Delta's hemoraging

[Ninja]

The math is not Pretty: 400 mil loss over 120 days = 3.3 mil/day



http://news.moneycentral.msn.com/ticker/article.asp?Feed=RTR&Date=20040312&ID=3487568&Symbol=US:DAL

 

[FDJ2]

The math is not Pretty: 400 mil loss over 120 days = 3.3 mil/day

Delta also prefunded $320m for non contract employee pensions this quarter, which I'm sure added to this number. Last year Delta depreciated $1.2B, which is a charge and not a cash expense, which partially explains how a company like Delta can simultaneously post a loss yet be cash flow positive.

 

[General Lee]

They funded the pensions EARLY----and we had a bond sale earlier in the year that resulted in an extra $325 million in our coffers, but we used it for early funding of the pensions. That $325 million could have offset most of that loss---but I get the feeling that we will ALWAYS show some sort of a loss until they get concessions from the pilots. It will be tougher though over the next two quarters to show huge losses--since these next two are our best two quarters of each calender year. We have been jammed full as of late, but we were fairly light for about three weeks after XMAS break ended.

Bye Bye--General Lee

 

[jbucpt]

this is not bait , rumor has it that SONG is done....anyone else hear the same???

 

[General Lee]

jbucapt,

That rumor probably came from our new CEO who said he is looking at the whole Delta Package(via a strategic review due in July I believe)---and he has also stated in the past that he did not like two seperate brands at Delta. Even if we got rid of the Song brand--we would still keep the planes and we would still give you competition, but under the Delta brand instead. We shall see, but we have been packed on Song as of late.....

Bye Bye--General Lee

 

[Heavy Set]

Just remember that a loss can easily be a "paper" loss and not a cash loss. If a company decides to accelerate depreciation of assets, that alone can lead to a big depreciation "loss." But that is not a cash loss.

I am not clear about the cause of the $400 million loss but I am very curious... Given that the economy has been recovering somewhat, what could the Delta management have done to lead to a $400 million loss? Delta's management SHOULD BE HELD ACCOUNTABLE FOR CRAPPY MANAGING - shouldn't they?

It can't just be the pilots' fault all of the time... Good riddence to Fred Reid - he can NOW LOSE MONEY for Dick Branson...

 

[storminpilot]

http://finance.yahoo.com/q/cf?s=DAL

Cash is flowing out not in.

 

[BLUE BAYOU]

All airlines will be recrunching the numbers due to the high cost of fuel and the reluctance to raise prices in this competitive environment.

 

[General Lee]

Storminpilot,

Didn't we get a bond sale to Morgan Stanley for $325 million? Yes, yes we did. And where did that go? That went to pay off the pensions early. Why would they do that? Hmmmmm. I am sure there is a difference between cash flow in and out, but I would guess that some of that loss is a "paper" loss--like aircraft depreciation. Other parts of the loss come from poor revenue management--even though we carry more people domestically than even Southwest. (in Dec we carried 6.1 million people, which was 400,000 more than Southwest and almost 2 million more than AA and UAL---and that is just domestically) Why couldn't we raise the fares 2 or 3 dollars? How about $5? Nope. We also just signed up for 25 more new RJs for ASA--which are "self financing". Very interesting indeed......

Bye Bye---General Lee

 

[storminpilot]

General Lee said:

Didn't we get a bond sale to Morgan Stanley for $325 million? Yes, yes we did. And where did that go? That went to pay off the pensions early. Why would they do that? Hmmmmm.

I would assume to meet their pension obligation as directed by government rules.

I am sure there is a difference between cash flow in and out, but I would guess that some of that loss is a "paper" loss--like aircraft depreciation.

I believe there was a change in cash down and not a paper loss in the cash flow statement.

Other parts of the loss come from poor revenue management--even though we carry more people domestically than even Southwest. (in Dec we carried 6.1 million people, which was 400,000 more than Southwest and almost 2 million more than AA and UAL---and that is just domestically)

You know that just because you carry more people does not mean you make more money. i.e. Eastern, Pan Am, Midway, Braniff. Everytime a fare increase is put through someone doesn't match and all the airlines loose passengers for a few hours until they go back down to the original price.

