Too many RJ's & why Comair can't wait for the E170

[surplus1]

Thanks.

 

[General Lee]

The VP of Flt Ops will tell you whatever you want to hear.

You can already see the lie in the "waiting for better pricing" line. Boeing planes aren't going to get cheaper. In fact, if demand for planes picks up (as the airlines recover), Boeing will increase prices.

While I'm pretty sure the MD88's and 733's will be replaced by other mainline planes, the 50 732's probably won't. They'll mostly get replaced by E170's.

Huh? I am glad you know what he was thinking. What? We aren't negotiating anymore. He can say anything he wants and we can do NOTHING about it. He also said a lot of interesting stuff about you guys, but we obviously wanted to "hear it." He talked about your Xmas fiasco and the net results. He talked about how Skywest and Chautaqua could afford new airplanes and how well they were doing.

On the Boeing front, he talked specifically about the current relationship with Boeing. That is all I will say, but more was said. He said he wouldn't mind leasing some airplanes in the mean time to fill any gaps. (he said this to make us happy? He called the lounge meeting when he just showed up) And, he said not all of the 732s will go quickly, since they are soo cheap to operate lease wise and they just re-uped some. He stated that we need all of the capacity we can get and we won't get smaller from where we are at now because we need the seats. Let's see now, the 732 carries 105, and the E170 carries 70. He also stated bluntly (to many questions) that DCI only gets a limited number of 70 seaters, as per our new contract. He stated that. But wait, he was probably telling us what we wanted to hear...... I have no doubt you will get more of some sort of 70 seater---CR7 or E170, but you will also eventually park some 50 seaters down the road. Not all of them will be replaced. With the lower fare environment out there, the need for seats will be there. Not frequency for RJs.(thanks Fred Reid)


Bye Bye--General Lee

 

[FlyComAirJets]

Sorry to rain on the parade but ...

The E-170 is the first in a line of at least four distinct aircraft. There are many seating configurations which allow for a wide range of seats up to nearly 110 seats. Even the E-170 can seat 76-78 pax. This family of aircraft falls under one common type rating, though. The company will not solely operate the E-170. The pursuit of the all mighty CASM will draw them to the larger aircraft. Delta did not stop at the DC-9-10 did they?

Most managers know in that in this day and age, everything is recorded so lying isn't very smart BUT omitting, misleading, and obfuscating key truths is perfectly acceptable.

Your VP probably didn't mention this. He knows it wouldn't make you happy. Have a nice day.

 

[General Lee]

The E-170 is the first in a line of at least four distinct aircraft. There are many seating configurations which allow for a wide range of seats up to nearly 110 seats. Even the E-170 can seat 76-78 pax. This family of aircraft falls under one common type rating, though. The company will not solely operate the E-170. The pursuit of the all mighty CASM will draw them to the larger aircraft. Delta did not stop at the DC-9-10 did they?

Most managers know in that in this day and age, everything is recorded so lying isn't very smart BUT omitting, misleading, and obfuscating key truths is perfectly acceptable.

Your VP probably didn't mention this. He knows it wouldn't make you happy. Have a nice day.

Thanks Dad...... It's also written in our contract, and for them to break it, that VP and all of the other Senior VPs would lose 330,000 options each. I doubt they would do that. Man, I hate it when someone actually has it in writing, it really blows away your argument. But, I guess if you were spun off, maybe then you might be able to get them for someone else, but I just don't see many other pilot groups wanting that either. Maybe you should go "Independent." You have a great one too.


Bye Bye--General Lee

 

[FlyComAirJets]

In this business, contracts are made to be broken, just ask any No Furlough-furloghee.

 

[General Lee]

In this business, contracts are made to be broken, just ask any No Furlough-furloghee.

What? How can they get around something that says "Nothing larger than 70 seats at DCI?" And, to top that off, there is a limited number allowed, with a growth addition for Delta mainline if DCI wants more of them. What are you smoking? The No Furlough Clause had a force mejeur clause in it with "circumstances beyond our control" included in it. I can't seem to remember our new contract saying "No more than 70 seats, unless Fred Butrell says "pretty please" and throws us a large party with cake and cookies...." Nope, not in there. I know that the E170 is just the starting of that group of planes, with the E175 next. Maybe that E175 will be my first Captain aircraft at Delta, or maybe the 737-700?...... Sounds fun. Toootles.


Bye Bye--General Lee

 

[FlyComAirJets]

Inconceivable!

How many times have the USAir pilots renegotiated their contract post-911? Or the United pilots? Do you seriously think DAL management wont be back for more concessions? Wake up and smell the java! Better tell your negotiating team to keep their schedules open this fall ...

 

[General Lee]

Both you and Medflyer need to read more. Here's an article that might be fun:

Analyst Likes Delta's Chances
http://www.thestreet.com/tsc/c.gif
By Ross Snel
TheStreet.com Staff Reporter
2/15/2005 10:49 AM EST



Delta Air Lines (DAL:NYSE - commentary - research) shares gained Tuesday after Calyon Securities upgraded them on a rosy assessment of the company's turnaround plan.

