Delta Transformation Planned Comes Thursday

[WorldTraveler]

One week into bankruptcy, DL will tell the world of its plan to reduce domestic capacity, esp. that which carries connections, and to increase international flying - although all route specifics may not come Thursday.

Fleet downsizing will come along with new outsourcing, lease rejections (facilities and aircraft), along with employee paycheck restructuring.

Some details will leak out by tomorrow.

Delta will say that it will be the most profitable US airline.

And it has no plans for a merger... which is the only legitimate statement it can make given that management's first priority is to maximize the value of the Delta estate - and mergers are inherently costly and risky.

 

[BoeingBoy]

I really don't mean this to rain on your parade, WorldTraveler, but I haven't stopped chuckling yet at all the proclamations coming from the US/HP merger - "LCC with all the amenities of a full service airline" (though I gotta admit that "full service" doesn't mean what it once did), "More capitalization than any other domestic airline", etc.

Seems like these things are always accompanied by hyperbole that never quite materializes.

I really do wish the best for DAL, and especially the employees - may their pain be as little as possible. After all, my son-in-law works there.

Jim

 

[Fly]

That's ballsy considering that MOST airlines never make it out of BK (you told me that World). Get out of bankruptcy first, then we'll see if they are the most profitable airline in the world. Do you think after all these years of losing money they had an epiphany this week and now know what to do??? :blink:


Is this how they are going to do it?



Thu Sep 15, 2005 5:43 PM ET
NEW YORK (Reuters) - Delta Air Lines Inc. (DAL.N: Quote, Profile,
Research) will send a letter to some 3,500 retired pilots informing them
of its inability to make their October pension payments, Delta lawyer
Marshall Huebner said in a hearing on Thursday.

The letters saying there is a good chance the October payments will not go
out will only be sent to pilots above a certain salary level, Huebner said
during the hearing in U.S. Bankruptcy Court in Manhattan.

 

[WorldTraveler]

Of course you have a right to be critical.... however, I point to Mike Boyd, who is one of the most respected analysts on the industry - whether you like what he is saying or not.

He says that DL and NW's problems can really be tied to stratospherically high fuel prices that hit very early in both airlines recovery plans. However, both NW and DL have plans to become more profitable carriers.

With all due respect, how long did it take UA and US to come up with a business plan? Delta's creditors committee hasn't even been seated and they are announcing the turnaround plan (which was shared with the creditors as evidenced by their willingness to provide $2.0 B in DIP financing). The reality is that Delta couldn't have come up with a transformation plan in one week but had one going into bankruptcy. They will simply use BK to accelerate the transformation and will cut some costs deeper using the tools that are available in BK.

Given how quickly NW is moving to shore up its fleet, I expect they will move just as fast. My only concern for NW is that I believe they have much more opportunities to cut costs than to reallocate assets; because much of DL's transformation plan is built around reallocating assets and improving revenue at the same time that they cut costs, I expect they will be more successful, faster.

Finally, I'd have to go back and check the numbers but I believe Delta was the most profitable legacy airline on a margin basis in the late 90s. It isn't at all difficult to believe DL could reassume that position and leapfrog past some LCCs in the process. (You might have read that JetBlue says high fuel costs may bring their string of profits to an end).


Here's Mike Boyd:

That's pretty much the best way to describe much of the media frenzy in the wake of the Northwest and Delta bankruptcy filings. Rarely in the history of aviation have so many, with so little knowledge, pontificated so much and so inaccurately on a subject matter about which they basically know diddly.

Again, wrong. The causes for Continental to file in the 1990s, for TWA to file more than once, and United's filing, are very different than the reasons for DL and NW going the C-11 route. Again, look at the specifics of each incident, and there are few common threads beyond them all being airlines.

If fuel had stayed where it was projected to in early 2004, we would not be now bombarded by the dogmatic idiocy being spit out by a whole circus of sudden experts on the airline industry.

http://www.aviationplanning.com/asrc20.htm

Oh and Fly,
I hope it's not wrong to report profits while in bankruptcy...after all UA has done it.
and I might remind you that UA has terminated alot more than just the supplemental pensions that DL is suspending. Since they come directly from the corporate treasury, there is no way they could continue when cash is critical.

As of this writing, Delta employees STILL have their basic pensions, Fly. Provided by their company.

 

[NAPAUS]

One week into bankruptcy, DL will tell the world of its plan to reduce domestic capacity, esp. that which carries connections, and to increase international flying - although all route specifics may not come Thursday.

Fleet downsizing will come along with new outsourcing, lease rejections (facilities and aircraft), along with employee paycheck restructuring.

Some details will leak out by tomorrow.

Delta will say that it will be the most profitable US airline.

And it has no plans for a merger... which is the only legitimate statement it can make given that management's first priority is to maximize the value of the Delta estate - and mergers are inherently costly and risky.

[post="303256"][/post]​

B) B) B) Question for u... do u actually believe all the crap u write, and by any chance are u related to 320 from the U Airways site...man u must be high!!! LOLOLOL

 

[a320av8r]

Worldtraveler- "however, I point to Mike Boyd, who is one of the most respected analysts on the industry - whether you like what he is saying or not. "

Didn't Boyd just say that he wasn't sure if Delta could reorganize since they have a weak route structure, high debt, too many 50 seat RJ's, etc, etc.?

