Interesting Delta article......read this

[General Lee]

Interesting Delta article......check this out

Airlines have habit of flying on empty

By DAVID MOON, Moon Capital Investment
May 16, 2004

It's bad enough when there is one little boy who constantly cries
"wolf." Imagine an entire neighborhood of little boys crying wolf,
while at the same time setting out food for the wolves.

That is the airline industry. Airlines regularly warn of their
impending doom, while often acting in ways that actually bring
about that doom.

On Monday, Delta Air Lines warned that it might have to file for
bankruptcy if its pilots' union didn't make certain salary
concessions.

A few months ago, someone related an experience to me.
She was in a meeting with Delta executives discussing
distribution systems. The Delta executives warned that they
would likely issue a bankruptcy warning this summer, but no one
should worry; it was all part of their negotiation strategy with the
pilots' union.
"Wolf," anyone?

It's not just Delta; it's almost the entire airline neighborhood.

A year ago, American Airlines wrestled wage concessions from
three major unions after threatening to file for Chapter 11
bankruptcy without the salary cuts. The company had just
announced a loss of a billion dollars for the first quarter of 2003.

US Airways, which emerged from bankruptcy in 2003, is now
threatening another bankruptcy filing if it doesn't get employee
wage concessions.

Don't forget, these companies received $15 billion in federal
financial assistance following the Sept. 11 attacks. A year later,
the industry went back to the feds, asking for another $9 billion.
The airlines are money addicts, and the government is an
enabler.

Local governments are as enabling as the feds. San Francisco
International Airport just cut its landing fees in an attempt to help
already-bankrupt United Airlines

In addition to financial bailouts, politicians are willing to help the
airlines with negotiating strategy. Florida Congressman John
Mica, chairman of the House aviation subcommittee, suggested
that "the best thing that could happen to the large U.S. carriers is
being forced into bankruptcy," acknowledging it would increase
their negotiating leverage with employees.

For every airline that threatens bankruptcy, however, it seems
another two or three actually file for protection.

The problems aren't just limited to well-known airlines or just
those in the United States.

Current bankruptcies include Royal Tonga Airline, Armenian
Airlines, Russian Vnukovo Airlines, Hawaiian Airlines, Las
Vegas-based National Airlines, Belgium's Delsey Airlines,
Trillium Air, Pem-Air Limited and Brussels-based Sobelair.

Last year, pilots around the world celebrated the 100th
anniversary of the Wright brothers' first flight at Kitty Hawk, N.C.
On Dec. 17, 1903, the aviation industry was born. Since that day,
the airline industry has, in total, failed to produce a profit. Since
inception, it has posted a net cumulative loss.

With the exception of Southwest Airlines (which is such a
different creature that it warrants an entire column), I cannot
imagine why anyone would commit a long-term investment to
this industry, except as a result of high-flying ego or stupidity.

Either that, or they are drawn to little boys and wolves.


David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. He may be
contacted by e-mail at [email protected].


Bye Bye--General Lee

 

[Heavy Set]

Need Medflyer's Opinion on THIS...

Not surprising. Dave Siegel and Frank Lorenzo have used this tactic successfully. Just shows you nobody can keep SECRETS...

Hey Medflyer, what do you think about this article?

 

[MedFlyer]

There's nothing in this article that surprises me.

I'm sure that management is using the threat of BK to get concessions. Eventually though, the threat will become a reality. Many UAL pilots swore that UAL would never file BK and that it was all just a threat for concessions. Initially, they were probably right, it was just a threat. But then one day, threat became reality.

I guess management could just say nothing at all and stick their heads in the sand. They could just ignore their bloated cost structure and hope things turn around some day. That's what Mullin and his cronies did after 9/11 and it worked so well for Delta.

