Delta's losses

[Launchpad]

It depends, is Delta using Arthur Anderson?



Sort of... The CFO used to work for AA from what I understand.

 

[Tim47SIP]

Hevy set et al

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...


Your statement is very contradicting. You are upset in that if Delta takes pay cuts, they will "lower the bar", but at the same time you and other mainline guys are insisting that the rest of the group also takes pay cuts. Well if the rest of the group is already at or below industry average, then Delta mainline is condoning the "lowering of the bar" for every one. This would put ASA somewhere near Mesa and Comair below Mesaba or Air Whisky. Is that what you really want? With negotiations going on at ASA, that could very well bring us to the bottom of the barrel.

Also, no one is blaming the Delta pilots for the condition Delta is in. We know the Delta pilots did not cause the rise of LCC's, 911, the recession, fuel prices, retirements, etc.. But the reality is we are here. We have a pilot group that is the highest paid in the WORLD by 47%. The pay scales of pre 911 are gone, or at least for the time being. Just saying that "it is not the pilot's fault" is assenine at best. If Delta guys were say 10% above the industry and management was asking for 30%, then I could fully agree. But we already know that isnt even close to reality. This smoke and mirrors is getting old, on both sides of the fence. Management is very much to blame, but something (other than what is being offered by DALPA) has to be tendered to ensure long term survivability. What is so sad is the fact that even if G gets everything he wants (which he wont), Delta pilots will still be the HIGHEST paid pilots in the world. I am in no way suggesting that DALPA give everything G wants. On the contrary. I am suggesting that DALPA be a little more sincere in their offers to management and their demands of other employees.

 

[rvsm410]

Just wondering...HMMMM....

I'm pretty new to the club here and have spent alot of time getting up to speed on the airline issues after recently retiring from the AF.

I think I understand the economics currently affecting the legacy carriers verses the LCC's. Fuel costs should be affecting everyone the same so I'm not addressing this point.

The General says that most of the DAL employes are senior and thus in payscale which make sense, so my question is what happens in 5 or 10 years when the employees at the LCC"S are making 2x what they make now? Will they be as overly competitive as they seem to be at this point in time? will the gap in salarys between legacy and the LCC's be as great? And how will this affect their pricing?

Though I have only been in the job market for about a year, it seems the HR departments would be motivated to get rid of the oldest employees so they can hire 3 new ones at a lower scale, maybe this is one reason many of us are waiting so long to get offers?

Anyway, my point here is that in 5 to 10 years with the mainline salarys/bennies going down and the LCC'S moving up they will meet somewhere in the middle sometime in the future, so will the public find the same pricing, service etc then?

Just an observation while I wait to get on board hopefully somewhere in the middle of all this mess.

 

[IAHERJ]

I have a friend who is a 38 year flight attendant with American. In her 38 years she has had W-2's in excess of 50,000 only 5 times. She commutes on JetBlue and has befriended several of their commuting flight attendants. In their first 2 years, it is possible to make $50,000 as a flight attendant at JetBlue. This information comes from a flight attendant at JetBlue who is in the middle of the seniority list and picks up several trips a month but still has 13-15 days off each month. It can be done in under 5 years at this LCC.

IAHERJ

 

[hoosier33]

Pilot Pay - Delta

Just getting up to speed but seems clear that delta mgmt is not going to settle for much less than 30%+ cuts. from the stats i have seen, looks like delta pilots would remain the highest paid of the network carriers even with a 30% cut in pay. why do so many of the notes so adamant about cuts elsewhere when the company itself is intent on getting at least 50% of the total costs saves from non-pilots. The pilot compensation is the only pay scale that is significantly above peers. To create real long-term value, the company needs to get costs down to compete with the new realities of the competitive landscape. Take a look at the AMR stock chart relative to DAL's since pre-9/11 and you will see why mgmt is unlikely to bend. To only get half the cuts creates no LT value and only delays the day of reckoning. How important to you are the work rules compared to actual compensation? Is the union membership really that far from what the company is proposing? On the AMR example - believe that AMR still had around $2 billion in cash when they went to the brink - it is fair to say that the cash burn was significantly higher then because of SARS and Gulf War, but the environment can change quickly similar to the events in Spain last week.

 

[~~~^~~~]

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

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

In the case of ACA, the debt obligations and "profits" are all on ACA's books. However, if the scope language in contract 2000 forces Delta to buy the Dornier 328's, then the debt obligation and losses (the airplane has a 60 something percent dispatch reliability rate [ 9 of 34 getting new engines since the beginning of this year]) those losses go straight to Delta's books.

And General, you can call it a "paper loss" but paying nearly 20 million each for broken Dornier jets is going to harm the company. My guess puts this "paper loss" at $600,000,000 plus.

