Delta's losses

[Tim47SIP]

ATLANTA, March 12 /PRNewswire-FirstCall/ -- Delta Air Lines DAL today filed its Annual Report on Form 10-K for the year ended Dec. 31, 2003. The Form 10-K contains updated guidance on Delta's March 2004 quarter net loss estimate. The estimated March quarter net loss is now expected to be approximately $400 million. Delta had previously estimated its net loss to range between $300 million and $350 million.

Continued pressures on passenger revenue, sustained higher fuel prices and costs associated with the settlement of fuel hedge contracts drove this revision. Approximately $47 million, net of tax, of the increase in Delta's March 2004 quarter net loss estimate is attributable to the fuel-related costs.

The continuing weakness on the revenue side, coupled with external cost pressures, including but not limited to fuel prices, further illustrate Delta's critical need to reduce costs to a competitive level for the long term.

For a complete copy of the Form 10-K filing, see delta.com/inside/investors/index.jsp

Well it is our slowest season. The flights have been slowly picking up in the last couple of weeks. Most of my flights have been nearly full. I wonder if this is just an orchestrated plan by management to get concessions. Time will tell.

 

[crjdxr]

I wonder if this is just an orchestrated plan by management to get concessions. Time will tell.

I hate to say it but I think your suspicions might be correct. Since DAL management doesn't seem to be interested in negotiating with their pilot group, DAL's next option might be to drive headlong into Ch. 11 to void the contract. That seems like an awfully extreme way to go, but, at this point, I'd believe it.

Having said that, what happens to the contracts at the W.O.'s? Does a Ch. 11 at Big Daddy void the contracts here at Skooter?

Best of luck to the mainline employees. It sure seems like things are going to get uglier. But quick.

 

[BlackCoffee]

United management did it. I hope Delta is more fortunate.

 

[StaySeated]

Filing Chapt. 11 does not "void" anything. Ever since Frank Lorenzo BK laws have prevented this technique. The company can, under bankruptcy law, file for certain sections of the contract to be renegotiated. The union gets a representative involved in the process and both sides can negotiate new language. The BK judge has the final decision. It is VERY risky for an airline to file for bankruptcy as an attempt to win concessions. With all of DAL's liquid cash, I would be shocked to see anything close to a BK filing.

 

[crjdxr]

Filing Chapt. 11 does not "void" anything. Ever since Frank Lorenzo BK laws have prevented this technique. The company can, under bankruptcy law, file for certain sections of the contract to be renegotiated. The union gets a representative involved in the process and both sides can negotiate new language. The BK judge has the final decision. It is VERY risky for an airline to file for bankruptcy as an attempt to win concessions. With all of DAL's liquid cash, I would be shocked to see anything close to a BK filing.

Thanks for clearing that up.

 

[MedFlyer]

In this case, I don't think this warning is related to concessions. All of the airlines are getting eaten alive by fuel costs. Along with DL, Frontier warned last week that they would not meet expectations. Simultaneously, analysts have lowered earnings expectations on almost all airlines including most of the LCC's.

DL is running out of places to cut costs. DL has done a decent job of hedging fuel, but they obviously can't control OPEC or other happenings in the Middle East. Customer service has been cut to bare bones and DL's customer service is probably close to being the worst among the major airlines. Aircraft leases are difficult to renegotiate as most of the major leasing companies have already been screwed over by USAirways and United. So, they're in no mood to give DL a break.

So what's left? Labor.

All other employee groups are right around or below industry standard except for DL's pilots. This leaves the pilots as DL's last piece of fat. It sucks, but that's life.

 

[no_land_3]

Really?

There are "other" pieces of fat to trim...not just our contract. Between donating multi-million dollar floats to the gay pride parade and handing out $135,000 in scholarships...hmmm...seems as though DL has plenty of cash to throw around.

No way is the DL pilot group going to fund events like these, management retention bonuses (worked great w/Fred Reid and a few others right?) and "self financing" rjs our guys aren't going to fly. There is a lot of fat left on the top of this company.

I will be happy to give DL a loan, but not a grant, if DL can show me that concessions will be used appropriately. Based on GG's comments this will not happen as he wants "deep and permanent" cuts.

