has a situation where ``its costs are substantially out of control.''

``You wouldn't be able to turn United around without tackling (the costs) in a very aggressive way.''

On industry costs and possible reductions resulting from the effects of bankruptcy proceedings at United and US Airways:

``The adjustments that (airlines) are making are in some senses, unfortunately, overdue to make this a much more cost- effective industry. Whether or not that can be carried out in such a way where the pain of that can be made appropriately low remains to be seen.''

``If United and US Airways ``are succeeding in getting themselves reorganized under bankruptcy they will come out with a cost structure that is substantially better than that of the solvent carriers, and this would put a tremendous amount of pressure on organizations like Delta, American (Airlines), Northwest (Airlines Corp.) and Continental (Airlines Inc.) to revamp their cost structures outside of bankruptcy. I think in some sense that's a bit of a fair fight.''

If United is successful in reaching its pilot cost reduction goals it ``could be 30 percent better off in terms of pilot costs than Delta. Now, there's no way that Delta can go forward and be successful in the long term with that kind of variance in pilot cost. So we have some heavy lifting to do to deal with over time.''

On the impact of a war in Iraq:

``War will have a tremendous impact on the airline industry and with a very weak industry such as we have right now, it could have very serious repercussions for everybody.''

 

[Full of LUV]

Uh Huh!

Yeah, Delta ought to just roll over and let Airtran take over. An airline seat is a time valued commodity, I fail to see how matching Airtran's rates down to an empty seat will produce less revenue than flying empty seats. Why doesn't Airtran just raise it's rediculously low fares, give their employees a raise and then ya'll could move into peachtree city and enjoy the good life! You see that if DAL paid it's people 40% less, they could probably show a profit on the ever crucial $39 each way from ATL to DAY. I wonder if Leo is listening to Airtran for suggestions on how to correct the revenue problems dogging the industry?

 

[Heavy Set]

Someday...

Some day the economy will rebound (yeah, it may take awhile...), and Delta will cash in on all of the business travelers who will be sick of Airtran and Southwest. Yields will improve again and Delta will have the proper mix of LCC and regular mainline flying to appeal to the all-important business traveler. Sure, it will NEVER be the same as it was in the latter 90s, but business travelers will be back, and they will want more legroom and frequent-flyer points than you will find on a corndog 737...

It may take 2-3 years, but Delta will likely weather the storm, create a competitive LCC with 60 757s (a lot of capacity) and will capture the lion-share of eventual business travelers who will no longer have UAL (maybe liquidated) and AA (busted with zero plan) to choose. Delta will be the YIELD KING in a few years...

Don't count out Delta just yet... Mullin is paid too well to roll-over and die...

 

[General Lee]

Spinup,

Thanks for your concern over this matter, Leo will be calling you soon to ask you your opinion. One question for you: Why would Leo only ask the Unionized pilots for pay cuts, and leave out the other 50,000 Non unionized employees? AA is asking everyone for cuts--everyone. I am sure that a prolonged war would hurt everyone, in every industry. (except the oil industry) The Bush administration knows that every industry needs this war to be quick, and that is why Bush and his men are going to lob everything they can at Hussein in the first 3 or 4 days---and hopefully the outcome will result positive in about two weeks total. Then oil prices will fall, and the economy will start to grow again. If Delta really does get whacked because of the war and a bankruptcy from AA, think what will happen to the other carriers. Continental has no borrowing power and just took a "spare lightbulb" loan of $200 million, mortgaging their last spare parts--so they could be gone. UAL could go Chap 7. USAir could also fold, especially if this pension thing drags them down. The end result could be a lot less competition, meaning Delta could expand when this economic downturn is reversed after the war. IF UAL sells its Asian routes, the last I heard was that AMR was interested----but wait, how could they afford that? Hmmmm. Our CFO said that we were interested. Hmmmmm. Sounds like we really aren't in the same boat, especially since we didn't buy TWA and remove seats "for more space" in our planes during a down revenue environment. But what do I know, I am still dreaming...

Was that the snooze alarm, or Leo calling me up??

Spinup, have you answered my initial question about why only the pilots are asked to take cuts? We must not be doing that bad, eh?

Bye Bye---General Lee

 

[Ty Webb]

Re: Uh Huh!

Yeah, Delta ought to just roll over and let Airtran take over.

That's the dinosaur thinking I'm talking about. We're not trying to take over, not by a long shot. We can only fly so many people at a time. DAL has more airplanes in MX at any given time than we have in our whole fleet. There are many customers looking for DAL's product, and there are people looking for ours.

