Delta Schedule Changes

[tom barry]

WT,
WHY do i get the feeling that with QF relocating Non-Stop flights from "down under" from (I believe it was SFO), to D F W, that QF wont be doing ANY deals with DL ?

 

[topDawg]

glad you're back, Dawg.
It is not a given that DL is interested in continuing joint ventures.... there is a point when your size is larger than the other party in the JV and there is less and less value in you sharing anything w/ anyone. If DL gains substantially more access to LHR and a much larger position in Latin America, it may decide that in order to get government approval it will give up its joint ventures. Remember that DL only agreed to a joint venture with AF AFTER the merger and when DL was looking for access to LHR which AF provided - with KL providing the- then NW operated flights. Keep in mind that if BA convinces DL to move to oneworld, then the current DL slot portfolio at LHR might have to be returned to AF/KL. Note that DL has shown no interest in developing a joint venture with KE in Asia.... why should DL agree to share its revenues with anyone in Japan when DL's transpacific service is larger than JL and NH combined and the Japanese market is far larger than the Korean market, even if the latter is growing.
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With respect to the pilots, I think DL could make a pretty strong argument that it is reducing more RJ capacity.... 50 seaters will continue to be parked as fuel continues to increase - which it will. RJ capacity will be made up of 70-76 seaters but the lifespan for 50 seaters - which are still the bulk of the RJ fleet - will be phased out in the next 5 years or so... and probably whichever airline can do it fastest will obtain the greatest financial benefits.

I think they would have to give up the JV to get the EU to agree. I don't think the EU would be happy about DL/AA in the first place but i see no way they let the AA capacity get merged into AF/KL (or something crazy like a DL/AA/AF/KL/AZ/IB/BA JV).

and I think we are coming up with interesting times for airlines like OO/9E/RH etc. 50 seaters don't make money, yet make up the bulk of the RJ fleets. Once again the ball is in labors court. Hopefully idiots like Lee Moak who think big RJs are good for mainline employees don't f**k it up anymore than they already have. UA/CO could also have a really big say in the matter. Along with the next contract for DALPA.

 

[topDawg]

Hmmm, not so sure about that. The Eurozone is looking like a minefield for the next couple years, and It doesn't help that AF is sitting right in the middle of it. Germany is holding on better than France, and LH is also on a sounder financial footing (not having competing hubs tends to help...). BA is relatively isolated given that the UK opted out of the Euro, but has exposure via IB and Spain.

If the debt crisis continues, it wouldn't surprise me to see TATL capacity fall back even further, especially to the second tier cities.

Delta doesn't have a choice. They have a agreement with DALPA that says they will maintain 50% of the JV(its some crazy formula that Delta came up with. Its a mix of ASMs and flights and then market types and yada yada). Delta got a waver from DALPA to go below 50% "do to aircraft mods" but as of right now Delta is way below its minimums. (something like 15 763 flights) So in 2014 they will have to add flights or go to court.

 

[topDawg]

good comments, E.

Remember, though, that DL gave ATI for its TATL system to AF in order to gain access to LHR. You have to wonder if they would rather just gain their own position at LHR, couple that w/ their own continental Europe system, and forget about JVs with anyone... cooperation, yes but I'm not sure ATIs make sense as the industry continues to consolidate.
Power is fine but if you the financials don't work it doesn't make sense to hold onto power.
AF along with the rest of southern Europe esp. will face alot of restructuring issues over the next couple years. Who knows if it is worth it for DL to continue to share revenues with them. everything i hear is its pretty much their turn for the s**t storm that we got in 08-09. good luck to them, scares the crap out of me that AMR seems to think a capacity dump is the way to save their airline. I guess the plan is to just f over everyone.
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It is true that smaller cities will feel the pain first but once you get rid of a half dozen or more medium size carriers, then dynamics in the European industry could change alot. this. The airline world is becoming more and more global. As long as the state run airlines like EK, AI etc. are around public airlines will have to consolidate to be able to get the pricing power to compete with said airlines. I also believe this will drive the product of Us carriers back up. (along with labor getting more back, with the cost passed onto the PAX)
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Despite people continuing to believe that DL will walk away from its intra-Asia flying, I would strongly bet that its margins on intra-Asia flying are as good as if not better than on its US domestic flying. They would sacrifice the possibility of having a JV w/ a Japanese carrier before they would walk away from the right to carry intra-Asia traffic.agreed. I don't think a JV with JL would be a problem with DL/AA though. The Euro and OZ JVs would be the problems. This is also why i expect to see the non-Delta alliance picked apart
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All kinds of partnerships come up for consideration.... but I think the only real desire an airline the size of DL or UA have its to be able to codeshare to distribute its traffic within various global regions. Thus, the partnership with Gol and AM suffice for what DL needs. And even a JL and AF/KL relationship within Europe and Asia-Pacific may be enough.
Once again, if DL decides to ditch its ATI/JV with AF, then the slots they use to LHR NOW would likely go back to AF/KL.
If DL picks up the partnership with QF and dumps Virgin, then they "move up" in the US-Australia market.
DL could benefit from a partnership in HKG and would likely be able to add service based on its presence there and a stronger partnership. Whether any of the current Skyteam partners would move to oneworld would be a question but I am betting they would. a partner ship with CX would level the playing field a bit. UA is very strong right now to HKG.
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What is certain is that alot of conventional wisdom about what the airline industry needs will be re-examined as the next round of consolidation takes place.

