typhoonpilot
Daddy
- Joined
- Feb 24, 2002
- Posts
- 1,381
JUDGE: And I see a few hundred million dollars spend for stock equity in a
South American airline?
DL: That airline unfortunately went out of business, your honor.
JUDGE: I see. I mentioned that Delta needed a viable business plan. You do
understand this would presume a management team capable of competent
execution and decision making. It appears as though your management has
exercised all the financial restraint, responsibility and competence of a
spoiled sorority girl with her father's Neiman Marcus charge card. Were they
penalized?
DL: Um no. Actually we gave them bonuses. And a separate "bankruptcy proof"
retirement trust fund. You have to pay top dollar to keep top talent!
JUDGE: And have been able to keep top talent?
DL: Well, the funny thing is.............um.......they kind
of...........left.
JUDGE: All of them?
DL: Just about.
JUDGE: Well that is the first good news I've seen regarding this case so
far. From what I have seen so far, I am very concerned about the debt
accumulation which has been allowed. It appears Delta would be profitable
now if there were not such huge debt service. Do you seek a restructuring of
your debt? I see about half of it is unsecured. Your requests so far have
been unusual in that with most bankruptcy proceedings, debt reduction and
restructuring is the main priority.
DL: Uh, can we have our pilot pay cut now please? JUDGE: Enough about
operating costs and debt service. How about revenue? DL: Well, demand is
down so we have no pricing power.
JUDGE: Really? What are your load factors?
DL: In the 80% range.
JUDGE: That seems kind of high.
DL: Actually it is an all time record.
JUDGE: Shouldn't you raise ticket prices?
DL: I'll have to get back to you on that one as well, your honor. You see, a
funny thing happened. We tried to save money by cutting out travel agent
middle men by forcing our customers to the internet. And we kind of lost
control of our product distribution. (Heh, heh!) We believe the customer
always goes with the lowest price.
JUDGE: So a low cost carrier like JetBlue has cheaper tickets than Delta and
therefore is profitable?
DL: Well no. Actually, Jet Blue tickets cost more than Delta on average.
JUDGE: So then why don't the passengers choose Delta of over JetBlue?
DL: They will when they find out. For some strange reason, passengers think
JetBlue is a better value. We need to convince them otherwise. Unfortunately
we spent our advertising dollars on retaining top executive talent instead.
JUDGE: Not that again.
DL: Look, our marketing department is very busy at the moment managing all
aspects of our airline, they do not have time for marketing.
JUDGE: Regarding your pilot contract. You want me to allow you to basically
throw it out?
DL: We want our pilot costs down where American, United and US Airways are.
JUDGE: But looking at your total operating costs compared to the airlines
that have gotten employee concessions, you are presently cheaper than US
Airways, about the same as United, and only slightly above American. In
fact, you are also about the same as Northwest and Continental who turned a
profit last quarter. Perhaps we should be addressing the revenue side of
this equation.
DL: Yes but, we'd rather take it out of our pilots. Come on, most of all the
other airlines got to do it. PLEASE!?
JUDGE: "Because everyone else is doing it" is not an acceptable business
strategy in the opinion of this court. Besides, your haven't your pilots
been offering you over $300 million annually in concessions?
DL: Yes but this would require a two year extension to the pilot contract,
and should we need further relief, we would have to open negotiations with
the pilots.
JUDGE: But isn't that what you are doing now?
DL: Yes, but we prefer not to negotiate. We find we can get more leverage
with legal or political proceedings.
JUDGE: Have you tried to cut costs in any other areas? How are your other
employee groups' wages compared to the industry average?
DL: Above average, like the pilots. You see your honor; our competitors used
bankruptcy, or the threat thereof, lower employee wages across the board.
That is why our wages are relatively higher. We were hoping you could, you
know, help us out.
JUDGE: You feel it is important to lower your workers' wages to the match
the industry's reduced average. Since you are not contractually bound to pay
these other employee groups certain wages, and since you claim Delta is in
such dire straits as to need bankruptcy protection, why have you not lowered
their costs to align them with the rest of the industry?
DL: We cut some of their benefits but left their wages intact. Overall, we
feel that only the pilots should be paid less. Besides, we need a
competitive salary to attract the best people.
JUDGE: God forbid you should want to attract the best pilots. Counselor, the
purpose of this bankruptcy proceeding is to serve as a last resort to help
your company after all other possibilities have been exhausted. This court
is not a tool for you to use in the management of your company, especially
with regards to contract negotiation. That is what consultants, whom your
company seems all too fond of, are for. At this time, I find no cause for
action to allow you to move forward with bankruptcy proceedings. I would
recommend that you negotiate in good faith with your pilots, and get back to
the task of running your airline. This court is adjourned.
