FDJ2 said:
JP Morgan
"• Cash Flow Update – By our estimates, even without a pilot deal,
Delta should easily remain solvent in 2004, with an ending
unrestricted cash balance slightly north of $2 billion. With a 2H
pilot deal in place, we estimate an unrestricted cash balance of $2.4
billion. In our view, either figure is more than adequate under all
but the most draconian scenarios."
[email protected]
North American Credit Research
I never said DL would go BK this year. I agree with JP Morgan that for this year, DL is ok. However, what happens in 2005??? If DL has about 2 Billion in unrestricted cash on 12/31/04, that means DL will have reduced its cash position by 700 million during 2004. 1.5 Billion is likely the bankruptcy trigger amount, so that means by next year at this time, DL will have about 500 million left to play with. DL could easily burn another 250 million in 1st quarter '05 (they expect to burn 300-350 million in 1st quarter '04, so I'm assuming things improve some). This would leave DL around 1.75 Billion on 3/31/05 which is precariously close to the edge.
Of course, I'm assuming the pilots don't give concessions which grows less and less likely every day. Even DALPA has said they will soon abandon concession talk and begin preparations for section 6 negotiations.
The two elements that have been the hallmark of Delta throughout much of its history were a low-cost structure and top notch customer service. DL has never had the best route structure or best hubs (except for ATL). However, having costs lower than its competitors and good service easily made up for the structural weaknesses.
Today, DL's cost advantage has evaporated. The LCC's have costs much lower than DL and even many of the network carriers have costs that are similar to DL's. DL's customer service has fallen and is now mediocre at best. There's almost nothing to distinguish DL from Airtran. In fact, on many routes Airtran will have better service. Which would you prefer on a route like ATL-BUF if you were a business traveler: (1) a relatively new 717 with good sized overhead bins and enough room to use a laptop, plus affordable upgrades to Business Class and free XM radio OR (2) being crammed in an RJ with no upgrades, no radio, no room to open a laptop, walking out on the ramp in the pouring rain, plus there's a good chance ASA will lose your luggage or delay your flight?
Even Song, which is a big improvement in terms of service, is really just a copycat of JBLU. There's not much that really distinguishes Song. Worst of all, Song only provides good service on a bunch of leisure routes, while business routes (ATL-BOS, ATL-ORD,etc) are ignored by Delta. Could this be why DL's advanced bookings are weak??
Don't get me wrong, I'd love to see DL avoid BK. I'd love to see DL thrive and grow and maybe have the chance to fly for the Big D. Unfortunately, given DL's state of affairs I don't see that happening. It's not the pilots fault and I agree that concessions won't fix most of DL's problems, but this is where DL is now.
Before I turn into the General completely and write an entire novel, I'll stop.
)TC
