When is Delta going to SELL/IPO CMR/ASA?

[General Lee]

Man alive. I sure do get a lot of responses. I will try to answer each.


Doh,

Maybe Comair will be sold or IPO'd, but it won't be great news for you guys. If and when it happens, the new owner will tell you that it is "time to be competitive." That really means PAY CUTS. Delta pays you more than any other regional, and even though I believe most regional pilots aren't paid enough, management doesn't think that way. They see you as being paid a lot more than most, and that would have to change to "be competitive." You have a contract, that is correct. When it is up, and you have a new owner (if you do), you will get a huge pay cut so you can bid those other contracts to fly feed for other airlines. That won't be fun, and I have been there already. Also, with all of your RJs, you don't want to be a stand alone carrier. You wouldn't last long against expanding Southwest, Airtran, and Jetblue. Right now you are profitable because we mostly put you on routes that LCCs don't serve directly. (sometimes we do, though)

Medflyer,

The plan is working, except for one part---oil. Did you know that it would get to $60 a barrel? I didn't. Did you buy any oil futures? You're right that high oil will not help our cause, but the rest of the plan is going very well. Our CFO--Palumbo, said that we have already hit 80% of our planned transformation in record time----faster than he has ever seen it done. Part of that is because we have only one major union---which is another attractive thing about our company (to potential investors). And yes, if we get to a certain cash level, we may have to file. That is true for everyone, and all of the majors are dealing with that right now (except the LCCs). Here are the good things going on at Delta right now:

1. Pilots and other employees gave big bucks for savings
2. Got rid of RJ hub--DFW, which was $ucking us dry
3. Started to advertise, and started Simplifares
4. Operation clockwork---doing wonders in ATL (during good weather)
5. working with major creditors--GE and AMEX---and allowing us flexibility
6. Song is growing, giving us a great tool against Jetblue--point to point
7. up to $5 billion a year in savings by 2006
8. short term fuel hedging---10%, not great but better than nothing

Bad things at DL:

1. Debt looming
2. Pension payments looming, trying to get pension relief through Congress
3. High Oil


If we have to go to Chap 11, two of those will be changed. The only thing we can't change is high oil. As far as investors or DIP financing while in Chap 11---it has been apparent that other airlines have not had any trouble getting either, and their assets sometimes have been minimal too. USAir owned very little, and they have people waiting in line to get onboard. United, without the pensions, has been approached by Texas Pacific group and another group headed by Gordon Bethune. United really hasn't formulated a plan yet, after 3 years in Chap 11, and we have. What does TED do anyway? It goes through hubs and point to point....? What I am saying is that our guys probably do have a plan----and hopefully that does not include Chap11, but if it does there will hopefully be something on the other side. And how do you know GE doesn't think Delta is doing well? We were told in a memo that they (GE and AMEX) were "impressed" with our progress (going for $5 billion a year cuts). Sounds probable to me. And, is there something in a contract that says AMEX can't use other airlines? The Skymiles card has 25 million customers. Yeah, they don't think that is worth it.....???? Come on now.


inthewind,

Don't say that out loud, you might get ambushed by an RJDC member or Medflyer. He thinks he is saving the WORLD with his RJ. (Just like the RJ saved DFW) The RJ is good for route finding, point to point away from hubs, and hub feeding to cities that don't have LCC service. Throw a LCC mainline plane in the mix, and the RJ is sunk most of the time with the business traveller.


twobits,

The reason the RJ service has grown is because Fred Greed (who is gone now) thought businessmen wanted FREQUENCY. He got that wrong. What did AirTran do with their RJ feed? They dumped it. How about Southwest? Never had it. How is INDY air doing with their majority RJ fleet? Worse than we are. Jetblue is starting with 100 seaters as their smallest plane. Good idea. The way to make money with low fares is high seat numbers. You can spread out the costs with more seats. If an RJ with 50 or 70 seats goes up against a Southwest 737 with 125 or so seats, Southwest can charge a fare that would make them money, but not on an RJ. Southwest , Jetblue, and Airtran are growing. Mainline hasn't gotten many new planes since 9-11 (some 738s and maybe a few widebodies---not many) and we actually parked our MD-11s too soon. The ex VP of Marketing (Vicky E.) stated that "She didn't think the loads would have been so good after the invasion of Iraq." Infact, we had record loads that Summer, and we parked all MD-11s just before it. There were many management blunders, and almost all of them are GONE now.



