Interesting ATA article

[Daedalus]

General Lee.....the Spinmeister!!!!

GL,

Let me be the first to congratulate your consistent efforts to defend your company. That is the proper thing to do in most cases since it is this same company which helps you put food on your table, and a roof over your head. However, with that said, I must also tell you that your positive outlook on Delta's future is just a tad bit over the top.

What do I mean? Well let's look at your statement:

Our cash on hand (unrestricted) went from $1.9 Billion to $2.8 Billion---and even though our debt is high, our liquidity is great.

Do you really know how high Delta's debt is? Let's start with the total (both long & short term) debt; as of Mar 31, 2003 (your company's latest SEC filing) Delta was in hock for a total of $23.9 Billion. No big deal right? Hell, you've got years and years to pay that off. In most situations I would agree with that sentiment. Much more alarming however is Delta's short-term debt obligations, aka current liabilities. These are liabilities which are due within the next 12 months. Once again, as of Mar 31, 2003 Delta had a short-term debt obligation of $6.8 Billion . This number has surely gone up since the Q1 number was posted (reference link below).

You then go on to say "....our liquidity is great."

If you mean that liquidity equals working capital (the proper definition of liquidity), then it is anything but great, and marginally worse than AMR's. To put it another way, Delta's quick ratio (a measure of liquidity) is .55; AMR's is .59; and way out in the lead is LUV at 1.55. Any number less than one means you owe more in debt than you possess in relatively liquid assets. All that cash you have (the $2.8 billion) is not even half of the money needed to pay your short-term debt in the next 12 months.....nevermind your normal operating expenses!

Delta better be OCF (operating cash flow) positve by a sizeable margin (a la JBLU) during the next 12 months, or face their creditors with hat in hand asking for a huge favor. As a matter of fact, Leo et al. is already well aware of the dire straits that lie ahead, and with your union saying no to wage concessions, Delta management has now approached their creditors with offers to renegotiate debt repayment due dates....see link:


http://biz.yahoo.com/djus/030728/1456001236_1.html

(BTW, reference the link, I'd love to ask the analyst from Vermont what he means by "strong Liquidity" with an apparent $11.4 billion in short-term debt due & $2.8 billion in cash)


While things may seem to be looking up in the current and last quarter, the fall and winter months ahead appear to be ominous again. This is evidenced by the fact that JBLU, AAI, ALK and others are now advertising big fare sales after Labor Day all the way thru Thanksgiving. The big-five majors will have to respond, and it will mean a whole lot more red ink for you and other legacy airlines.

Delta has mortgaged all its assets (net tangible assets under water by whopping $1.7 billion), and it can't sell it's own stock in the secondary markets. The sale of worldspan was probably the last big hoorah without resorting to more draconian measures. There are very few places left to turn to for relief. I can just hear the "B" word falling from Leo's lips if things turn any more negative.....May 2005 looks like an eternity away from today.

For your sake, and all my friends at Delta, I hope that I'm wrong. But I don't think you guys are going miss the blast effects of this one free and clear.

 

[LAZYB]

...and their pension plan is not fully funded. Some billions of $$$$

 

[General Lee]

Daedalus,

Very interesting. You seem to be right in there with Leo. I am sure he asks you for advice. If we were in those dire straits that you predict, wouldn't Leo have asked the other employees for help? No, he would have slashed their wages anyways since they have no unions. It would have been very easy to do that, but he did not, and that would have helped right away. You are right about the debt, and DALPA is looking at that everyday with their EF&A committee. If we were in danger of tanking, like you say, they would have given everything but the kitchen sink, and they are privey to the important documents---unlike you. Delta did just refinance some of the debt payments due in 2005--I believe they paid half in cash and refied the rest at a little higher rate. If and when ALL of the employees give 10-15%, we will easily pay that debt payment off. Sure, we will be paying for a long time, but we are not close to the "B" word you like to point out. Dalpa would be on top of that quickly---what do you think we are? Idiots? Nope. This company is far better off now than we were last year, and we are leaner and meaner. Some of that debt you talk about is debt brought on by the building of two new terminals--one in BOS and one in JFK(if that was really hurting us don't you think our CFO Michele Burns or Leo would stop the construction??). Right? I guess they don't know what they are doing, and only your CEO knows how to run an airline. Give me a break. Jetblue is the solution to every airline. Right. Maybe we need to hire you to clean house? Yeah, and you would require a $10 million signing bonus and a huge off shore pension. We are healthy in the cash department. You seem to think that isn't very important with the high debt, but Standard and Poor's thinks it's good:

"For its part, Delta Air Lines' stock (DAL: news, chart, profile) rose 7.4 percent to $11.98. Standard & Poor's noted Delta faces adverse conditions on the debt-market front, but also said the company has a healthy cash flow. Separately, the carrier announced it's adding flights between Atlanta and Oakland, Calif."

We all know about the debt front, and we do not owe $6.8 billion right away--we owe $1 billion in 2005, and most of that has now been pushed to 2007 and 2008(refied)--waiting for better times. Dalpa is watching this like a hawk, and knows the financial aspects of this company a lot better than YOU do. And, Leo and CFO Michele Burns stated that we were in no danger of Chap 11. We know about the debt payments, and will help when needed. According to your insight--debt is everything. Well, AOL currently has $24 billion in debt, and according to you they should be history. It really is all about cash flow and servicing the debt. And, we have great cash flow. You can easily survive with tons of debt, as long as you can service it, and we can, especially if we eventually give back 10-15% from EVERYONE. And, in case you didn't know, Leo was a banker with First Chicago bank for 15 years--so he probably knows something about this issue, unless you think you know better, and you probably think you do. You really missed your calling as a banker, or a teller.

Lazy B,

The pension shortfall is a function of the stock market. As the stock price rises for each stock, the pension shortfall decreases. Our stock has doubled (from $6.00 to $12.00 or so) in the last 2 months, and it will go up even more when we eventually give some pay back. (Common sense) The shortfall will get smaller and smaller, and Delta has met their minimum obligations as set forth by the government.

Bye Bye--General Lee

 

[flyhard]

Lee,

You voiced your concern over your furloughed pilots. Then you brag about how your captain buddy sells back over 100 hours of vacation. Now tell me Lee, why would the company start making recalls when they can buy more production from the pilot group? Spin away Lee, spin away.

 

[General Lee]

Flyhard,

Because they have to. They will lose this upcoming grievance( I think in late Sept in ATL) and the word is (on our Dalpa net) that they are preparing to bring back the 250 War Emergency furloughs. Yes, some Captains sell back their vacation, and that is a part of the contract that the senior guys like very much, but they were doing that pre-9-11 too. But, do you think those senior guys pick up a lot of extra trips (besides some greenslips awarded to the very very senior)? No way. If you think everyone gets $68,000 back you are mistaken, and most guys (90%) use their vacation to get away from ATL.

Bye Bye--General Lee

 

[FLB717]

Gen,

1. Delta went for you first on the givebacks so then could cut the other groups and say,"Hey we got money from those evil pilots but hey woldnt give enough now you Mr. (Ramper,Mech,Gate Agent) must share some of the pain also" in the backgound "Mr Leo your 2pm facial is ready, and your 4pm bonus meeting is approving your personal 10 Billion Stock Grant"

2. If the pilot group as a whole reall cared about the furloughed guys (as you say you do) they would not take green slips/overtime/extra to force the company to recall some pilots.