Delta CFO Touts $3B Turnaround Plan (AP)

While Prudence may not have liked DL's stock buybacks, they are not prohibited by law nor are they part of the equation she is required to consider in making a decision re: terminating the pilot contract. She clearly does not want to make a decision and apparently thinks that by dragging the process out long enough, the parties will eventually come to terms. Such a mindset is very dangerous and there is no certainty that DL will be able to turn things around fast enough to satisfy lenders. One thing is certain, though. If DL doesn't get what it needs from the pilot contract, it will get it from the pilots in another form - whether that means further downsizing and outsourcing or termination of the pension plans. I doubt that Prudence will feel quite so proud of herself when she is forced to preside over a pension termination because DL has been weakened to the point they cannot turn things around w/o dumping the pensions. It's time for the judge to get off her pontificating fanny and issue a ruling. It's the company's job to run the business, not hers.
 
You truly are living in an alternate reality if you believe any legislation will save DL's defined benefit plan. The company touts the pro labor mantra by continuing to fight the good fight,when in reality,it has no intention of retaining the plan.At this time DL management will not claim to want to terminate the plan because it would clearly be termed a concession,and would have to be included in the 300 plus million the company dersires. You see, the company considers this a "no cost" item because it wants that termination in addition to the proposed cuts.
As for your directions for Judge Prudence, perhaps you should appear in court. I am sure she would spare you the public humiliation she has already laid upon DL's legal counsel and management team. Perhaps she doesn't know of your legal expertise.
 
You may very well be right about pension termination which is why I think Congress needs to provide a carrot and stick - airlines should be given relief but also penalized heavily if they choose to terminate their pension plan after being given the tools to preserve them. Congress tried to include a punitive provision but it was struck. If they don't get serious about shoring up pension plans and then holding companies accountable, pensions across the country will be in jeopardy.

I don't set myself out as being a legal expert. It doesn't take a rocket scientist, however, to realize that airlines are in bankruptcy in record numbers because their business plans didn't work. However, DL did nothing illegal to get itself in trouble and they are simply taking advantage of the bankruptcy laws to turn themselves around. That option was offered to UA and US and very little of their plan was questioned by the bankruptcy court before it was enacted. It only takes a high school education to realize that the purpose of the judicial branch of government is to apply the laws set by the legislative branch to individual cases brought before them. Congress did not put qualifications in section 1113 saying that previous stock buybacks or any other previous business decision have any bearing on the ability of a company to seek to terminate their contract.

Perhaps what Judge Prudence should be asking - and I'm surprised DL's lawyers haven't raised it - is why the pilots waited three years after 9/11 to decide to grant help to the company when it was so apparent that DL's costs were out of line. And DL should not hesitate to point out that its original request for help to ALPA was well less than the $1B per year they ultimately ended up giving and will continue to give for many years to come. You see, luv, the airline industry is very unforgiving and not one legacy airline has managed to turn itself and show a sustainable profit streak to prove that its decisions were correct. And those companies that have not gained what they wanted have almost universally disappeared from the industry. Plain and simple - poof you're gone. In the absence of any sustainably positive track record, it's pretty apparent that both the bankruptcy court and DL management had best take the low road now in hopes that there will be a high road later because it is certainly far from guaranteed that there will be one.
 
I gotta agree with WorldTraveler on this one.

Sure, the stock buybacks (which ended five long years ago) used cash that DL wishes it had today.

Same thing at AMR, which bought back a couple billion of stock (at very high prices) with cash in the late 1990s thru year 2000.

But bringing up those old stock buybacks is a lot like questioning the business judgment of decisions like buying the MD-11 or the L-1011s. Sure, those decisions don't look brilliant now, but they looked fine when made.

Second-guessing the DL execs now on their decisions to soak up the excess cash 5-10 years ago makes absolutely no sense. Would be much different if the DL stock buybacks ended last year or in 2003. But they ended FIVE years ago.

Add this to the judge's other stupid statements (like the pilots may be way overcompensated) and it is becoming apparent that this judge is not up to the task. Lord help DL with this woman at the helm.
 
of course part of this could all be Judge Prudence's attempt to back-pedal from her equally offensive and inappropriate comments about pilot salaries earlier in the trial.

