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The five dumbest things on Wall St Last week!

spinproof

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By Colin Barr
Companies Editor
9/23/2005 7:04 AM EDT
Click here for more stories by Colin Barr




1. Liftoff

Even in bankruptcy, the airline industry seems doomed to repeat its own mistakes.



On Thursday, Delta (DAL:NYSE - commentary - research - Cramer's Take) tightened its belt yet again. Just a week after seeking Chapter 11 protection, the big Atlanta-based carrier set plans to eliminate as many as 9,000 jobs on top of the 8,000 it has cut in the last year. Delta is calling for staffwide salary givebacks too, mostly in the 7% to 10% range.

All told, the moves will help Delta to slash annual costs by $3 billion.

No one doubts the cutbacks are necessary. Hefty overhead and a sharp rise in energy prices have laid low big carriers such as US Airways and Northwest (NWACQ:Nasdaq - commentary - research - Cramer's Take), and even stronger players such as Southwest (LUV:NYSE - commentary - research - Cramer's Take) have grown dependent on gimmicks like fuel-price hedging. And to his credit, Delta CEO Gerald Grinstein saved the deepest cut for himself, docking his own pay 25%.

But underlying Delta's latest plan is yet another optimistic assumption, the likes of which you'd think industry execs would have gotten over by now. Delta is assuming it can zip through bankruptcy court in just over two years.

Delta's comments echo those made by United parent UAL almost three years ago. In December 2002, CEO Glenn Tilton pledged to get United back on its feet in just 18 months.

But today, UAL is still operating under bankruptcy protection.

Last week it disclosed plans to emerge from Chapter 11 on Feb. 1 -- nearly 38 months after its bankruptcy filing.

"Delta will move quickly and decisively to do what is necessary to beat our competitors and meet our financial commitments, and this means we will become a smaller, more cost-efficient airline, with a strengthened network and a stronger balance sheet," Grinstein said Thursday. "Our transformation will be sweeping and fast-paced; it must be if we are to survive and thrive as a stand-alone company in control of our own destiny."

You can't fault Grinstein for trying.

But considering all its other problems, a race against time is the last thing Delta needs right now.

http://images.thestreet.com/tsc/common/images/storyimages/dum90.jpgDumb-o-Meter score: 90. Considering United's experience, time should be getting some good odds against Delta.
 
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Tejas-Jet

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<<even stronger players such as Southwest (LUV:NYSE - commentary - research - Cramer's Take) have grown dependent on gimmicks like fuel-price hedging.>>


I wouldn't call Fuel Hedging a "gimmick". Its a business strategy that has been a success. SWA had the finances to get involved to a large degree. Something other carriers didn't have.

Fuel hedges are always being re-negotiated but you've got to have the up-front money...again, something most carriers don't have. In addition, word up on the street is that SWA has been quietly doing some of its own cost cutting over the last few years...and looking at more in the future....remember their mantra....During the good times, plan for the bad times...

Tejas
 

bestpilot

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Tejas-Jet said:
<<even stronger players such as Southwest (LUV:NYSE - commentary - research - Cramer's Take) have grown dependent on gimmicks like fuel-price hedging.>>


I wouldn't call Fuel Hedging a "gimmick". Its a business strategy that has been a success. SWA had the finances to get involved to a large degree. Something other carriers didn't have.

Fuel hedges are always being re-negotiated but you've got to have the up-front money...again, something most carriers don't have. In addition, word up on the street is that SWA has been quietly doing some of its own cost cutting over the last few years...and looking at more in the future....remember their mantra....During the good times, plan for the bad times...

Tejas


Duuude, are dere like Brewski Hedging programs dat any of da peeps know bouts? Ifn you do, can you gimmie somma dat up-front money cause I aint gots dat eether
 

spinproof

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...funny how a company wants to move fast when its "your" money and it takes three years and abitration when its "theirs":mad:
 

capt. megadeth

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spinproof said:
And to his credit, Delta CEO Gerald Grinstein saved the deepest cut for himself, docking his own pay 25%.

.

Screw that guy.....he will still be a millionaire. The only credit I would give him is if he never had to file in the first place.
 

FN FAL

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spinproof said:
You can't fault Grinstein for trying.

But considering all its other problems, a race against time is the last thing Delta needs right now.
Why are you picking on Delta?

You guys can argue CASM's, regionals v. mainline, 70 seaters v. 90 seaters, outsourcing v. in house...but one thing remains, it's gotten a hell of a lot more expensive to pump gas in the car and take the old lady out to dinner.

It doesn't matter what airline you work for...disposable income for Americans has been dug into by recent events in the news. Good luck.
 
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