A New Business Plan Must Be Forthcoming

WorldTraveler

Corn Field
Dec 5, 2003
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We have passed another weekend and Delta has not filed for chapter 11 which leads me to believe it won't have for two more weekends since I doubt if they will file on the weekend of 9/11. Regardless of whether a bankruptcy filing is coming, there is no doubt that a large scale business plan change is needed and will be coming. I also believe DL realizes bankruptcy doesn't alter the need for change.

I believe changes will be announced soon, perhaps this week, along these lines:

Network - DL has hinted at additional service from JFK and to Latin America. Some of these are with new aircraft but some are with existing aircraft which probably means some reallocation is coming. I think it is likely that DL will thin its presence in Florida and possibly CVG and SLC.

Although crude oil is settling back a bit, I have not heard anything to say that jet fuel is coming off of its elevated heights. $2 plus jet fuel was unimaginable just a couple months ago and will require major and lasting changes at every airline.

Personnel - layoffs are quite likely but I think it is also likely that DL will change personnel policies so as to make employee careers more short-lived for many employee groups. I believe Song has personnel policies like JetBlue's which requires employees to leave after a few years. Someone correct/ enlighten me on both carriers' policies.

Fleet and financing - both of these are probably more closely tied to a chapter 11 filing but I think it is possible but probably a stretch that DL could succeed at an out of court restructuring. Either way, the fleet will change and debt will be restructured inside or outside of bankruptcy.

Because this business is so competitive, whatever changes DL makes will almost certainly require a response by other carriers. Being largely non-union, DL does have an advantage that they can make some HR related changes that other carriers cannot. The next few weeks will be interesting.
 
According to a German business paper, Delta will announce a new route to Europe tomorrow, Atlanta-Dusseldorf, that is. DUS is a market, where - if I am counting right - five US carriers have failed before (National, Pan Am, American, United (with two routes), and Continental). I am not sure, why Delta feels they might be more successful. If they plan to fill that flight the same way as the one to Berlin, with free companion tickets and free hotel nights, I don't think that business plan is all that great.
 
I do agree that DL needs to modify their business plan. I think that part could be to accelerate their fleet modification and retire some planes quicker. I would like them to take a serious look cities to make sure that they are profitable. Some small cities that see a mix of mainline and express flying, to be more specific. There is more but that is a start. Just my thoughts.........
 
WorldTraveler said:
Personnel - layoffs are quite likely but I think it is also likely that DL will change personnel policies so as to make employee careers more short-lived for many employee groups. I believe Song has personnel policies like JetBlue's which requires employees to leave after a few years. Someone correct/ enlighten me on both carriers' policies.


When Song began employees were given options to choose from.

1. You could choose to work for a period of 2 to 5 years and dependant on the number of years would be given a lump sum($10,000 to $25,000?) at the end.

2. An option to flowback to mainline Delta after a 2 year period as long as there were openings. After 5 years a position would be made available.

3. Stay at Song for as long as Song operates.

Beginning in January Song changes from a subsidiary to a division. I'm not sure I understand whether this is a subtle change or not. Someone with better business acumen could enlighten(World ?).

Don't know for fact about Jetblue, but remembering hearing that they sign 1 year contracts that are renewed each year at either the companies or employees descretion.

Bottom line is there is no requirement at either to leave at any point.
 
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thanks for the insight fadl,
I'm guessing that DL will put more emphasis on performance and proving one's worth year after year rather than settling in for a career. I also think DL is trying to correct the problem of having 30 year employees. No offense to anyone, but I think we all realize that most airline jobs require experience but that is gained alot faster than 30 years and usually alot less. I would guess that most people in an airline type job are at their peak within two years of their specific assignment. The fact that airline employees move to different parts of the country and different jobs in the company says they are looking for some change of pace, indicating they probably are not learning and contributing alot more in their present position. I'm sure some people will disagree w/ me but that is the impression I get from my relationships with airline employees.

I believe Song right now is considered a business unit at DL. The only current flying subsidiaries are Comair and ASA (there are non-flying subsidiaries like Delta Technology and Epsilon Fuel trading or something like that). I'm not sure what the specific benefits of a change from a business unit to a division are but I would guess it would allow for more focus and transparency, something Song has not done up to this point. It's possible DL could set Song up to do a partial divestiture but I kind of doubt it. Song's costs are probably not low enough for it to be that attractive as a standalone airline. Also, Song is flying some of the largest and most important routes in DL's route system. Losing control of those routes would not be wanted.

I sort of doubt any transatlantic routes would be announced this time of year but I could be wrong. If there is a solid business connection between cities, any route can work any time of the year. Supposedly, DL's ATL-Stuttgart flight is essentially a Daimler-Chrysler shuttle. The strength of ATL is its ability to carry passengers all over the US (and many points in Latin America from Europe).
 
You would think that the shareholders would be looking to kick the "Grinch" out the door. I am amazed that he is still running Delta. It's the same as United with Tilton. Why keep these idiots? They can't even figure out how to turn it around.
 
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I think DL's biggest enemy has been time. Grinstein did wait too long but it doesn't say he doesn't have a valid turnaround plan. DL is now down to the wire because they didn't start making hay soon enough.

If you'll remember, UA has spent almost 3 years in BK and alot of people accused Tilton of having no idea what was going on but UA looks pretty good right now. I am quite confident that DL can turn things around in BK and probably exceed what other airlines have done in terms of both cost control and revenue generation. It's a shame it has come so far but ultimately DL will be much stronger, as will UA.
 
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The CVG move is expected and certainly a step in the right direction. The fact that DL says more changes are coming is evidence that they aren't expecting this to be the cure all for DL's problems.

The reality is that DL has done far more network restructuring outside of BK than any other airline has in BK. Given that network is the largest determinant of an airline's success, they are doing what needs to be done. While costs have to come down, DL has largely shown that it can get that under control as good as if not better than competitors. These moves will go a long ways toward fixing DL's revenue underperformance relative to the industry.
 

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