Jetflyer,

I don't always say things are "peachy." I tend to be upbeat, but I know what might be out there. I think we finally have people that want this airline to succeed (even with Gay Pride float sponsorship....). But, we may be too late with our initiatives. They are trying to do what they can, and hopefully more fare increases will come with the higher priced oil. It is their job to monitor that and make decisions. Leo Mullion waited too long, thinking USAir would die in the meantime. Never happend. Grinstein is working hard, and he should be on a golf course by now. He isn't, though. He still makes time to go to the incommand meetings, and is very straight forward. There is a plan out there.
You can continue to see all the bad, and your situation may warrant that. I really enjoy my job. I wish you did too.


Bye Bye--General Lee

 

[viper548]

Muhammed Saeed al-Sahaf. The Iraqi Information Minister.

Some of his best:
"There are no American infidels in Baghdad. Never!"
"Our initial assessment is that they will all die"
"God will roast their stomachs in hell at the hands of Iraqis."

"They're coming to surrender or be burned in their tanks."

"No I am not scared, and neither should you be!"

"Be assured. Baghdad is safe, protected"

"Who are in control, they are not in control of anything - they don't even control themselves!"

"We are not afraid of the Americans. Allah has condemned them. They are stupid. They are stupid" (dramatic pause) "and they are condemned."

"The Americans, they always depend on a method what I call ... stupid, silly. All I ask is check yourself. Do not in fact repeat their lies."

"I can say, and I am responsible for what I am saying, that they have
started to commit suicide under the walls of Baghdad. We
will encourage them to commit more suicides quickly."

"I triple guarantee you, there are no American soldiers in Baghdad."

"They're not even [within] 100 miles [of Baghdad]. They are not in any
place. They hold no place in Iraq. This is an illusion ... they are
trying to sell to the others an illusion."

"they are nowhere near the airport ..they are lost in the desert...they can not read a compass...they are retarded."

"They are not in Baghdad. They are not in control of any airport. I tell you this. It is all a lie. They lie. It is a hollywood movie. You do not believe them."

"Our estimates are that none of them will come out alive unless they surrender to us quickly."

"Their infidels are committing suicide by the hundreds on the gates of Baghdad. Be assured, Baghdad is safe, protected."

When told coalition troops occupied Baghdad airport -
"...at Saddam Airport? Now that's just silly!"

 

[General Lee]

Yeah, I look like him too------time to hit the gym....... I tend to be on the positive side, and if that is wrong, then sue me.


Bye Bye--General Lee

 

[jetflyer]

You're always so positive when it comes to Comair. You wouldn't ever hold a grudge or anything ......

I hope and pray you're right about Delta General. Let's cross our fingers and hope we can pull it off. I also hope the sale of Comair helps us all.

Let's hope,

Jet

 

[General Lee]

You're always so positive when it comes to Comair. You wouldn't ever hold a grudge or anything ......

I hope and pray you're right about Delta General. Let's cross our fingers and hope we can pull it off. I also hope the sale of Comair helps us all.

Let's hope,

Jet

Agreed. I keep saying that a possible sale would be "business"---and that things probably wouldn't change, except for who writes the pay check. And, as far as my grudge, we all know when that started.