I'm sure DL wishes they got another judge since the Southern District of NY is regarded as a pro-business court. I think Prudence presided over Enron's case and Air Canada's case in the US so perhaps she gets around to doing the right thing but makes it mighty painful on everyone in the process.
 
I don't disagree that the comments Judge Prudence made regarding stock buybacks should be meaningless in regards to her final decision.
WT, its seems hypocritical to me that you chastise the pilot group for the year 2000 contract, and delay with concessions, and yet you are quick to point out that the comments directed at DL's management team are inappropiate. If we are going to point blame at pilots, then surely it is acceptable to point out how poorly this airline has been run, ie., SERPS, Song, stock buybacks, Ron Allen, and Leo Mullin. As you pointed out, those poor decisions are now irrelevant. Lets discuss what is.
DL claims a need for $325 million from the pilots, and has stated repeatedly they are flexible on how that number is achieved. As I pointed out, the DB plan is in all reality, defunct. A realized cost savings that is not being addressed. The company is demanding scope relief that would allow for over 200 additional RJ's configured for 79 seats. Under current scope provisions, these would have to be flown by DL pilots and not DCI, which the company desires. Judge Prudence asked DL's management team what the dollar figure of such a concession would be, to which they responded it was non economic. A so called "no cost" item. When then asked why DL pilots couldn't fly those jets, they responded it did not work economically. Judge Prudence responded to the effect that it would cost more DL pilot jobs. Another unrecognized savings.
My point is this. We all agree with the assertion that Judge Prudence should rule within the guidelines of the law. DL, having filed the 1113 must demonstrate a legitimate need for the courts to throw out the PWA, and they will have to quantify that $325 million. That is something the company refused to do in our brief negotiations and one of the main reasons ALPA offered to agree to binding arbitration. An offer DL refused because it knew it could not quantify its demands. I believe ALPA will successfully argue that managements proposal far exceeds the $325 million.
 
I think the gov needs to get involved to help get rid of this over abundence of small jets in congested airports. I don't know how they can do this other than to encourage consolidation and up gauging. Bankruptcy court isn't the place to do it, but antitrust review of mergers might be.
 
I think the gov needs to get involved to help get rid of this over abundence of small jets in congested airports. I don't know how they can do this other than to encourage consolidation and up gauging. Bankruptcy court isn't the place to do it, but antitrust review of mergers might be.

You're right, ORD and LGA and ATL were never bottlenecked until the RJ's showed up. :rolleyes: <--sarcasam

This smacks of a thiny veiled plea to return to the days of regulation.

As far as the RJ is concerned, the market is taking care of "rignt-sizing" the number of RJ's in service.
 
actually, the market is ridding itself of 50 seat RJs. DL is expected to get rid of some, NW is getting rid of some, and it is very likely that Independence will throw more on the market. This is what is driving Bombardier and Embraer to suspend production of 50 seat and smaller jets. And some of DL/Comair's 50 seaters are approaching their economic life cycle of 15 years so will probably be parked within a couple years. And it is simply not accurate to say that there were no air traffic delays at ATL or ORD prior to RJs. It is also inaccurate to say that RJs are only hogging valuable runway capacity at hub airports since a number of airlines use RJs for point to point service, particularly in the east.

luv,
I'm not saying that DL management is faultless in its actions. However, it is a big difference to talk about actions that were done in the heydays of the 90s and actions that were done post 9/11. Stock buybacks particularly have no relevance to DL's request to seek further pilot cuts now. In fact, bankruptcy law is not backward looking in assessing blame for how a company got to a particular position; it simply says what is necessary to move forward.

I do agree with you that DL is not fully costing out certain aspects of the concessions they are seeking - particularly w/ regard to reduced scope clause issues. However, it is simply inaccurate to say that the DB is defunct because it isn't and there is no evidence whatsoever indicating that DL intends to terminate it regardless of what Congress does. In fact, DL has repeatedly said that if Congress takes no action, they will be toast but they are not now. Attempting to argue that DL isn't fairly costing out pension costs now because ALPA believes the pension plans will be terminated is inaccurate if for no other reason than that DL will have to come up w/ some pension plan at some point. Have you considered that it is probably cheaper for DL to maintain the pensions under a very stretched out payment schedule than to terminate the plans and then have to come up with some sort of new retirement plan - which will undoubtedly be much more cash based?
 
