Song turns profit in 1st Qtr

[General Lee]

Delta's Song Unit Turns Profit In 1Q -Source

DOW JONES NEWSWIRES
April 15, 2004 10:44 a.m.

(Adds company source in the fourth paragraph confirming that Song was profitable in the first quarter.)

By Elizabeth Souder
Of DOW JONES NEWSWIRES
NEW YORK -- Delta Air Lines Inc.'s (DAL) low-cost airline unit, Song, turned a profit in the first quarter, with operating costs 20% below that of similar operations at Delta's main airline.

Delta Chief Executive Jerry Grinstein pointed out the "positive" first-quarter results in a letter on Thursday to Song employees congratulating them on their first anniversary.

"Song's leadership team has shared with me the positive first-quarter results you have helped achieve, including operating costs that are approximately 20 percent below those for mainline 757s," Grinstein said in the letter. Delta doesn't break out Song's financial results or operating statistics.

An inside source at the airline confirmed that Song was profitable in the first quarter, going into the black in both February and March.

Song flies a fleet of 36 Boeing 757 airplanes on routes that primarily serve leisure passengers.

Grinstein said Song has come up with some innovations that were adopted by the main airline to cut costs, such as boarding passengers according to zones rather than seats, selling food on board and preparing planes more quickly for takeoff.

Grinstein is reviewing all of Delta's operations to find ways to return the airline to profitability. It's not clear whether Song will survive the possible changes as a distinct unit and brand.

Delta has halted some of the growth it had planned for Song. In March, Grinstein said of Song during a presentation: "I understand fully what a fighter brand is, and that sometimes you have to make an economic investment in order to hold off competition; that makes a lot of sense to me. But there's always a question of the price you're willing to pay, and I think we have to understand that more fully before we're willing to expand."

On Tuesday, Grinstein said he will present the results of his review to the board in late summer, and that he hasn't reached any conclusions yet.

-By Elizabeth Souder, Dow Jones Newswires; 201-938-4148; [email protected]


Bye Bye--General Lee

 

[Flying Freddie]

Hey General,

Any published figures on Song? I have serious doubt on the validity of results on hearsay alone. But, then again would management lie to you guys (just before they all leave)?

 

[General Lee]

Freddie,

Why would Grinstein offer any good news now unless it had some truth to it? It should be all doom and gloom---to force concessions. I said before that John Salvaggio (the head of Song and probably fighting for his job....) told a group at recurrent that Song was doing a lot better and actually taking market share from Jetblue. Do I know if that is true? Nope. Could he be just protecting his job? Maybe. For some reason the numbers are private, and a lot of us would also like to know. But, you can understand (as I can) that more seats, faster turn times, more efficient aircraft (vs gas guzzling 737-200), and lower wages can make a difference, and that is overall what we want---to compete and fly MORE agianst the LCCs. (Not necessarily the lower wages part, but most of us are aware that that is what MUST happen)

As far as the people jumping ship----most have been part of the last "administration"----hired by Leo and Fred. (which were really hired by Grinstein) He seems to be cleaning house and he also hired Jack Smith----who headed GM and turned them around. That all sounds good to us----now if we could just get them to the table and actually negotiate......

Bye Bye--General Lee

 

[jetblue320]

Freddie,

Why would Grinstein offer any good news now unless it had some truth to it? It should be all doom and gloom---to force concessions. I said before that John Salvaggio (the head of Song and probably fighting for his job....) told a group at recurrent that Song was doing a lot better and actually taking market share from Jetblue. Do I know if that is true? Nope. Could he be just protecting his job? Maybe. For some reason the numbers are private, and a lot of us would also like to know. But, you can understand (as I can) that more seats, faster turn times, more efficient aircraft (vs gas guzzling 737-200), and lower wages can make a difference, and that is overall what we want---to compete and fly MORE agianst the LCCs. (Not necessarily the lower wages part, but most of us are aware that that is what MUST happen)

As far as the people jumping ship----most have been part of the last "administration"----hired by Leo and Fred. (which were really hired by Grinstein) He seems to be cleaning house and he also hired Jack Smith----who headed GM and turned them around. That all sounds good to us----now if we could just get them to the table and actually negotiate......