 

[General Lee]

Medflyer,

Dalpa knows this strategy too and also has a copy of the "books"--and they know better than you and I how things are going to play out. They just put management on "notice" that they are monitoring for any type of "stock manipulation" with regards to statements in the media. We all know that things aren't great right now, but the realy question is: "Will the two sides come to an agreement that is fair and one through negotiation?" I think that will eventually be the case. We sure as heck don't need extra pressure from Comair pilots who themselves are worried about their own possible pay cuts. I don't mind your opinions---which are free on this board----but don't try to come in and use scare tactics when you and I both know that WE don't really know or can see the whole picture. We read what is in the media and hear rumors etc---but that isn't the whole picture.

Bye Bye--General Lee

 

[FDJ2]

I guess management could just say nothing at all and stick their heads in the sand. They could just ignore their bloated cost structure and hope things turn around some day. That's what Mullin and his cronies did after 9/11 and it worked so well for Delta.

Mullin and his cronies agressively pursued RJs. DAL has spent billions on high cost RJ lift, more than any other carrier. DAL also squandered billions in purchasing ASA/CMR when it could have gotten the same lift from other contractors for less and avoided a $700M 89 day strike. Prior to DAL's RJ binge it was one of the most profitable airlines with the best balance sheet. Apparently the RJ strategy has not worked out. Did DAL need to sink $3B into acquiring ASA/CMR, just to lose an additional $700M from an 89 day strike? Does DAL need to have the largest RJ fleet, with its high costs flying 1/3 of its block hours? I'm sure these are some of the issues GG is considering in his strategic review.

 

[ATR-DRIVR]

OK then!!! I guess we all know now that the problem(s) at big D are all the fault of ASA/CMR. Boy I am glad FDJ has got that all cleared up!!! I thought the problems were over at the big house!! Whew, silly me!!

 

[Heavy Set]

ATR,

I don't think that is what FDJ2 meant. Certainly DAL, like a lot of the other majors, was in a much better position financially pre 9/11. Leo made some strategic errors in terms of cash management - he didn't necessarily need to acquire ASA and Comair to maintain feed. He certainly did not need to squander billions on a huge stock buyback - it all evaporated....

Now that DAL's financial situation has changed, all the pieces of the puzzle will need to be reexamined. That includes Song and its future, the need for owning regional feed vs. renting it like UAL, a West-Coast strategy, and the 100-seater question... These are all strategic questions that need to be answered - not just the RJ issue (although AirTran has made a big statement recently with its discontinuation of Air Whiskey contract).

Hopefully GG will address all of these issues with the new strategic plan in August...

 

[climbhappy]

based on FDJ2's numbers, wouldn't Delta have been better off just putting out for bid all of the RJ flying. Does owning a regional make any sense at all in todays low cost environment?

 

[General Lee]

ATR-Drivr,

Easy now. I know it seems like everyone is pointing fingers at everyone else. Yes, we here at mainline have a pay gap that is inconsistant with our peers, and that will be addressed by us and management in a negotiation. We know that. But, at the same time, we know that the CASM side of the equation makes RJs more expensive on shorter flights, and we also know that most businessmen would rather avoid RJs on long flights. Airtran and Jetblue have figured out that RJs are not the answer---with Airtran bailing on all of their Airwhisky RJs, and Jetblue getting nothing smaller than a 100 seater. Those guys along with Southwest tend to think that lower fares and more seats equal profits. That will be the trend in the future, and Delta will have to follow eventually. We will have great competition from the LCCs--and on direct competition routes we will have to respond with more seats. On routes without direct competition--we can still offer RJs which should make money on those specific routes. Even those ATRs are good at one thing---taking a lot of people from one place to another at a relatively low cost---albeit at a slower speed. I don't thinnk FDJ2 was blaming you guys in general---but rather the flawed strategies of Leo and Fred---and now surmising what Grinstein will do next. I don't think he will ground the RJ fleet........They are still a great tool for exploring new routes, supplementing some mainline flights on off peak hours, and a good prop replacement on certain routes. This strategic review will be interesting to see---if anyone actually gets to look at it......