An airline seat is a time valued commodity

Uh, huh. That's why you have to maximize yields, instead of selling them at a loss in order to keep them off your competitor's flights.

I fail to see how matching Airtran's rates down to an empty seat will produce less revenue than flying empty seats.

Then you just plain "fail to see".

Why doesn't Airtran just raise it's rediculously low fares,


We can't raise our fares, because DAL is dumping seats in our markets at below cost. That is why DAL is losing money, that's my whole point.

. . . . . and give their employees a raise and then ya'll could move into peachtree city and enjoy the good life!

Because living next to you in PeachTree City isn't my idea of the "good life", but I do appreciate your offer. Maybe, instead, I'll come park my RV in your driveway next Xmas. I could still dump my holding tank in your storm drain, and my dog could still do "the wild thing" on your leg, there . . . . That way, all three of us would be happy.

I wonder if Leo is listening to Airtran for suggestions on how to correct the revenue problems dogging the industry?

I'm sure he's listening to what Joe is saying, and also to what the rest of the industry is saying, as well. Maybe you should follow his lead and listen up, too. . . . . . Neighbor?

 

[mad691]

New Business Fares Result in Significant Revenue Improvement for United Airlines
Monday March 3, 10:45 am ET


CHICAGO, March 3 /PRNewswire-FirstCall/ -- United Airlines (NYSE: UAL - News) announced today that business passengers have responded well to reductions in business fares introduced on January 6, 2003, positively impacting revenue by $20-$25 million per month.
"This is an excellent example of how United is responding to our customers' needs," said Doug Hacker, executive vice president-strategy. "Our new business fares are great for customers and good for United's bottom line. Contrary to some reports in the media, the increase in business passenger volume has more than offset the lower fares."

The airline initiated the sharply reduced one-way business fares to meet the pricing needs of increasingly cost-conscious business travelers. The new rules allow customers to get up to 40% off the unrestricted coach fares with no advance purchase. For customers able to purchase seven days in advance, the discount is even greater. There are no minimum or Saturday night stay requirements, though discounted tickets are not refundable.

"Passengers have reacted very favorably, because we gave them what they asked for -- more affordable fares on the strongest route network in the industry," said Chris Bowers, senior vice president-sales and reservations. "The new fares, coupled with other recent enhancements such as expanded flight availability through our marketing partnership with US Airways, are part of the formula that keeps passengers coming back to United."

United tested the new fare concept extensively on numerous Chicago and Denver routes.

The fares apply to travel in markets to and from Chicago and Denver -- the airline's top two hubs -- as well as over 11,500 markets reached through connecting service. Although these fares are non-refundable, confirmed changes can be made for a $100 service fee. Customers can also stand by for free on earlier or later flights on the same day they are ticketed to fly.

United Airlines was rated number one in on-time performance for 2002.

News releases and other information about United Airlines can be found at the company's website, www.united.com .

DOMESTIC U.S.: Fares above are listed for purchase each way on United Airlines® and United Express® carriers. Seats are limited and may not be available on all flights/dates. Purchase Requirements: Tickets must either be purchased at least 7 days in advance or do not require an advanced purchase. Tickets for both fares must be purchased within 24 hours of making reservations. Travel Days/Dates: Fares for the destinations listed above are valid for travel indefinitely. Fares are valid for travel all days of the week. Blackout Dates: There are no blackout dates. Min./Max. Stay: No minimum or maximum stay is required. Additional Taxes/Fees: Fares do not include the September 11th Security Fee of up to $10 maximum per roundtrip. Fares do not include a $3 per flight segment tax. A flight segment is defined as one takeoff and one landing. Fares do not include Passenger Facility Charges of up to $18, which may be collected depending on the itinerary. Itinerary Changes: Tickets are non-refundable. No changes can be made after ticketed departure date for any portion of the ticket. Changes made before departure are subject to fare rules and a service charge of $100, provided the new itinerary is within the parameters of this offer, minimum and maximum stay requirements are met, and the origin and destination are not changed. Other Conditions: Fares are subject to change without notice. Other restrictions may apply. Lower fares may be available to select destinations.

Worldwide Communications:
Media Relations Office: 847.700.5538
Evenings/Weekends: 847.700.4088


YA I GUESS RAISING THOSE FARES REALLY IS GOING TO WORK. GET REAL......