....All because ALPA does not want airplanes larger than 70 seats to be operated at any of the "non preferred" airlines. Even if the "non preferred" airlines pay more than US Airways. When will you guys realize the RJDC is on to something? ALPA needs to return to its roots and stop trying to run airlines with scope language. Scope should simply require that all Delta flying is done by Delta pilots, period.

~~~^~~~

 

[General Lee]

I don't think we think we are "above everyone else" and don't deserve a pay cut---I think we are just looking at the numbers. I don't know what the final amount will be, but we would like to know how much? Where will it go? When can we start to have SOME OF IT back? Will EVERYONE participate? ETC. Our negotiators would probably like to ask some of these questions---but we can't get any answers. When we hear stuff like "You will never get a raise again and LIKE IT"---that type of stuff is unacceptable. We also would be treating this like an investment--which in reality is what it is since we still have a contract. But, the company doesn't want to think of it that way. Something like "We give you some money now that you need, and we should be able to get some of it back when times are better...." But no, according to them "times will never get better due to the LCCs." That doesn't really float. I hope they do come up with something, though.

Bye Bye---General Lee


PS--Fins, I don't know how that Dojo deal will work out---but since Comair is soooooo profitable, I am sure they will have no problem absorbing those extra costs.....And, I doubt they are worth $20 million a piece still.

 

[~~~^~~~]

General : Do you think it is a sure thing that Delta will survive this?

Just looking at the numbers, I would have to say there is no chance Delta can recover. But, a lot of funny things happen with big employers. Maybe the government will bail Delta out like they have US Air and United. But, it is ust as likely that Delta will come begging for money about the same time that the politicians have to consider stopping the flow of government backed loans. At some point (even you have to agree) it is rediculous for the taxpayers to keep US Air & United alive.

Of course, that is also the other angle to the bankruptcy issue. If Delta has to get bailed out, the government can set the conditions to approve the loans. I think ALPA would rather deal with Grinstein than the Bush administration.

 

[XRMEFLYER]

Will EVERYONE participate?

Nope!

 

[General Lee]

Fins,

Will Delta survive this? They have twice the money and more assets (ASA/Comair, terminals, planes) than UAL and USair ever did, and those guys are still around, after Chap 11s and 9-11. The economy is still in somewhat of a recovery mode, and the other Majors would go first, resulting in a huge capacity loss that would be filled fast--and not necessarily by LCCs due to their lack of aircraft. You have got to be joking me.... Sure, there is the debt issue--but AA and other airlines have a lot more and we still have the most profitbale hub in the world (ATL) and carry more people domestically than anyone (even Southwest). I would say there is a good chance---but you like Grinstein are in "scare the heck out of everyone " mode. Why were those pensions paid off EARLY again this year? Why did we buy more RJs for you? Why did Morgan Stanley pay us $325 million for bonds? Would they do that on such a risky investment--and only one buyer for the whole lot? Are you shatting your pants?

Bye Bye--General Lee



PS--here is something interesting about Delta's Capital Expenditures as of late:

"Separately in the 10-K, Delta said it expects to spend about $1.2
billion on capital expenditures in 2004, according to its 10-K filed
with the Securities and Exchange Commission.

Capital spending will cover about $600 million for aircraft
expenditures, which includes $500 million for the acquisition of
regional jet aircraft, $300 million for aircraft parts and modifications
and $300 million for non-fleet capital expenditures. Non-fleet
capital expenditures will be funded through cash flows from
operations, while Delta said the remaining expenditures in 2004 will
be funded through cash and cash equivalents.

The company's 2003 capital expenditures totaled $1.5 billion,
which included the acquisition of 31 CRJ-200 and 20 CRJ-700
aircraft."

 

[hoosier33]

Will a pilot take less than a 30% pay cut if Delta enters chapter 11? Agree with you that Delta is not going away ie liquidate - maybe the only one that is likely to liquidate is USAIR and that has probably been pushed out another year with the amended terms of loan that were just made public. At least in the short-term RJs are good collateral and the airlines need to continue to buy to get around as much as they can from high labor and work rules to compete. Economy is picking up but airlines are not likely to increase revenue. Maybe traffic increases but in general fares will continue to soften. Price transparency and the untenable price of unrestricted fares are here to stay. The paradigm has shifted and from most of the posts it does not seem like anyone really gets the joke. This is not unique to the airline industry - "restructuring/cost cuts" have happened in all industries. Do you really think Morgan Stanley is still holding the $325million of convertible bonds? Those are long gone and whoever holds them now is at a significant loss unless they hedged the risk with shorting the DAL stock. That offering was a bet on the improving economy. Have to commend the company for taking the money when they can get it.

 

[General Lee]

hoosier33,

We played the capital markets and Morgan Stanley was the sole buyer of a chunk of convertible bonds with good yearly pay backs. they would not have invested that much as one buyer without thinking that Delta was fairly stable.