Shares were up 9 cents, or 1.6%, at $5.67 after rising by as much as 7.2%.

Ray Neidl, Calyon's airline analyst, raised his rating on the stock to add from neutral. "After meeting with management, our confidence that Delta can execute its plan to address its cost structure and overly leveraged balance sheet has increased," Neidl wrote in a research note explaining the upgrade. (Calyon has not received compensation for investment banking from Delta in the last year and does not expect to receive or seek such compensation in the next three months.)

After achieving $1 billion in annual savings from a new pilots contract late last year, Delta last month rocked the industry with its SimpliFares program, which simplified pricing and reduced maximum fares. The airline also executed a major rescheduling at its Atlanta hub.

"We believe that, over the next 12 months, while the company addresses its overly leveraged balance sheet, Delta will also realize the benefits from its recent cost cuts, schedule changes and streamlined operations," Neidl wrote. "As a result, we believe that Delta could have substantial upside potential in returning to profitability and in its stock price. We believe that Delta will now survive the slow winter period, even with the dilutive impact of SimpliFares, and then benefit from the higher cash flow typically seen during the spring and summer seasons."

The Atlanta-based carrier had a fourth-quarter net loss of $2.2 billion, or $16.58 a share, including noncash charges totaling $1.4 billion, vs. a loss of $327 million, or $2.69 a share, a year ago. The airline industry has been plagued with high fuel prices, overcapacity and cutthroat price competition.



USAir and United both went Chap 11 before they lost their scope. Delta would have to go that route too, and with all of the huge option grants given to the VPs, it will be tough for them to lose that. That is a performance incentive. Do well, become rich. Get it? Well, maybe you don't. Our VPs don't want to have to be in that position either, or they could lose out on HUGE money. They will do anything to avoid court, which is good for the stockholders too. We have given them a HUGE concession, and now it is your turn. Enjoy the E170, or more CR7s, or some D328J's, maybe some metroliners, or whatever.....


Bye Bye--General Lee

 

[FlyComAirJets]

Ahhhhhhhhhhhhh Metroliners, the beloved San Antonio Sewerpipes!

Talk about rose colored glasses! You find one analyst who rates a nearly valueless stock a speculative 'buy' and that is supposed to mean we are out of the woods? Uh, OK. Here is a quote from Morningstar right back at ya:



Delta Air Lines DALhttp://im.morningstar.com/im/StkQT_AnalystReport_on.gif[url="http://im.morningstar.com/im/StkQT_AnalystNotes.gif"]http://im.morningstar.com/im/StkQT_AnalystNotes.gif[/url][url="http://im.morningstar.com/im/StkQT_ReportArchive.gif"]http://im.morningstar.com/im/StkQT_ReportArchive.gif[/url][url="http://im.morningstar.com/im/StkQT_TopRatedStocks.gif"]http://im.morningstar.com/im/StkQT_TopRatedStocks.gif[/url]http://im.morningstar.com/im/StkQT_14pxlinebottom.gifhttp://im.morningstar.com/im/dot_clear.gifhttp://im.morningstar.com/im/dot_clear.gifhttp://im.morningstar.com/im/dot_clear.gifhttp://im.morningstar.com/im/dot_clear.gifhttp://im.morningstar.com/im/41x41/41x41aclozier.jpgby Chris Lozier

Thesis 01-10-2005format('Delta Air Lines has averted bankruptcy for now, but this legacy carrier is far from sustainable.The airline industry has undergone a fundamental shift that may be too much for the weakest airlines to overcome. Low-cost carriers control almost 30% of the total U.S. market, and with help from the Internet, they've benefited the most from improved price transparency. Ultimately, Delta cannot count on a return to the high airfares of yesteryear, even for business travelers. Given today's lower yields per revenue passenger mile (a measure of airfares), the key to sustainable profits is a competitive cost structure, which Delta has been unable to achieve. Since 2001, Delta's cost per available seat mile has exceeded industry cost leader Southwest's ')

Delta Air Lines has averted bankruptcy for now, but this legacy carrier is far from sustainable.