Bye Bye--General Lee

 

[ATR-DRIVR]

Heavy Set,
I hope very much for all that he does have a plan, sure wouldn't be good practice for them if they are just reading the AJC and snacking on Krispy Kreme's.
General,
The RJ's have a place in the business for sure, I agree. My reaction is because his post(s) in almost all cases blame ASA/CMR. I and most of the others on this side tire of this. We applaud and support Mainline pilots and their stand for pay and benefits.
WE are not to blame. Mainline is not to blame. The big red house on Virgina Ave is the place to start.

 

[General Lee]

ATR-drivr,

That is true. In ways looking to cut costs, our pilot pay is an obvious starting point---but not the ending point and just hoping other airlines die and having no concrete plan to compete. We can see that we need to give some back, and hopefully they will negotiate something fair and also come up with a good plan to move forward. I am not against giving up pay---but rather against giving it up with nothing to show for it.......

Bye Bye--General Lee

 

[jarhead]

General Lee,

This is not meant to be some sort of flame bait, but would not keeping your employer in business, and your opportunity to be paid by Delta not be “getting something in return”?

Although not an all together appropriate comparison, I recall in the 1980’s when the president fired all the air traffic controllers for going on strike. ( Yes, I know there is no strike involved here) But in my neighborhood, I had two neighbors who were ATC. One went out on the illegal strike, the other did not. The guy who wanted to be paid more than he was getting, lost everything; his job, his home, everything. 10 years ago I lost track of him, but he left the area destitute, with no prospect of ever getting close to his former pay.

The guy that did not partake in the illegal strike, kept his job, is doing real well, and never lost a dime.

The point is, that sometimes getting half a loaf, is better than having no loaf at all. That is getting something for your sacrifice, is it not?

 

[MedFlyer]

Mullin and his cronies agressively pursued RJs. DAL has spent billions on high cost RJ lift, more than any other carrier. DAL also squandered billions in purchasing ASA/CMR when it could have gotten the same lift from other contractors for less and avoided a $700M 89 day strike. Prior to DAL's RJ binge it was one of the most profitable airlines with the best balance sheet. Apparently the RJ strategy has not worked out. Did DAL need to sink $3B into acquiring ASA/CMR, just to lose an additional $700M from an 89 day strike? Does DAL need to have the largest RJ fleet, with its high costs flying 1/3 of its block hours? I'm sure these are some of the issues GG is considering in his strategic review.

You really need to decided if DL should own its regional carriers or just contract out. On this thread, you complain that DL should not have bought ASA/CMR because it would be cheaper to use contract carriers. But in another thread, you posted about UAL's big losses using regional carriers...ALL of which are contract carriers. Apparently, UAL's strategy of contracting everything out isn't working so well either.

As I mentioned in another thread, I actually agree with you to some degree. The RJ's are a PART of the problem. DL relies too heavily on them. Part of the reason is because DL has really crappy hubs (except for ATL), but the big reason is DL has tried to use the RJ's to fix a broken mainline product.

 

[General Lee]

Jarhead,

Of course it would be great to keep my employer afloat, but at the curent "RJs and frequency" plan, it will sink against the LCCs. Every LCC has figured out that RJs aren't the way to go---and they are profitable. Grinstein will hopefully see this in his strategic review and come up with a plan to fight the domestic LCCs. I am sure pilot pay cuts will be included, and I am fine with that. But, that alone will not help us compete, and I think you know that too. The passengers are finally back, and now we don't have enough mainline planes, we have 3000 total less mainline pilots, and hundreds more RJs with 1000 new DCI pilots---and the only thing they are targeting is our group. It makes you wonder what they will do next.....And, a lot of those striking PATCO people back in the 80's eventually went to ASA---like Bob Arnold--their MEC Chair. (I read his bio)