WorldTraveler -

exactly my point...there are far too many 50 seat RJ's in service, the "market" is correcting that through actions like fly-i, Comair parking planes, Mesaba furlough's...etc.

Delta Mgmt. doesn't want aircraft like the EMB190 at mainline becuase today's EMB190 CA is tomorrows 767 CA and Delta has to keep that person on the payroll for his/her whole career.

If that 190 driver is at a contract carrier, his payroll is never a Delta problem.
 
you got it...why perform a service inhouse if it can be done cheaper and with as good a quality by a contractor. UA has taken the virtual airline concept to the nth degree in its business plan by rejecting leases on most of its assets so that it can scale the operation based on the strength of the business. It may not be necessary to go that far but there are clear and legitimate benefits to contracting out certain functions and portions of any business.
 
I think the gov needs to get involved to help get rid of this over abundence of small jets in congested airports.

You are absolutely correct! I have an idea directly from my MIT Airline Economics class (back in the late 80's). Landing fees should NOT be directly proportional to the weight of the aircraft. However, there should be a fixed portion (paid whether it is a Cessna or 747) plus a smaller variable portion based on aircraft weight. Massport in BOS tried to implement this but a judge ruled it "unconstitutional" (how ridiculous!).

This would not only discourage the overabundance of RJ's, but also would encourage the usage of larger (widebody??) planes on higher demand domestic routes. At one point, AA had something like 23 flights per day between LAX and DFW primarily on MD-80's. A more realistic landing fee structure might change that to 10 767's (or something like that).
 
You are absolutely correct! I have an idea directly from my MIT Airline Economics class (back in the late 80's). Landing fees should NOT be directly proportional to the weight of the aircraft. However, there should be a fixed portion (paid whether it is a Cessna or 747) plus a smaller variable portion based on aircraft weight. Massport in BOS tried to implement this but a judge ruled it "unconstitutional" (how ridiculous!).

This would not only discourage the overabundance of RJ's, but also would encourage the usage of larger (widebody??) planes on higher demand domestic routes. At one point, AA had something like 23 flights per day between LAX and DFW primarily on MD-80's. A more realistic landing fee structure might change that to 10 767's (or something like that).

Welcome FormerAA!! Nice to see some intellegence on the board. I've been advocating realistic landing fee regimes for years now. Personally, i'd go farther. I'd charge a fee per departure to cover the cost of the FAA (instead of the current per ticket scheme) and impose minimum size limits on equipment that should serve certain city pairs (RJ's shouldn't be allowed to fly IAD-ORD). While we're at it, maybe some "HOV lanes" in the sky. A 767 shouldn't be held at 370 because a guppy is at 410. Make the guppy descend. Another possibility would be giving landing and TO priority based on a formula that includes SIZE as well as who's been waiting the longest. I'd rather sequence a 747-400 in first over a 30 seat jungle jet.

and i came up with it without MIT.... :p I would like to know more about the Boston case though.
 
formeraa and bus,
while your proposals seem reasonable, they represent significant intrusions of government into the marketplace - one that no other industry has to put up with. Yes, I think it is a bit ridiculous that AA felt a need to fly 20+ MD-80 flights/day in any market but no one has proposed that Coke should be limited in the amount of 12 oz soda cans or 16 oz bottles they produce even though a 2 liter bottle uses less raw materials, creates less waste, and takes up less space than the number of smaller containers that hold the same amount. It is the market's job to decide the price each option should cost and in the sense that there should be more variability in airspace/facilities costs that favor larger planes, I agree. However, keep in mind that Delta built its domestic network using big jets which should be more efficient and yet DL's problems are largely because they have too much capacity in too many markets. Besides, I don't think AA or UA would really look very kindly on a proposal that would give DL priority over them on LGA airspace/runway use since DL operates far more 757s and 767s at LGA than does any other carrier. It's one thing to advocate a proposal that gives you an advantage over someone else; it's quite another when you are the one with the disadvantage.

Further, FAA's free flight project is supposed to counter many of the bottlenecks in the airspace system that are induced by slow moving/ mismatched performance aircraft. And there really are only a few airports in the entire US where delays are a chronic problem and yet customers are willing to accept the lack of reliability in the system as a necessary part of living/doing business in those communities. I'd also venture to say I can put up with the inadequacies in the airspace system far better than I can put up with them on America's roads; at least there is some level of competence required to operated an aircraft.
 

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