 

[FlyDeltasJets]

Ty,

Please post all the routes where we increased seats on routes you fly. You have mentioned one. One does not a trend make. Also, if we did as you suggest, our airplanes would be empty and you would be adding service on every route. Airline tickets are very inelastic, and even a dollar increase in fares over a competitor will usually result in a lost sale. Res computers print lowest price first on an identical route, and the first shown is more often than not the one purchased. Your suggestion to us ignores that reality. There are many other factors that you seem content to ignore in your oft-repeated theory.

#1. Every airline is suffering from fares being too low. Your thery seems to indicate that only fares on routes in direct competition to aai should suffer.

#2. There is too much capacity in the industry, causing airlines to lose their pricing ability. Most airlines recognize this and are cutting capacity. Some (yours included) are adding capacity, further harming the industry's price control ability. Do I blame them? Not really, if it makes sense for them. But it is pretty ironic to hear one of their pilots blame US for low fares!

#3. The ONLY airlines who are able to make a profit at current pricing levels are ones who pay their people below industy standard rates. I have mentioned this before, and people always argue that it doesn't have an effect on the profession. If that is the case, why is EVERY airline who does pay industry standard wages asking for concessions (major concessions)? LCC cost advantage lies primarily in wages and benefits. I think all of us, regardless of airline, should be pretty concerned about the future of this career. In most LCC examples, if the majors were to lower their wages and benefits to your level, your airline would die. Without low costs, you could not compete with our routes, schedules, size, international presence, ff program, alliances, cash reserves, marketing budget, etc. Your only choice would be to lower wages. Then we would be exactly where we are now, only making less money. LCC disciples can ignore it if they want, but their wage packages ARE having a devastating effect on this profession. MUCH worse than a few extra seats on a single route out of florida.

I await your response. I enjoy our discussions, but I think that you are WAAYY out in left field with this one. The very vast majority of industry analysts do too. In fact, I have never heard one propose what you are proposing.

As always, I could be wrong.

 

[mad691]

Sounds like the industry standard is about to change. Hold on for the ride!!!!

 

[Boeingman]

Continental has no borrowing power and just took a "spare lightbulb" loan of $200 million, mortgaging their last spare parts--so they could be gone.

No borrowing power?

This is really funny. Your CFO has also failed to mention that CAL wholly owns the Chelsea catering division and Air Micronesia, both worth I believe around 1.5 Billion. Plus there is over a billion and a half in cash.

The spare parts issue was a brilliant move to recover cash on unused parts which is due and payable at a below market premium. Perhaps you guys feel it is ok to have paid assets collecting dust on shelves in this environment.

Before you keep knocking our financial stats., might I suggest you review, among other issues, the underfunded pension obligation at DAL? Your financial picture although not as bad as CAL's is not that red hot either. And it will only get worse.

 

[FlyDeltasJets]

Re: Re: Uh Huh!

Yeah, Delta ought to just roll over and let Airtran take over.

That's the dinosaur thinking I'm talking about. We're not trying to take over, not by a long shot. We can only fly so many people at a time. DAL has more airplanes in MX at any given time than we have in our whole fleet.

Weren't you talking on another thread about aai getting larger airplanes. How long do you suggest we wait until we address your threat? You are trying to take over. You are desperately adding capacity to an idustry that has too much. You are growing every month while establised carriers shrink. If you aren't trying to take over, then you should replace your ceo, because I sure hope that mine is trying to rule the world! Unfortunately, it looks like his hands are full trying to compete with airlines who don't pay their people enough.

 

[mad691]

ya I thinks its 4.4 billion dollars. More than Usair and United. But, hey just raise those fares and everything will be just fine. We should have thought of this months ago.

 

[spinup]

I'm not sure what you mean by Leo needing my opinion; we (me and Mullin) are already in agreement. Your CBA is under fire. Did you not even read his comments regarding your labor agreement? Your statement, "I will give to "save" this company--but it will all have snapbacks." has got to be the weakest bargaining position I have ever heard. Save these comments until you look into their books and are better educated. The race for the bottom (contractually) has already begun. If you are still in doubt about being along for the ride, re-read the above post, and then call your LEC.

As to the other 50,000 employees at Delta entering this discussion, well, I thought this was a flight crew board. If you want to participate in Machinist, Flight Attendant, or Ramp agent discussions I suggest you visit those boards.

Best of luck,

 

[mad691]

FLYDELTAJET your socialist views are old. Germany and France think that way. Either you change or you die.