The airline industry has undergone a fundamental shift that may be too much for the weakest airlines to overcome. Low-cost carriers control almost 30% of the total U.S. market, and with help from the Internet, they've benefited the most from improved price transparency. Ultimately, Delta cannot count on a return to the high airfares of yesteryear, even for business travelers. Given today's lower yields per revenue passenger mile (a measure of airfares), the key to sustainable profits is a competitive cost structure, which Delta has been unable to achieve. Since 2001, Delta's cost per available seat mile has exceeded industry cost leader Southwest's caseConvert('LUV')LUVformat(' by nearly 40%. Sky-high pilot compensation had been a key culprit until the pilots agreed to $1 billion in pay cuts, but the firm's out-of-court restructuring plan will need to deliver significant additional savings from reduced overhead and other labor expenses, improved productivity, and contributions from lessors, lenders, and vendors.We are also uneasy with the extreme cyclicality of the network airline business. Because airfares may never return to the levels of yesteryear, Delta can no longer rely on healthy up-cycle profits to sustain it through down cycles. The firm steadily went from about a $1 billion profit in 1999 to a $773 million loss in 2003 on roughly the same level of sales, continuing an industry pattern that has persisted since the 1940s. With higher costs and depressed fares, we expect both the peaks and the troughs to be lower in the future.Last but certainly not least, Delta's leverage presents an enormous liquidity crisis. The firm finished 2003 with $2.7 billion of unrestricted cash and about $20 billion of debt, including operating leases. Its defined benefit pension plans are underfunded by about $5.7 billion. With negative $685 million of operating cash flow in the first three quarters of 2004, Delta is rapidly siphoning the cash from its balance sheet.In our opinion, additional competition from low-cost carriers is inevitable and the industry will remain burdened by a glut of capacity. We believe a meaningful turnaround effort at Delta would have to include additional concessions from nonpilot employees, lease restructuring, and a restructuring of pension plans. Short of all this--plus relief from record-high oil prices and some rebound in passenger yields--Delta might not generate cash fast enough to avoid bankruptcy through 2005.') by nearly 40%. Sky-high pilot compensation had been a key culprit until the pilots agreed to $1 billion in pay cuts, but the firm's out-of-court restructuring plan will need to deliver significant additional savings from reduced overhead and other labor expenses, improved productivity, and contributions from lessors, lenders, and vendors.

We are also uneasy with the extreme cyclicality of the network airline business. Because airfares may never return to the levels of yesteryear, Delta can no longer rely on healthy up-cycle profits to sustain it through down cycles. The firm steadily went from about a $1 billion profit in 1999 to a $773 million loss in 2003 on roughly the same level of sales, continuing an industry pattern that has persisted since the 1940s. With higher costs and depressed fares, we expect both the peaks and the troughs to be lower in the future. Last but certainly not least, Delta's leverage presents an enormous liquidity crisis. The firm finished 2003 with $2.7 billion of unrestricted cash and about $20 billion of debt, including operating leases. Its defined benefit pension plans are underfunded by about $5.7 billion. With negative $685 million of operating cash flow in the first three quarters of 2004, Delta is rapidly siphoning the cash from its balance sheet. In our opinion, additional competition from low-cost carriers is inevitable and the industry will remain burdened by a glut of capacity. We believe a meaningful turnaround effort at Delta would have to include additional concessions from nonpilot employees, lease restructuring, and a restructuring of pension plans. Short of all this--plus relief from record-high oil prices and some rebound in passenger yields--Delta might not generate cash fast enough to avoid bankruptcy through 2005.

Valuationformat('A discounted cash-flow model is of little use in valuing a highly cyclical and poor-performing company like Delta. On a net asset value basis, the firm has about $24 billion of tangible assets compared with total liabilities of about $37 billion. We believe Delta's network, slots, frequent flier base, and other intangible assets are worth something, but they probably don't amount to $13 billion. Combined with a reasonably high chance that the firm will file for bankruptcy, we believe it is prudent to assign a fair value of $0 to the shares.')A discounted cash-flow model is of little use in valuing a highly cyclical and poor-performing company like Delta. On a net asset value basis, the firm has about $24 billion of tangible assets compared with total liabilities of about $37 billion. We believe Delta's network, slots, frequent flier base, and other intangible assets are worth something, but they probably don't amount to $13 billion. Combined with a reasonably high chance that the firm will file for bankruptcy, we believe it is prudent to assign a fair value of $0 to the shares.Riskformat('The primary risk facing the major airlines is the onslaught of low-cost carriers coupled with the glut of capacity. Together, these factors are putting considerable downward pressure on airfares. The risk of sustained high fuel prices also threatens profits, as do the risks of terrorist activity, accidents, and difficult labor relations.')The primary risk facing the major airlines is the onslaught of low-cost carriers coupled with the glut of capacity. Together, these factors are putting considerable downward pressure on airfares. The risk of sustained high fuel prices also threatens profits, as do the risks of terrorist activity, accidents, and difficult labor relations.

Just because management has financial incentives to avoid bankruptcy does not mean the company wont be forced into reorganization, indeed, it can be argued that they will go back to the pilots for more concessions as a last ditch effort to AVOID it. Seriously, I hope you are right and I am completely wrong on this.

 

[MedFlyer]

Thanks Dad...... It's also written in our contract, and for them to break it, that VP and all of the other Senior VPs would lose 330,000 options each. I doubt they would do that.

Bye Bye--General Lee

The options aren't worth anything at this point. They are all underwater right now. So even if DL goes BK, the VP's aren't going to lose anything...as the options aren't worth anything. Plus, they can always give themselves cash bonuses...like Leo and friends did.

About a year ago this time, General, you were predicting that DL pilots would only give up 13.5% of their pay...because DALPA's crack team of economic experts determined that that was all that "needed." Look how that turned out....you were a million miles off.

If DL finds itself on the verge of Bk again, they will come after your contract again. Believe it or not, you are still some of the most expensive pilots out there.