Bye Bye--General Lee

 

[Tomct]

Well GL, I don't agree with you on the DFW hub. We were doing a lot of good business there and mother D just handed it over to AA. We had a lot of customers that were very upset at the fact that they were going to have to switch to Eagle from ASA! Believe it or not, we had a TON of faithful pax that preferred the RJ to mainline for one fact....They actually got Service!! No FA hiding in the galleys reading when their fat asses should be working! Yes, I know that we have some big people here, but most of them "bust a move" to serve the passengers to the best of their ability while those on mainline try to AVOID serving the passengers! I commute to/from work and see it first hand! Easy on the shoulder press!!

 

[StaySeated]

Be careful what you wish for

I am rather surprised by the number of people that are actually hoping to get sold in this economic era and stage of the game in aviation. Comair was very successful in the past, but the aviation world could not be more different today. I am not starting a pissing match here with other groups, but in the 90's there just was not the "small jet" whip saw to the extent that there is today. Do you people actually want to be a part of an RFP as an independent carrier against a company like XYZ (insert whatever air carrier you like here, I just don't want to get off topic and hurt someone's feelings). If you thought the "three year pay/longevity freeze for nothing" sucked wait until your costs are compared to other independents in a fee for departure war, or even worse, a pro rata agreement. Ask air whilly how well that went three years ago with Bain consulting and the UAL feeders. It was the beginning of the end of their code sharing agreement and now their industry leading contract is decimated and they have 15 year captains commuting from a closed home base in denver to philly. In 2002-3 air whilly and comair had very similiar pay and work rules. The parallels between what they went through and what comair is about to go through with a DAL bk are frightening ESPECIALLY when you consider the whip saw pilot groups that are now entrenched in both companies feeder system. It is obvious to me that independence is not the way to go. What ever happens, one thing is for sure, we are all totally fuked either way. I can't control the destiny of the airline I work for, therefor I am focused on the things I can control, like my exit strategy/back up plan.

 

[PropsR4Boats]

Delta’s mainline flying accounts for roughly 85% of the available seat miles marketed by Delta Airlines. That leaves 15% to be done by the regional affiliates. Of that 15%, 80% is flown by Comair and ASA (they both share a fairly equal portion of that). This equates to Comair and ASA flying a total of 11% of Delta’s marketed flights. If delta were to lose direct control of this large of a percent of flying they could see total cost increase by 3 cents per seat mile on 11% of there flying. This in turn will increase the total cost 1-2%. In Delta’s situation that is lose of 2%. In other words Delta could see lose (after the sale) of $75,000,000 per year, every year. In more other words the revenue generated by owning Comair and ASA would out weighs the cash gained by selling the two in a very short span. They just have to hang on to rep the benefits. These are rough numbers!

 

[cmrflyer]

When talking about costs, I would hope you could get your facts straight first, even the Generals old mate has been known to say Comair has the lowest costs of any regional. I sure he can't be "wrong" on this.

Delta is hanging on, it dosn't look good and the clock it ticking. Selling Comair now is better than dragging us down the shi**er with you. I'd rather take a pay cut from new managment rather than from a judge.

 

[PropsR4Boats]

Everyone takes the bait. They can't take it if the courts don't see it fit. Until then they may just be lying to you. If the CEO is a true pro he does not want his name to go do the craper too. He will find a way to make it out, and /or grow if not they need new ideas. There is no reason you should be paying fares for the pax. I think the SWA guys and gals make a tad more than the Delta & UAL 73 bros and hoes, and they are not paying for there pax to fly. No, in fact they get more cash if the company does well.

 

[Tomct]

But Props, what you are not seeing is that SWA has ONE type of airplane, NOT 6 or 7. That is where they are saving the money that bid D cannot. It is a totally different business plan! Unless you go to a one airplane fleet, you cannot compete with SWA! JB is actually pushing the envelope by buying those 190's because this brings in more training costs with sims and whatnot! Just my .02's!

 

[twobits]

is Delta's cash flow positive or has it been in the last few quarters?

 

[jetflyer]

General Lee,
Can you answer twobits question?? "Is Delta's cash flow positive?"