I also think it is a very very good shot we will end up with 3 airlines, DL/UA/WN with some smaller LCCs. I think US would be toast without some type of merger.

 

[topDawg]

WT,
WHY do i get the feeling that with QF relocating Non-Stop flights from "down under" from (I believe it was SFO), to D F W, that QF wont be doing ANY deals with DL ?

he is talking about with a DL/AA merger. If DL and AA merge it is very likely Delta would dump the virgin partnership(and then i expect Virgin would pretty much instantly join *A) and keep a partnership with QF.

 

[tom barry]

With AA safely tucked in the warm cocoon of BK (temporarily), I think I'll keep a daily Watch on Jet-A prices.

Today's price @ $ 3.20 is heading towards the 1 year high of $ 3.26, and Also heading in the direction of the All Time High of $ 3.89 (7/08)

Hmmm

Steadily rising fuel prices could be Devastating to Big Fat Airlines, with tons of employees, flying from the US to virtually Anywhere that has a paved landing strip, and operates it's company flying Dam near every kind of Jet known to mankind ! :unsure:

 

[topDawg]

With AA safely tucked in the warm cocoon of BK (temporarily), I think I'll keep a daily Watch on Jet-A prices.

Today's price @ $ 3.20 is heading towards the 1 year high of $ 3.26, and Also heading in the direction of the All Time High of $ 3.89 (7/08)

Hmmm

Steadily rising fuel prices could be Devastating to Big Fat Airlines, with tons of employees, flying from the US to virtually Anywhere that has a paved landing strip, and operates it's company flying Dam near every kind of Jet known to mankind ! :unsure:

Fuel prices hurt Delta just as much as they hurt any airline. All fuel prices will do is put even more pressure on CEOs and the Gov to merge carriers and get a better handle on pricing power.

 

[Kev3188]

"everything i hear is its pretty much their turn for the s**t storm that we got in 08-09. good luck to them, scares the crap out of me that AMR seems to think a capacity dump is the way to save their airline. I guess the plan is to just f over everyone."

I haven't seen much else other than that, either.

 

[eolesen]

Delta doesn't have a choice. They have a agreement with DALPA that says they will maintain 50% of the JV(its some crazy formula that Delta came up with. Its a mix of ASMs and flights and then market types and yada yada). Delta got a waver from DALPA to go below 50% "do to aircraft mods" but as of right now Delta is way below its minimums. (something like 15 763 flights) So in 2014 they will have to add flights or go to court.

Are you assuming that AF maintains the current schedule?

They just announced a FY2011 $1B loss, so it's more likely to me that to maintain the intent of the JV, AF may be more willing to be reducing capacity.

http://www.washingtonpost.com/business/air-france-klm-reports-1-billion-loss-for-2011-amid-high-fuel-costs-slow-global-growth/2012/03/08/gIQAy72KyR_story.html

 

[wings396]

With AA safely tucked in the warm cocoon of BK (temporarily), I think I'll keep a daily Watch on Jet-A prices.

Today's price @ $ 3.20 is heading towards the 1 year high of $ 3.26, and Also heading in the direction of the All Time High of $ 3.89 (7/08)
AA isn't immune from those high fuel costs either. It will dwindle that much boasted 4 billion in a hurry, then what? Foolish to feel all cozy tucked away in bk...