 

[Adam4848]

My grandfather is a retired Detla pilot Ret. in 2003 He remembers when Delta was just another airline making money and life great. And now there taking away their pay check. Yall know whats gonna happen to the retireies pension???

 

[Fly]

I swear....I do believe World joined the MileHighClub on Delta. Never seen anyone (except Piney) pine over a business before. (hey World, guess which airline I flew first in my life....yep, Delta!! Hey World, I even have a gazillion miles on Delta ....betch didn't know that)

Carry on my pontificating friend.

But World, did you know that MOST airlines don't get out of bankruptcy???? Did ya know that, huh, huh, huh? (I bet American isn't stupid enough to go into bankruptcy, dontcha think?)

 

[Borescope]

As of this writing, Delta employees STILL have their basic pensions, Fly. Provided by their company.

[post="303293"][/post]​

Don't be so fast with your glee World, UA employees had their "Basic Pension" a couple of weeks after they filed BK also.

 

[hp_fa]

A few outside predictions...

1. Delta's non-executive pensions are going to be cancelled;

2. Delta's non-unionized workforce is going to be taking one heck pay cut; and,

3. The executives will be getting fat bonuses.

 

[Ch. 12]

I can't get over all of the disgruntled people here. Let's clear some things up...

a. I know it is apparently in rebuttal to World's past comments but we all know that it is quite untrue that carriers usually don't make it out of BK. The airline industry is perhaps the only one that has had nearly every (every?) major player in and out of BK at least once...some several times.

b. Stick to the facts, hp fa...you should know more than anyone that now is not the time to try to incite riots. It is that idiocy that further destroys this industry. Cheerleaders for doom...

c. Let's look into company-funded pensions, shall we? There was a time when all major companies...not just airlines...rewarded their employees during good times and set up long range programs also during good times. These programs include pensions. The reality in ALL industries (except for refining, of course) is that times aren't as good in the US and pensions are being dumped everywhere. It happened in the steel, auto, and banking industries among others. It is a reality of the marketplace...not an evil intention of mgmt. If you can't see that, you are letting emotions and not rational thought run your life.

d. a320- So what if Boyd said that "he wasn't sure if Delta could reorganize since they have a weak route structure, high debt, too many 50 seat RJ's, etc, etc."...What I see is that DL is strengthening its route structure significantly, is resolving debt issues (hence BK) and taking care of the RJs (ASA sale...more to come?) Based on that....what is your point? Boyd pointed to those issues as being DL's obstacle to overcome (huge surprise to all of us) and it looks like they are attacking the issues head-on.

e. Fly- major mis-conception is that by DL not making payments INTO the pension fund, retirees will not receive $$ OUT OF the fund. Please notice the wording...the pension fund is exactly that...a fund. DL pays into an already large existing pool and pension payments are distributed out to retirees. SO...this means that nothing changes...at least for now.

Let's all stop trying to read between the lines (or make up lines) and stick to the facts. I can't say whether or not DL will become a superpower in the future as World proclaims. Does seem pretty far-fetched. What I can say is that DL has impressed me more than any other carrier that has gone into BK...for as long as I can remember. They are looking at all angles (assets...not just cost cuts) and seem to know what is needed in the industry to try to turn this thing around. As we all know...this industry can be quickly and hugely impacted by external forces and nobody can predict how any one airline will do in the future...regardless of how they are doing now.

 

[WorldTraveler]

Thank you, Ch. 12. One note of correction. The odds are considerably stacked against airlines in terms of their emergence from bankruptcy. To their credit, UA and US have changed the track record of airlines in bankruptcy. And it is only to be expected that DL and NW will improve on UA and US' successes. However, to restate Mike Boyd's words, DL and NW filed for bankruptcy for very different reasons that did UA and US and both DL and NW have fundamentally sound business models that will only be improved upon in bankruptcy. And I am not at all sure that AMR or CO will want to stay out of bankruptcy either. Bankruptcy is sometimes used as part of a valid business plan. I will remind you that Dow-Corning was in bankruptcy for ten years and still exists and thrives. I will also expect that the makers of some of painkillers that have been targeted as being harmful will file for bankruptcy if the threat of litigation grows too much.

HP FA is just plain ignorant. DL execs just don't have any fat incentive programs - that is apparent from DALs SEC filings. NW execs were a bit better compensated but they still don't have anything that will pay them the wads of dough that UA and US execs walked away with - at the same time they were slashing employee costs.

Yes, DL and NW employees will suffer both job losses and pay cuts. I don't think anyone, especially me, has ever said that DL employees are safe from outsourcing and pay cuts.

DL and NW's pensions are in fact fully intact and both company's execs have publicly said they are likely to keep them if pension reform is passed with a sufficiently long catch up period.

My information (which is apparently what you most are enjoying) that DL's statement that it will be the most profitable US airline is what DL will say and is not my commentary.