Jet

 

[FlyBoeingJets]

Cash Flow Statement
Operations (ttm):-651.00M
Free Cashflow (ttm):-30.25M




http://finance.yahoo.com/q/ks?s=DAL

http://yahoo.brand.edgar-online.com/doctrans/finSys_main.asp?formfilename=0000950144-05-005152&nad=


Have fun crunching the numbers. I anticipate the current quarter to be much better than last year.

 

[FlyBoeingJets]

Operating Expenses

Operating expenses were $4.6 billion for the March 2005 quarter compared to $3.9 billion for the March 2004 quarter. As discussed below, the increase in operating expenses was primarily due to (1) $531 million of charges related to pension settlements, asset writedowns, restructuring and related items and (2) significantly higher fuel prices in 2005 than in 2004. Operating capacity increased 6% to 38 billion Available Seat Miles (“ASMs”) primarily due to operational efficiencies gained through the redesign of our Atlanta hub from a banked to a continuous hub, which allowed us to increase system-wide capacity with the same number of aircraft. Operating cost per available seat mile (“CASM”) increased 11% to 12.16¢.

Salaries and related costs decreased 12% to $1.4 billion in the March 2005 quarter. This reflects a 16% decrease from salary rate reductions for our pilot and non-pilot employees and a 3% decline due to lower Mainline headcount. These decreases were partially offset by a 3% increase due mainly to higher seniority-based pay increases and a 2% rise related to higher capacity.

Aircraft fuel expense increased 54%, or $310 million, to $884 million, with approximately $290 million of the increase resulting from higher fuel prices, which were at historically high levels. The average fuel price per gallon increased 49% to $1.42 and total gallons consumed increased 3%. Our fuel cost is shown net of fuel hedge gains of $32 million in the March 2004 quarter. None of our aircraft fuel requirements were hedged during the March 2005 quarter.

Contracted services expense increased 13% to $272 million, primarily reflecting a 7% increase due to increased outsourcing of certain airport functions as a result of higher capacity, a 2% rise from new outsourcing contracts to provide airport handling and other miscellaneous services and a 1% increase due to the outsourcing of certain human resources functions.

During the March 2005 quarter, we ceased use of certain leased facilities at Dallas-Fort Worth International Airport in conjunction with our dehubbing of operations at that airport. For additional information about the related costs and the future impact on landing fees and other rents, see Note 10 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.

Expenses from our contract carrier arrangements decreased 14% to $204 million. This is primarily due to the ramp down of our arrangement with FLYi, Inc. (formerly Atlantic Coast Airlines) (“Flyi”), partially offset by higher expenses from increased fuel prices and higher capacity under certain of these arrangements. For additional information about our previous arrangement with Flyi, see Note 4 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.



Aircraft maintenance materials and outside repairs expense increased 13%. This reflects a 10% increase from higher outside repairs and a 3% increase due to higher engine materials costs. Aircraft rent expense decreased 21% to $143 million due to our lease restructuring efforts in connection with our transformation plan in the

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December 2004 quarter. The decrease in aircraft rent expense reflects an 18% decrease from the reclassification of certain leases from operating to capital in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 13, “Accounting for Leases” (“SFAS 13”) (see Note 7 of the Notes to the Consolidated Financial Statements in our Form 10-K). This reclassification of certain leases, however, has increased our interest expense (see below for further information). We also experienced a 3% decrease in aircraft rent expense from other restructured operating leases.

Passenger commissions and other selling expenses increased 11% to $192 million. This increase is primarily due to higher booking fees related to a rise in traffic. Passenger commissions and other selling expenses were $47 million and $145 million, respectively, for the March 2005 quarter compared to $47 million and $126 million, respectively, for the March 2004 quarter.

During the March 2005 quarter, pension settlements, asset writedowns, restructuring and related items totaled $531 million. This includes:

• A $453 million charge related to certain employee initiatives under our transformation plan. This charge primarily reflects the curtailment of pension benefits related to (1) the planned reduction of 6,000-7,000 non-pilot jobs and (2) the freeze of service accruals under the defined benefit pension plan for pilots (“Pilot Plan”) effective December 31, 2004. For additional information about this charge, see Note 5 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.