Hmmm

Steadily rising fuel prices could be Devastating to Big Fat Airlines, with tons of employees, flying from the US to virtually Anywhere that has a paved landing strip, and operates it's company flying Dam near every kind of Jet known to mankind ! :unsure:

 

[WorldTraveler]

Based on fuel hedge guidance provided by various airlines, AMR is hedging almost half of what they hedged last year and less than what UAL has hedged this year. Thus, AMR could very well face significantly higher fuel costs - and the likelihood is that is happening since they are now willing to try to get deeper cuts NOW in return for placating some labor outrage (that debate is on the AA forum) by not terminating pensions.... once again, fuel costs are a threat to an airline's reorg plans. And., yes, Kev, AA has given no indications of how they are going to turn their revenue problems around... and to be fair to them, doing so is very difficult in the face of a shrinking industry and against other competitors who have the advantage of stable business models.
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AF is facing some of the same problems that other southern Europe companies are facing, compounded by AF's much larger presence in N. Africa and the Middle East. AF has an enormous turnaround task facing them.
It is also very possible that DL will not want to continue to absorb AF's losses - since any JV does link the profitability of the two airlines. I'm not sure what the provisions are for DL to limit its participation in AF/KL losses but those kinds of terms are certainly there and could potentially allow DL to terminate the JV if AF cannot address the problems....
But even LH which normally is one of the most profitable airlines has reported losses, in part due to some of its smaller subsidiaries in Europe.
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Global aviation is going through the ringer and Europe is front and center.
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Regardless of what the JV/pilot requirements say, DL is not going to add flights just because they aren't flying what they are supposed to based on an agreement that was based on a much different world. Of course DALPA will require some changes - but I still believe that DL can easily argue that they are cutting regional carrier flights faster than any other US network carrier. That may or may not be what DALPA will accept but when the industry is facing losses and huge paycuts and scope changes at AMR, the prospects that DL pilots can expect wage and benefit increases is not likely to gain a lot of traction, esp. since DL pilots are the highest paid US network carrier pilots.

 

[eolesen]

When does the DL pilot contract expire? When are openers?

 

[BoeingBoy]

I thind it's amendable sometime this year but have no idea when openers will be exchanged.

Jim

 

[topDawg]

Are you assuming that AF maintains the current schedule?

They just announced a FY2011 $1B loss, so it's more likely to me that to maintain the intent of the JV, AF may be more willing to be reducing capacity.

http://www.washingtonpost.com/business/air-france-klm-reports-1-billion-loss-for-2011-amid-high-fuel-costs-slow-global-growth/2012/03/08/gIQAy72KyR_story.html

AF would have to do a good bit of cutting. I don't think that side will come down low enough to make Delta able to say at current levels.

 

[topDawg]

Based on fuel hedge guidance provided by various airlines, AMR is hedging almost half of what they hedged last year and less than what UAL has hedged this year. Thus, AMR could very well face significantly higher fuel costs - and the likelihood is that is happening since they are now willing to try to get deeper cuts NOW in return for placating some labor outrage (that debate is on the AA forum) by not terminating pensions.... once again, fuel costs are a threat to an airline's reorg plans. And., yes, Kev, AA has given no indications of how they are going to turn their revenue problems around... and to be fair to them, doing so is very difficult in the face of a shrinking industry and against other competitors who have the advantage of stable business models.
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AF is facing some of the same problems that other southern Europe companies are facing, compounded by AF's much larger presence in N. Africa and the Middle East. AF has an enormous turnaround task facing them.
It is also very possible that DL will not want to continue to absorb AF's losses - since any JV does link the profitability of the two airlines. I'm not sure what the provisions are for DL to limit its participation in AF/KL losses but those kinds of terms are certainly there and could potentially allow DL to terminate the JV if AF cannot address the problems....
But even LH which normally is one of the most profitable airlines has reported losses, in part due to some of its smaller subsidiaries in Europe.
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Global aviation is going through the ringer and Europe is front and center.
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Regardless of what the JV/pilot requirements say, DL is not going to add flights just because they aren't flying what they are supposed to based on an agreement that was based on a much different world. Of course DALPA will require some changes - but I still believe that DL can easily argue that they are cutting regional carrier flights faster than any other US network carrier. That may or may not be what DALPA will accept but when the industry is facing losses and huge paycuts and scope changes at AMR, the prospects that DL pilots can expect wage and benefit increases is not likely to gain a lot of traction, esp. since DL pilots are the highest paid US network carrier pilots.

sigh, WT you must not understand the way a basic contract works. They have a signed legal agreement, RJs and AMRs BK has nothing to do with it. So Delta can tell DALPA how they are cutting 50 seaters, while adding 70/76 seaters, as much as they want to. Unless the RJ capacity is going to Europe then it has nothing to do with said agreement. Its not in negotiations, its done, over, sign sealed and delivered.

As for C12, DALPA should be looking to something very close to WN pay rates, much better handle on codeshares and JV and likely less big RJs a DCI or it may be the end of ALPA at Delta. Delta isn't able to hide behind a judge anymore, Doesn't expect a 2nd BK contract.