OCT 8th DL announcement

[General Lee]

ATR-driver,

I think they might want to seperate them to have seperate rules etc. Look what they have done with the flight attendants. The Song flight attendants make less, work a lot more, and have fewer benefits. Also, except for the first 700 or so flight attendants at Song that came from mainline, the rest will be hired with 5 year contract that may or may not be renewed, and they leave with a little lump sum---or no retirement. Now, I don't think Dalpa would allow that, and I think if Song does become profitable, they probably wouldn't sell it. But, I can see them making it a different category, like a Delta Express, where they pay 15% less than mainline, but let you work 10 more hours a month to make up the difference. That seems plausible.

Bye Bye--General Lee

 

[GVFlyer]

Re: General Lee

Yeah, what's with the new thread?

Glad to hear that it's a viable rumor. With my ERJ holdings, I have my fingers crossed. Anyway, not to worry about the mfg slots. Embraer will be able to do 6 month on the 190 by 2005, and B6 is only asking for 1.5 per month till 2011. I wouldn't count out some 86 seat 175's as part of the purchase. The beauty of the 170/190 package is the ability to move the fleet based on demand. Besides the 175 will be available in the 3Q of 04.

I can't imagine why anyone would choose the 318. It's performance is similar to the 319, and carries fewer passengers. Can't see the 717 either, as I would think DL mgt wants that plane to remain an orphan. Besides BA is offering the 713, but that just increases pax to 130, and doesn't help the range. On top of that, the order may cannibalize the 737.

Being able to turn the a/c to the left coast from both hubs is a major factor. I have my fingers crossed.

I know this is way outside of my bailiwick, but how does the duribility of the product enter into the equation?

The EJ135 was certified in large part on the ramp at Savannah by the FAA's Atlanta ACO during the time we were doing GV developmental testing (Embraer had wanted Gulfstream to be a risk-sharing partner in their jet development; the Big G passed). That Jungle Jet, at least, was positively delicate. The CRJ is not exactly robust. I was at the Long Beach Boeing, nee Douglas, facility several times during 717 development (their chief test pilot for the project was the former chief test pilot for GV development). The 717 is a typical Douglas airliner that will last for 50,000 hours of multi-cycle airline use – short fields, hard landings, heavy braking.

Northwest is just now discovering that the AirBus is a 15 year airplane as their A300’s become maintenance intensive (and expensive). Compare this to the 50 Ex-Delta DC-9’s that they bought for $2 million each then spent $2 million an airframe to refurb. These DC 9’s have played a large part in Northwest’s economic recovery (they just cancelled a planned furlough) because the jets are reliable and Northwest doesn’t have to send money off to ILFC or GE Cap to pay for them.

Just my opinion, but I think that with either the Canadian product or the Brazilian airplane maintenance costs will skyrocket at the end of the warranty period and that should be a consideration when determining which jet to acquire. Is it?

GV

 

[lowecur]

GV

These new generation EMB mainliners are supposed to have a very stout airframe. I think Neeleman was quoted as saying they expected to get 60,000 hrs from them.

Maintenance Cost per flight hour is also less. The 170 is 19% less than the CRJ700. The 175 is 31% less than the CRJ900. The 190 is 25-27% cheaper than the 717, 736, and 318.

In other words, the NG of Embraer a/c are not built like an RJ. Now do they have a track record? No, so the final word will evolve over time. But keep in mind that B6 has had their engineers look at the a/c along with hired consulting engineers before their purchase.

Every day more and more credibility is achieved as many of the worlds airlines are lining up to purchase these new planes. You'll see a new IPO from China is evolving that will build the ERJ and EMB a/c in China (50-110 seats) just for their market.

 

[Bad-Andy]

lowecur,

You are kind of right about the IPO and big announcement. There is one coming (maybe as soon as today or tomorrow). But, it isn't China, it's Malaysia. I'm sitting at LIMA '03, and I've been shuttling VIPs back and forth (from the Minister of Defense to the heads of several airlines to the CDF) all week. Embraer chartered us to come over in the Legacy for a week to "show Embraer quality" to these guys. From all the conversations I've been sitting in on, it looks like Malaysia Airlines is going to lock up the market on the 190s and 195s. They are asking about how many delivery slots they can get, as soon as possible. So, if whoever comes in after them wants any orders, good luck getting them. The China deal is a little farther down the road. (Possibly early next year).

As for Delta, these guys have said with straight faces (both sober and after a drink or 3) that they have heard nothing about a big Delta-Embraer order. (Considering the President of Embraer is here, I think he'd have heard something by now if it was true...) The A-Bus guys have also said that they don't know about any big announcements either. (But, I haven't been able to ply them with drinks yet, either). The Boeing guys just smile and say "maybe, maybe not". Sounds to me like this whole "big order" thing is just a rumor...

 

[lowecur]

ba

Embraer folks are very good poker players. The B6 deal was under wraps so tight, that Wall St was really taken by surprise.

The fact that DL could possibly be going BA would be a stunner to me. The only a/c that fit are the 717 & 736. Airtran would like nothing better than to advertise the fact that the 717 has a future, and they would be licking their chops if DL picks the 736.

The possible Malaysia deal would not surprise me. The fact that they could tie up 8 to 10 slots per month on the 190/195 would be distressing. That certainly would send more business to BA and Airbus by default.

Another possible foreign order is the Qantas LCC startup. They are supposed to name an a/c soon. See if you can gleen any info on that deal.

Thanks for the heads up.