Delta has gotten smaller (mainline) and with total pay cuts through out the airline, even more can be done. The problem is that only one group is being targeted here currently for an huge sum---trying to "get it all" from one group. They are trying not to bring other unions on the property, and therefore are minimizing the effects on the other groups--unfairly. They claim that the others are at "industry standard" wages--but neglect to see that most are high time employees with higher pay scales than the competition. A thirty year gate agent at Delta make 5 times more than any Jetblue gate agent, and they are the competition. To say a small pay cut to reduce costs from them is not needed is ridiculous. Everyone has a stake in this company.

Also, fares have increased a tad as of late--but the major influence now is fuel prices. We are hedged better than some of the majors (CO/NW have zero, and USAir/AA have about 20%), and eventually those prices should come down---but trying to get wage concession down permanently for a temporary problem doesn't seem right. We can see that there needs to be some concession now, but to say that we can never have it back or can't have it back in steps is wrong.

Bye Bye---General Lee

 

[XRMEFLYER]

A thirty year gate agent at Delta make 5 times more than any Jetblue gate agent

Please! For the most part I'm with you on the "one ship one Navy" "we are all in it together" routine, but lets not get carried away with numbers that are not even close to reality. It diminishes your credibility and makes the entire argument suspect.

AMF

 

[hoosier33]

You are right about a couple of points. Delta is much better hedged than others when it comes to fuel but this only lasts through the 1st half of the year. On fares, think it will be interesting to see how "yield" plays out this year. Leisure fares have increased marginally with business fares still declining. Ultimately, for the big network guys to grow into the depths of debt that they have - they are going to need to grow the revenue line which can only really happen with fare increases and stable traffic. This seems very unlikely to happen over the intermediate term. Cutting costs by itself will not save the airlines but it is about the only thing they have some control over. On the Morgan Stanley converts - those bonds are trading actively in the convert market - today they are trading around 77 cents on the dollar compared to being priced at 1 dollar when issued in February. Morgan Stanley was only a broker in this transaction - they were not taking risk or saying that they believe in Delta's future. At the time the stock was 13.59 with a convert premium of 30%. The same DAL stock today is 7.70. Do not have an axe to grind but mgmt is telling the investment community that only half of the projected cuts are coming from the pilots. Maybe this is false but I doubt it. This is a bad situation but it is only going to get worse if you think your group is the only one targeted. "Us against them" has to have hugely negative impact on morale. The entire industry needs to remember they are really in the customer service industry.

 

[On Your Six]

Maybe management should also look at improving the revenue side... Delta's management is doing an AWFUL job of managing this airline. But the pilots are always the easy scape goat....

I think Leo's $14 million retirement pay package should be used to help pare down the debt... Thank GOD Fred Reid is leaving - he has helped to manage Delta into the ground - now things can only GET BETTER... Can't wait to see the stock rising again.

 

[MedFlyer]

Maybe management should also look at improving the revenue side... Delta's management is doing an AWFUL job of managing this airline. But the pilots are always the easy scape goat....

I think Leo's $14 million retirement pay package should be used to help pare down the debt... Thank GOD Fred Reid is leaving - he has helped to manage Delta into the ground - now things can only GET BETTER... Can't wait to see the stock rising again.

If DL management did such an awful job managing the airline shouldn't DL already be BK like UA and US or like CO and HP a decade ago?? Keep in mind that DL management has to find a way to compete against LCC's that have almost no costs and bankrupt airlines like US which are being kept alive by the government.

DL has little control over the revenue environment. Airlines with the lowest costs control the revenue environment and DL clearly isn't in that group.

The ugly reality is that pilot costs will have to come down permanently. The current DL pay structure was based on the revenue enviroment of the late 90's. However, that revenue environment was a brief anomaly in the airline industry. The overall revenue trend is downward and has been for 25 years. Any pilot that thinks revenues will return to the late 90's is delusional. They might briefly spike up again if we get a big boom, but you can't base long-term contracts on temporary spikes.

 

[General Lee]

Medflyer,

I agree that pilot costs need to come down, but I think OUR management wants your costs at Comair down too---and if you ever want to grow again, you will give in--just like we will. You are right, we will ALL give pay back and we will be paid less in the future, but everyone (all pilot groups) will get pressure from the top. The economy has been getting better overall, but now we have a gas crunch. Expect everyone to get sqeezed here. I bet when this is all over you and I will get close to a 20-30% pay cut....

Bye Bye---General Lee

 

[On Your Six]

Revenue management includes marketing - something that Delta doesn't do on any grand scale... On the cost management side, pilot pay is just one of many aspects up for review. What about fleet management? Why is Delta still flying gas-hog 737-200s? Why should JetBlue take the lead with regard to the 70-100 seat aircraft? Delta should have made a decision by now but instead must wait in line for years to get a decent fleet replacement (EMB, Airbus, 717, 736, etc.).

Delta's management has fumbled the ball again and again. Sure, pilot costs will have to come down, but that alone won't fix the problems - Delta needs GOOD LEADERSHIP and it is devoid of it at the moment - Grinchstein has started off on the wrong foot by blaming everything on the pilots...

 

[flaps30]

They already tried.

Hey General, Comair already said no to pay cuts.

 

[General Lee]

Yeah, I know. They won't get another pay raise though---and it will probably come down from there-----we will ALL lose money on this.

Bye Bye--General Lee