Medflyer,

That broken product was fine pre-9-11. We were making money hand over fist---and then we lost money with the Comair strike, and then the $2.3 billion stock buy back that later evaporated when the stocks tanked. The customer service part then went down due to all of the flight attendant furloughs (all the young and fun ones)--leaving the disgruntled senior ones now having to be short call reserves. What needs to happen is a pay cut for the pilots (to be negotiated), and a retirement plan (costs some more $$) for the senior stews so they can call back the junior fun stews that loved their jobs. They thought it was great making $30 an hour flying all over the country and world--whereas our current old mamas can't make less than $50 an hour and would rather read a magazine in the back than roam the aisles looking to assist people. I sit in my cockpit and try to fly a smooth flight and try to "roll it on" as much as possible----but they are back there for safety and service. (there I go again--pointing more fingers.....) Our most junior stew is an 8 year stew currently---but they are bringing back 130 furloughed ones in July--which should help a little. That is just one part that I think also needs fixing....

Bye Bye--General Lee

 

[jarhead]

General Lee,

I understand what you are saying. The LCC’s are DAL mainlines biggest headache. JetBlu for instance, is not typically a short haul carrier. I also think that DAL management needs to re-think its routes for the RJ fleet. They need to be used for the original intent, to bring pax from remote cities as feed for the longer leg, larger a/c. out of the hubs. I don’t have all the dynamics, but my gut tells me that this ‘frequency’ thing is a bit overblown.

Yes, the whole structure needs to be realigned for optimum utilization against the LCC outfits. And that area (the LCC competion) is where cost reductions have to take place to get the flying public on Delta airplanes.

 

[Heavy Set]

Jarhead,

Yeah, JetBlue is not a short-haul carrier YET. The EMB-190s will redefine how the LCCs address small-to-midsize markets efficiently. Delta does not have a 100 seater to address this new form of competition. Even AirTran has elected to ditch the 50 seaters in favor of 110-120 seat 717s on small-to-midsize markets. Again, Delta is behind the curve in terms of strategy to address the LCCs... Time to roll out the plan...

 

[701EV]

General,

I posted this a couple of weeks ago, I don't know if you saw it? Gerry has lot's of ways to save money. It appears he just want's to use your contract and the AJC to do it.



If Gerry really wants to save money. Why not show some good faith and merge Comair and ASA, then well you know... wishful thinking? We could get rid of three managemnet trees, Freddy B, Randy R, and Skippy B. Then Maintanence, Flight Control,and so on. Delta has their own hotel dept. Comair has their own hotel dept. ASA contracts out it's hotel dept to the tune of a couple of hundred thousand dollars a year. Oh another dept we colud consolidate to save money. I could go on, these just popped into my head.

Come on Gerry step up to the plate and show us you really want to save money. Or does he just want gut what costs the most right now?

Just a thought...

701EV

 

[wms]

Again, Delta is behind the curve in terms of strategy to address the LCCs... Time to roll out the plan...

I believe as soon as they resolve the issues with the ML pilots they will. They obviously know the need of the 100 seaters as they have taken the 732s out of retirement. DAL is in a better position and more formidable and flexible than they are willing to admit while these issues are still unresolved. Hopefully they are resolved soon and DAL really has a plan, and we can all get on with it.

 

[General Lee]

true dat!

 

[Holy Shiite]

I can't believe that there is still talk of how expensive the rj's are and how they can't compete with the lcc's. You guys need to remove your heads from the up and locked position and quit spewing this crap that someone is feeding you. The rj has and will never compete successfully with the lcc's. Remember comair flying the mco-fll legs back in 94 about 4 or 5 a day? Southwest came in and announced service on those routes and comair promplty exited the market asap and deployed the rj's to guaranteed profitable routes. There are hundreds of markets that have been identified and can support rj flying with guaranteed profitability that have not even been tapped yet. The rj's have their niche and will be around for a long.long time. Can somebody give me an example where delta has used rj's to try and compete with lcc's?
HS