Let's look at the historical facts. During the heydays of the late 90s when the airline industry couldn't have found a problem if it wanted to, here's how margins looked during the best year for each carrier:

Airline Operating margin Year
WN 16.4% 1999
DAL 12.7 1999
AMR 11.3 1998
CO 9.9 1997
UAL 8.4 1998
NWA 7.4 1999

You can see that DL had the best operating margin of the legacies and was actually closer to WN's performance than they were to UAL or NWA.

Now, you must ask why DL did so well in the late 90s. The answer is cost control - DL did it very well for much of its first 70 years but lost it under the Mullin era. However, DL hasn't forgotten why they succeeded in the past and they will return to the former successful ways. Even before bankruptcy, DL lowered unit costs in the 2nd quarter by more than 12% - the largest single quarter drop in CASM by any carrier since reorganization began.

Remember that bankruptcy is a process to lower costs and clean up the balance sheet. DL has already shown that it knows exactly what it needs to do in bankruptcy and is doing it - and that is the assessment of bankruptcy experts and not just mine.

Admittedly, DL wasn't using its assets as efficiently as it should and bankruptcy can't fix the revenue performance of a company. DL has already shown that it is correcting its below average revenue performance relative to the industry and the announcements of network restructuring just keep coming.

DL does have lots of regional jets but I would also remind you that they have the largest point to point domestic operation (point to point routes as percent of total routes) of any legacy carrier and that is directly because they have enough RJs to open up many new markets. Because they are relatively low risk aircraft, many routes are tried and some are found to work. Based on the fares that exist in the market, it is very likely that many of DL's regional jet point to piont flights are profitable, even some of the ones to Florida.

I will stand by my statement that DL is well-positioned to again become the leader in the industry. Their return to a position of strength will be fast and decisive. Just remember that you heard it here first.

 

[robbedagain]

Can You Say US Airways? if so, then you know that US Airways has set the standard for what is or may come about you at Delta. I just hope it aint going to be as bad there as it was/is at US Airways

 

[WorldTraveler]

I’m glad we’re having a spirited discussion… which is what we all come here for, right?

A few words for you, Mrs. Fly,
You are a well-traveled woman if you fly for a living and then accumulate gazillions of miles on DL presumably for leisure travel. Since your husband is a successful businessman and you live in an affluent area (edited), I would expect that you do have the resources to fly where and when you want. Congratulations for having a lifestyle that many only dream about. You obviously work for UA because you want to and I commend you for your contributions to the industry and to this forum. Sadly, I think airlines have their eyes trained on people like you – middle aged employees with a decent amount of service that can be replaced either by foreign workers or younger Americans willing to get their foot in their door. Air travel will always be glamorous to a lot of people who will be lured by the pass benefits and willing to stay for a couple years before settling down to something that pays more money.

You might be surprised, but I find DL and UA’s management philosophies more similar than not. While AA and NW have often been cold and calculating in executing their plans, DL and UA are probably much more conflict-aversive which certainly delays how fast things can be done. I would also say that DL and UA are better at developing long-term strategies that managing in a changing environment (again partly because of the slowness in their movement). UA’s undisputed best strategic moves have been to build domestic hubs in top business centers throughout the US and to acquire the most valuable portions of Pan Am at relatively little cost – and then make them work well. While the strategy now has to change, DL built the strongest connecting route system in the world, including pioneering the use of regional jets. And in an industry notorious for labor strife, DL has managed to keep its people pretty happy when compared with other carriers.

UA has outwitted AA in acquiring some of the best industry assets although AA has eventually recovered. AA has clearly been the marketing genius behind the industry, developing frequent flyer programs, revenue optimizing leisure and business fare structures, and revenue management systems. AA has stumbled at creating hubs and in acquiring other airlines. NW has had some of the most contentious labor relations and has run their business on a shoestring; that penny pinching now makes it very difficult for NW to expand internationally or diversify their revenue base out of the domestic cities where they are strong – the same problem CO has, although CO’s problem is driven more by size than lack of resources.

I say all this to show that some airlines are like turtles and some like hares. We know how the story ends. In real life, there are turtles and there are hares that finish the race. In the airline industry, during the best of times, one airline that everyone considered a turtle turned out to be the most successful in its class. That turtle moved very slow in the transformation process of this decade but your employer, which would probably also be considered a turtle and started its transformation only a few years behind the turtle called Delta, is set to emerge as a viable player. Given the similarities and the inherent strengths both DL and UA have, I don’t think it’s any more incredible to believe that DL can survive if one believes UA can.

And now it’s time for milk and cookies, children.

 

[Vikedog64]

I swear....I do believe World joined the MileHighClub on Delta. Never seen anyone (except Piney) pine over a business before. (hey World, guess which airline I flew first in my life....yep, Delta!! Hey World, I even have a gazillion miles on Delta ....betch didn't know that)

Carry on my pontificating friend.

But World, did you know that MOST airlines don't get out of bankruptcy???? Did ya know that, huh, huh, huh? (I bet American isn't stupid enough to go into bankruptcy, dontcha think?)

[post="303308"][/post]​

If oil stays in the 60 dollar range, they will wish that they were in BK