The DMEC is representing us well. Our contract is amendable in 2005.


land_on_3

 

[Freebrd]

Oh how wonderful and thoughtful of Leo to 'protect' those pensions for management types so they wouldn't leave dear old DAL! Let's see, how many have left now, with that protected pension............

 

[General Lee]

As I stated in another post---it is amazing how Delta received $325 million from a bond sale about six weeks ago, and then prefunded the employee pensions EARLY. They used that money, which could have offset most of this loss, to finish off most of the PENSION FUNDING FOR THE YEAR----EARLY. Hmmm. Yes, fuel prices are also high, and that is probably hurting everyone except Southwest. Also, FDJ2 commented that they are also probably reporting the depreciation of some of our older planes, and that is how they can show a loss without burning through a lot of our $3 billion in cash. I think we should contribute something to them, but they have to sit down and negotiate.....We will probably have a loss each quarter UNTIL we give them concessions. The next two quarters will be harder to post such large losses since they are historically our best quarters. We shall see........


And Medflyer, you really like to target us, and you say everyone else is paid "industry average". Well, most of our employees are OLD, and they have average wages for 30 year employees. But compare that to one or two year Jetblue employees---our people make ten times more per hour. Look at our Flight Attendants---the most junior ones are 8 year employees making five times more than new LCC flight attendants.(we have 14,000 flight attendants) Most of our gate agents and mechanics have grey hair and make a lot more than Airtran or other LCCs workers with the same jobs. But, we pilots are always compared with the others from the LCCs. Can you see where I am going with this? Everyone needs to contribute----everyone. The flight attendants in reality only got a 3.3% pay cut, and they can fly more hours per month now. Grinstein also doesn't want any more unions on the property--so he will target the sole union first and try to get the most he can right off the bat. I am not saying here that we pilots should not give up any pay--but everyone should contribute in some way because we all have a stake in this.

Bye Bye---General Lee

 

[Heavy Set]

A "paper" loss is not the same as a "cash" loss. It is not clear what caused the $400 million loss - I am betting BAD MANAGEMENT - convenient that Leo leaves with his $14 million now...

I agree that Medflyer is a bit aggressive with his Delta posts. Sure, it is always easy to blame the Delta mainline pilots - the only unionized group. Medflyer, do you want the industry average wage to decline? Are you IN FAVOR of Delta mainline pilots making less? Is that because you are a member of management? Why would you possibly support lower wages for the pilots who actually set the bar for wages in the industry? Do you want everyone else to make less? Maybe you should think about it before you take such an aggressive stance...

Let's not forget that the Delta pilots are not the "sole" cause of poor performance. What about revenue management? What about really poor management decisions (does Delta have marketing at all - I haven't seen any advertising for years)?

It is true that the LCCs have demonstrated that a lower cost structure is an imperative for all legacy carriers - that is crystal clear. Delta's pilots (and I am not a Delta pilot) seem inclined to negotiate right now a wage cut (I have heard in the neighborhood of 15-20%). However, other labor groups are not being targeted... Management is not taking advantage of an opportunity to reduce operating costs NOW and have an impact on profits NOW. The pilots, unlike the other groups, are not obligated to take any cuts due to their contract - however they are willing to come to the table and negotiate.

I think Delta's management needs to wake up and smell the coffee - time to look at issues beyond the pilot wage issue - including effective management decision making...

 

[General Lee]

Bravo Heavy Set, Bravo.

Bye Bye---General Lee

 

[MedFlyer]

And Medflyer, you really like to target us, and you say everyone else is paid "industry average". Well, most of our employees are OLD, and they have average wages for 30 year employees. But compare that to one or two year Jetblue employees---our people make ten times more per hour. Look at our Flight Attendants---the most junior ones are 8 year employees making five times more than new LCC flight attendants.(we have 14,000 flight attendants) Most of our gate agents and mechanics have grey hair and make a lot more than Airtran or other LCCs workers with the same jobs. But, we pilots are always compared with the others from the LCCs. Can you see where I am going with this? Everyone needs to contribute----everyone. The flight attendants in reality only got a 3.3% pay cut, and they can fly more hours per month now. Grinstein also doesn't want any more unions on the property--so he will target the sole union first and try to get the most he can right off the bat. I am not saying here that we pilots should not give up any pay--but everyone should contribute in some way because we all have a stake in this.