• A $68 million settlement charge related to our Pilot Plan. This charge relates to lump sum distributions under the Pilot Plan for 265 pilots who retired. For additional information about this charge, see Note 5 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q. We expect to record additional settlement charges related to the Pilot Plan in the June, September and December 2005 quarters, but we cannot reasonably estimate these charges at this time because certain data used to calculate these charges is not yet final.

• A $10 million charge related to the retirement of six B-737-200 aircraft in conjunction with our transformation plan. For additional information about this charge, see Note 10 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.

Other operating expenses rose 24%, primarily due to a 27% increase from higher sales and use taxes as well as fuel taxes and a 3% rise due to increased navigation charges due to increased international capacity. These increases were partially offset by an 8% decline due to lower communications, supplies and utilities expenses.

Operating Loss and Operating Margin



We incurred an operating loss of $957 million for the March 2005 quarter, compared to an operating loss of $388 million in the March 2004 quarter. Operating margin, which is the ratio of operating loss to operating revenues, was (26%) and (11%) for the March 2005 and March 2004 quarters, respectively.

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Other Income (Expense)

Other expense, net in the March 2005 quarter was $258 million, compared to $210 million in the March 2004 quarter. This change is primarily attributable to the following:

• Interest expense increased $74 million, or 38%, in the March 2005 quarter compared to the March 2004 quarter primarily due to a 22% increase from higher levels of debt outstanding and increased interest rates as well as a 13% rise due to additional interest related to the reclassification of certain aircraft leases from operating to capital in accordance with SFAS 13 as a result of renegotiations during the December 2004 quarter (see discussion of aircraft rent expense above).

• Fair value adjustments of financial instruments accounted for under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), resulted in a charge of $2 million in the March 2005 quarter compared to a charge of $23 million in the March 2004 quarter. This decrease is primarily due to costs associated with the early settlement of our fuel hedge contracts in February 2004. For additional information about SFAS 133, see Note 2 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.

 

[twobits]

cash on hand went up by $183 million in the first quarter.... sorry if this has been discussed before. I agree with the General that Delta will be singing a sad song until the pension reform takes place. The pension issue will be pushed hard because the numbers are about to start looking rosier for the airlines again. I bet something big will happen with Delta in the beginning of August (merger, sell off of subsidiary, new exec).

 

[General Lee]

cash on hand went up by $183 million in the first quarter.... sorry if this has been discussed before. I agree with the General that Delta will be singing a sad song until the pension reform takes place. The pension issue will be pushed hard because the numbers are about to start looking rosier for the airlines again. I bet something big will happen with Delta in the beginning of August (merger, sell off of subsidiary, new exec).

Just got back from a long three day thru the rain. Anyway, the pension issue is huge for us, because without reform (just extending out the payments---no handouts), we will have to pay another $250 million this year, around $850 million in 2006, $1.3 billion in 2007, and $1.6 billion in 2008-----and that is JUST PENSION PAYMENTS. (not fuel, not debt, not anything else) So, the PROBABLE way to go would be to go into Chap 11 (make sure we can get out first), and dump the pensions onto the PBGC. I don't think Grinstein wants to do that, but what choice would he have? I think we could possibly last another year (with the $850 million due) if there were some more pay cuts (not a popular stance at all), but that is what would likely happen. That would give pensioners another year of benefits, but hurt us more too. We would love to have some relief from Congress, and I guess the Senate is close to a vote.

As far as a merger, selling subsidiary, etc. ---I don't know. A lot depends on the price of oil/gas---maybe prices will go down a bit after the Summer driving season ends. If there was a sale of Comair or ASA, not much operationally would change. It will be interesting to watch, no doubt.


Bye Bye--General Lee