Why couldn't we raise the fares 2 or 3 dollars? How about $5? Nope. We also just signed up for 25 more new RJs for ASA--which are "self financing". Very interesting indeed......

Welcome to a commodity business.

 

[jetblue320]

this is not bait , rumor has it that SONG is done....anyone else hear the same???

Ditto on the flame bait but I did hear that Song had a -54% profit margin for the 3Q of 2003. Granted, they had only been operating for 6 months or so, but -54% !!! Wow. (yes, that's a negative) Certainly that figure, assuming it is true, really robs from the bottom line, on paper or otherwise.

C yaa

 

[rjcap]

Didn't we get a bond sale to Morgan Stanley for $325 million? Yes, yes we did. And where did that go? That went to pay off the pensions early. Why would they do that? Hmmmmm.

Fred Reid had stated previousely that in 2004 the company would have to begin to deal with the underfunded pension liability (approx 4 billion ). This may be part of complying with the federal pension requirements.

Either way, it is not preferable to issue debt to pay an obligation that should already be funded.

 

[On Your Six]

It is clear that Delta's MANAGEMENT has been performing poorly - obviously they can't blame everything on the pilots. You can be sure that if Delta is having issues with fuel hedging, that all airlines except Southwest are also ADVERSELY IMPACTED by the rising fuel costs too. Delta is not the only "hurting" airline out there - don't forget CO, UAL, AA, US, ATA, JB, etc. This is not an easy time for airlines in general...

 

[General Lee]

Jetblue320,

I think there were a lot of open seats on Song during the third quarter of last year, and that was expected. Song at that time was still not really known, and pax were back in school etc.. after the Summer break was over. We have increased our airplanes and even the IFE since then, and now the planes are full (due to Spring Break etc) and that is spreading the word. I don't remember much great news about how well Jetblue was doing until after 9-11 when the economy dropped. I think Grinstein will look at it and try to determine whether or not Song is "diluting" the Delta brand. It is doing a lot better now--compared to 2003 3Q anyway....

Storminpilot,

That early pension funding was not part of the NORMAL pension funding requirements. Sure, the pension is underfunded--but there are guide lines that outline when you have to fund it--and we did it early for some reason.

You are right that carrying more pax does not equal profits. But, it does mean there is potential, and hopefully the others will go along next time. We shall see.....

Bye Bye--General Lee

 

[jetblue320]

Jetblue320,

I don't remember much great news about how well Jetblue was doing until after 9-11 when the economy dropped. I think Grinstein will look at it and try to determine whether or not Song is "diluting" the Delta brand. It is doing a lot better now--compared to 2003 3Q anyway....

For the record, jetBlue turned it's first profitable month in it's sixth full month of operation. That was Sept. 2000. 9/11 wasn't until a year later. If you didn't hear any great news it's probably because you weren't listening. I will grant you that 9/11 did not have quite the effect on us as it did the legacy carriers for sure. We did spring back pretty quick. Anyway, I know you find this hard to believe, but I do not wish death to Song (or any others for that matter) because I am a firm believer that there is enough market to go around and this business is cyclical, like most others.

P.S. I HOPE it is doing better, it would be way too hard not to improve from -54% if that figure is accurate!

Take care Pal.

JB320

 

[General Lee]

Jetblue320,

I know you don't wish any harm, and in turn I am impressed with Jetblue and its growth. What I was saying was that Jetblue really "got going" after 9-11, and the legacy carriers really "got slammed" during and after 9-11---having 500 or so planes each with little or no passengers for a couple months. That hurt and we are still hurting.

I remember those months in the third quarter of last year and it was fairly lite----and we knew that from the beginning. I also hope we never see those load factors again, and this Spring break has been good for us so far--and I am sure for you guys too. I do wonder what Grinstein will do with Song--I think it takes time to grow loyalty--and maybe that particular market doesn't actually buy tickets with loyalty--rather just the lowest price. But, we couldn't just give up on a growing segment of passengers, especially since people are starting to fly again. Also, with super high prices at the pump (especially big cities in California and on the East Coast)--people won't be inclined to just drive an extra hour from those cities to get that lower fare--because it will cost the same in the end. That might help both of our airlines and hurt a certain orange one that likes "out of the way" airports like Manchester and Providence.....We shall see---take care bud.

Bye Bye--General Lee