Bye Bye---General Lee

General,

I'm not comparing DL's pay to LCC's for any employee. Obviously, you can't make that comparison....although somehow DL still has to compete with the LCC's.

I'm not sure if I could even try to argue with you given some of your outlandish comments. Do you really believe that other DL employees make 10 times what JB employees make? If that were true, DL FA's would be making 250-300K a year, DL mechanics would be making 400-800K a year and the DL pilots must be making close to 1+ million dollars a year IF they are making ten times what JB pays. You might want to check your numbers.

I agree with you General that all employees must help out and so far most have. DL employees (except for pilots) have had their medical benefits cut, retirement benefits cut, vacation benefits cut and have had their pay frozen for the past three years. Many DL employees have been permanently furloughed and unlike the DL pilots they will never be recalled. They've been replaced by kiosks or the internet. That's a permanent cost savings and a permanent productivity improvement.

Until the pilots have given up at least as much as the other employees, I can't really see taking any more from them. Once the pilots have made equal concessions, then you can go after all the non-contract employees for more.

 

[General Lee]

Medflyer,

Ok, you got me with my outlandish "Ten times" statement---Maybe 3 times more pay should be adequate for you. That is the truth---if you want to compare different pay scales like management is trying to do with us---then you should look at all of them. Most of the employees at Jetblue and growing Airtran are fairly junior---and most probably start in the $10-15 an hour range. Now look at our Delta people---most are old and have been around since we flew DC-6s. It is true. So, you must compare the employee groups to the other identical employee groups. Have you been on one of our flights lately? How old were the stews? I just got off a 3 day trip and we had DFW based stews on one leg that were all in their upper 50s or lower 60s. They all make at least $60,000 a year and work 2 on 5 off. How much do the Jetblue flight attendants make? What I am saying here is that our flight attendants may make "industry standard" wages--but at thirty years for longevity. You can't compete with LCCs when all or most of your employees are very senior at the top of their pay scales. Yes, our pilots make more than the LCCs and other Majors, and I have said that we should take a pay cut---but you have to look at everyone.

Also, we have taken a huge hit on the pilot side when it comes to furloughs, and we have a total of 3,000 less pilots (out of 10,500 pre-9-11). That is significant. Just like ticket counter people loosing their jobs to kiosks, we had flight engineer positions vanish with the parking of the L1011s and 727s.

I understand that the other employees lost some benefits---and we will also have increase medical premiums soon when our DPMP (Delta pilot medical program) ends within 1 year. We also are willing to talk about other benefit cuts---including those same things you wrote about (although I am not a negotiator)---and a lot of that is on the table--but they won't come to the table unless we capitulate and give them an outlandish sum just because "the LCC market is growing." The next pay reduction will be asked for because "Mars may be inhabited by little red men and we better be ready in case they build a space ship." We know about the debt and we also know that ASA just got 25 new RJs for FREE (or rather they are self financing.....). Where would our money go? To buy more RJs? Hmmmmm.

I will say it again---we will talk about giving up probably more than the others (more than the 3.3% the stews gave up)---but we will not be "taken." Read that statement again Medflyer and call Grinstein and tell him to show up at the table.

Bye Bye--General Lee

 

[MedFlyer]

I agree that Medflyer is a bit aggressive with his Delta posts. Sure, it is always easy to blame the Delta mainline pilots - the only unionized group. Medflyer, do you want the industry average wage to decline? Are you IN FAVOR of Delta mainline pilots making less? Is that because you are a member of management? Why would you possibly support lower wages for the pilots who actually set the bar for wages in the industry? Do you want everyone else to make less? Maybe you should think about it before you take such an aggressive stance...

No, I don't want the industry average to decline, but it will regardless of what I want. I'm not in FAVOR of DL mainline pilots making less, but I realize that making less is probably better than making nothing which is where DL is headed. I'm not a member of management of any airline.