 

[Bad-Andy]

Lowecur,

Had an interesting dinner tonight with the Embraer guys, including a few too many drinks. We were talking about the Oct 8th deal (actually I was badgering them to tell me the truth), when one of the very senior PR guys walked up, and asked what we were talking about. We told him "the Delta deal" and he said, (this is a direct qoute) "Oh, you'll hear the details in a couple of days". He then got kind of pissed at my continuing to badger him for details and told me "his eniglish isnn't so gooodd..." So, who the heck knows what these guys are doing... Hmmmm..... And, now, just to mix it up a little, Air Asia (the Malaysian LCC) is being swooned to buy the 190's and 195's as well.... It will definately be an interesting week for Embraer...

 

[Redtails]

And to think, to pay for all of this they're asking Comair to open talks about renegotiating pilot/flight attendant contracts. Can they do that???!!!

 

[lowecur]

ba

So there is definitely some light on the DL deal? I sure hope ERJ gets the nod. DL needs this a/c to compete with WN, B6, and FL.

I've been talking with a DL pilot on another board, and he said DL has mentioned talking with Boeing on the Russian RRJ 95 (100 seater). When you mentioned the Boeing guys giving you a smile on a possible DL deal, the 717 or 736 just didn't make sense. I think if Boeing has any inside tract, it's for the RRJ 95. But time will tell.

Hopefully, EMJ has fattened their order book this weekend and will make some great announcements. Even if the DL is on hold till Dec 1, I still think ERJ has the inside track.

BA, thanks for all the inside. It's nice to have someone half way around the world listening to all this wheeling and dealing. Looking for a great week.

 

[lowecur]

Redtails

Giving the DL pilots more mainline seats and security is what the renegotiations will hinge on. They know they need to get in line pay wise with the rest of the industry. If they don't do a 100 seater deal soon, I look for them to buy ACA's CRJ's, and start another wholly owned regional. These a/c could be staffed by mainline furloughs.

As far as cash, DL has more than enough to get by. Heck, B6 ordered the 190's with around $250M in the bank. DL sure has a heck of alot more unstricted cash than that. With the economy picking up, I look for DL to do fine in 2004. Which means only losing 200-300M.

 

[FlyBoeingJets]

Re: Redtails

Giving the DL pilots more mainline seats and security is what the renegotiations will hinge on. They know they need to get in line pay wise with the rest of the industry. If they don't do a 100 seater deal soon, I look for them to buy ACA's CRJ's, and start another wholly owned regional. These a/c could be staffed by mainline furloughs.

Why would Delta buy a 100 seater and staff it with highly paid furloughees vs. buying more RJ's and staffing them with relatively low paid folks?

Delta has two wholly owned regionals already, ASA and Comair.

 

[General Lee]

Lowecur,

Well, I just got off a 4 day trip and heard bits and pieces, but no exact new airplane order yet. I don't think any Russian airplane would be considered, but maybe the A318 or EMB-190. We do have $3 billion in the bank, and $2.8 Billion of that is unrestricted. A piece of that could put a small down payment on some planes, but the lower payscales associated with that, along with getting rid of the more expensive 737-200s---might help pay them off in the long run. I don't know about buying more CRJ-50s and staffing them with our furloughs, but I would like to see that happen---doubt it will though.

Redtails,

First off, I don't think Comair will give up any pay, unless there is some expansion tied with it (getting ACA's Dorniers.....)---then they might accept it--but I don't know. I think Dalpa is ready to talk to management about our own paycuts, but management doesn't seem to want to give in to their demands--like a contract extension. I think we all know that we might want to help the company with some sort of cuts, but what about when times eventually get better? Can we have it back? No? That is not right---and they know it. I think we will eventually give about 15%, but that is my guess.

Bye Bye--General Lee

 

[FLB717]

Ok my bet is the announcment has NOTHING to do with Rj's from Emb or Canadair or Boeing or Airbus. Im quessing it is corporate structure. Why because Uncle Leo is all about splitting the baby. Time will tell but thats my guess.

 

[lowecur]

FlyBoeingjets

It's called give and take. Believe it or not management does understand economics and psychology. The 100 seater (provided it's the EMB 190) is by far the more economically sensible a/c vs the 50 seater. Mgt knows that DALPA wants jobs and security (contract extension), plus a fair paycheck. The 100 seater plus the contract extension, fits the bill on the give part of the equation. The take is the reduction of the existing hourly wage, plus a change in work rules.

The 3rd wholly owned would be insurance. Get 60 add'l CRJ's under a separate cover, and start staffing them with DL furloughees, and watch how quick Comair pilots & FA's come to the table.

They may do both, or they may elect to do one.

 

[lowecur]

General

The Oct 8th thing really is going to be touch and go. If ERJ announces any new orders before the 8th, it's going to skew the stock price/volume. That was one of my green lights prior to the B6 announcement.

The RRJ 95 is really an interesting possibility. The nice thing about it is of course the price (2/3 of the 190), but it could be ready for service 18 months after the first 190 goes to B6. I believe Boeing is making a hefty investment in this a/c, although the exact amount is unknown.

The retirement of the 732's down through the MD88's could start as soon as 8/05, and last until 2012. If DL purchased 250 EMB's over this time period, that's about 40 per yr (or $900M). I think with pay/work rule changes and economics of the 100 seater, that would be more than enough to warrant the purchase.

 

[General Lee]

Lowecur,

You come up with some good points. I think they will absolutely get lower rates with a new airplane, but doubtful about the productivity changes. I was told to my face by a member of the MEC that there would be no productivity changes until the last furlough, TBKANE, comes back. Now, that could have been told to me so I would get out of his face---I don't know. The extra RJs thing you have come up with could possibly happen, but it would surprise me. You must be good at "Battleship"---it seems like you can think ahead really well. I hope what you're thinking actually comes true. (I would bet on the A318 or EMB-190)

FLB717,

I don't think it would be a management change up---they have it too good right now. Who knows? We shall see---and it wouldn't surprise me if there isn't an anouncement after all.......

Bye Bye--General Lee