Bye Bye--General Lee

Hey Old Buddy, how can they be "taking market share from jetBlue" when our loads and yields are actually as high as they ever have been? Just curious. Sounds like a snow job to get in your pocket, as I am sure you probably suspect. But, if Song is truly turning a profit (which I doubt), then congradulations, really.

C yaaa

 

[Flying Freddie]

General,

With Song turning a profit maybe you won't have to have wage concessions. I never went to Harvard business school so what do I know?

 

[General Lee]

Freddie,

I doubt that. I just posted that article because many on this forum harrass me daily about Song. When I saw it, I yelled, "Ah yeah!" That doesn't mean any of our problems are solved, but it does back up what I have been saying about "giving Song time to get better known and maybe it will do well...." Who knows what will happen??(except Lowecur the palm reader)

Bye Bye--General Lee

 

[B6Busdriver]

Song might very well be profitable. I bet there are many profitable routes in the Delta system. The problem is there aren't enough to make a profit systemwide. UAL is supposedly going like gangbusters to the far east but the rest of the operation is losing it's arse. What's the answer? Convert the whole airline to Song? That won't work either with a hub and spoke system and various fleet types. So what's next? Cut costs and go after the pilots because they make too much (mgmt thinking). They will get concessions out of the pilots guaranteed. DALPA better decide where they want to give before the real game of brinksmanship comes. I hope it doesn't come to that.

 

[General Lee]

B6busdriver,

I agree, and I think the whole domestic ops should be like Song--with TVs etc--because that is what people really want. But, we still have a profitable INTL (Europe, Carribean, South America, Central America, and Tokyo). Maybe there will be two distinct sections---have a domestic airline built close to Song, and full fare INTL......With thousands of RJs in between. Dalpa has been watching this also, and is looking over the books now I believe. They also know the economy is getting better and people are returning to planes. The fares will be higher this Summer, but we still know we need to give some back. How much is the question.....

Bye Bye--General Lee

 

[Heavy Set]

I agree with the General. I think Delta mainline should incorporate Song's low fares and entertainment offerings (not the paint scheme) once the cost structure is reduced to an "agreeable" level. That agreeable level needs to be negotiated with the understanding that the LCC environment has changed EVERYTHING.... It's too bad that Song may have to go now that it is starting to gain some name recognition, etc. and doing relatively well...

Nice to hear Grinstein say SOME POSITIVE THINGS...

 

[BLUE BAYOU]

January was slow, but for most carriers, LCC or legacy, February and March were strong, especially the FL flying-- Our load factors to certain markets JFK- MCO, TPA, FLL, RSW, PBI were well above 95%-- it's inevitable that there would be spillover traffic to other carriers. Given that Song is only in its first year of operation, to turn a profit in light of the high fuel costs this past quarter is quite an accomplishment. DL management obviously knows how successful the unit is doing, and if its the only part of DL that's making a profit, why are they stalling its growth??? Unbelievable.

 

[CatfishVT9]

I'm no math major, but if Song's costs are 20% less than Delta mainline (with DAL regular aircrews?), that would seem to make the case for smaller wage concessions.

If I was a stockholder, I'd want to know why they haven't reduced costs at mainline as well..........

?????

Catfish

 

[b737drivr]

yeah right!!! a profit?

 

[skydraulic]

I'm no math major, but if Song's costs are 20% less than Delta mainline (with DAL regular aircrews?), that would seem to make the case for smaller wage concessions.

20% difference with less payroll going to stews, rampers/ CSAs and increasing aircraft utilization....just think what the cost savings would be if Jet Blue's pilots were flying them.

GG