What's the point in setting the bar for wages if your company is not economically viable? DL's current cost structure is not viable. If DL eventually is forced into BK or to the edge of BK, trust me the cuts will be far worse than what DL is asking for right now. Even worse, if DL does go BK, the bar set by Comair will come tumbling down which will drag the regional pay further into the mud.

Let's not forget that the Delta pilots are not the "sole" cause of poor performance. What about revenue management? What about really poor management decisions (does Delta have marketing at all - I haven't seen any advertising for years)?

You're right, the pilots aren't the sole cause and I haven't said they were nor have I seen it published anywhere that they are the sole cause. In fact, the 10-K filing which started this thread specifically mentioned fuel as being a big problem. I did state that in terms of costs, labor is the once place DL can still make large cuts. All other DL employees have taken some cuts already, which leaves the pilots standing out. That is a fact.

It is true that the LCCs have demonstrated that a lower cost structure is an imperative for all legacy carriers - that is crystal clear. Delta's pilots (and I am not a Delta pilot) seem inclined to negotiate right now a wage cut (I have heard in the neighborhood of 15-20%). However, other labor groups are not being targeted... Management is not taking advantage of an opportunity to reduce operating costs NOW and have an impact on profits NOW. The pilots, unlike the other groups, are not obligated to take any cuts due to their contract - however they are willing to come to the table and negotiate.

I think Delta's management needs to wake up and smell the coffee - time to look at issues beyond the pilot wage issue - including effective management decision making...

Again, other employee groups have taken cuts. They may not be pay cuts, but they still help DL's bottomline.

Is DALPA really serious about negotiating cuts? I have my doubts. I think they're only doing it for appearances sake. DALPA has no intention of offering any paycut. The 13% that DALPA offered was a joke...they knew it would be too low and that management woudn't go for it.

 

[Ninja]

Plz take off the rose colored glasses

 

[General Lee]

Ninja,

I think I have said many times that we should take cuts, but we all know that Delta is asking for the world, and we will probably settle for less, which will still help the company out. But, we need to all chip in something, and I am not talking about a 3.3% pay cut like the stews got. That was a ploy to make sure they didn't unionize---pure and simple.

Medflyer,

Of course you are worried at Comair---you don't want your pay to fall either. But, you have seen with the latest RFP that you also will not get growth without pay cuts of some sort. We are willing to negotiate, and I talked today with an MEC member in the lounge and he said he had no clue what management was doing, and that they were ready to talk when they had a offer. Maybe you haven't bought a car before, but you don't go in taking the first offer---on any negotiation. The 13.5% offer was a little low in my opinion, but most guys I fly with have told me 15-20% (or 15% plus the May raise) is probably right---and that would contribute plenty--and that is without other benies we would also probably give up. (I keep saying this--but I am NOT a negotiator) It would be nice if they came back and actually negotiated, and I think Dalpa would like to sit down again and talk this over---but we will not be "taken". I hope they eventually talk--but it is not Dalpa that is stalling. Even the analysts say they should take the money now and run.....and they say Chap 11 is an EMPTY threat right now, especially with the upcoming Summer season and the current Spring Break ---which has filled our planes to capacity. I would be very very surprised to see another huge loss next quarter(2nd).

Bye Bye--General Lee

 

[Freddie Spencer]

I would be very very surprised to see another huge loss next quarter(2nd).

Not those exact words, but you have been saying the same thing for at least the past year, maybe it's time to get off the crack pipe...

 

[XRMEFLYER]

Generally,
.

Where would our money go? To buy more RJs?

Delta does not pay for the WO's airplanes. They are paid for by the companies operating them. Delta more or less cosigns the note. That is all.

 

[80drvr]

Generally,
.
Delta does not pay for the WO's airplanes. They are paid for by the companies operating them. Delta more or less cosigns the note. That is all.

And who's balance sheet does that debt show up on?

Who's P & L does the interest show up on?

 

[XRMEFLYER]

And who's balance sheet does that debt show up on?

It depends, is Delta using Arthur Anderson?

AMF