Checkmate

WNrforlife

Senior
Apr 17, 2003
444
3
www.usaviation.com
Motley Fool
Discord at Delta
Monday August 9, 10:24 am ET
By Rich Smith

I admit to being of two minds about the ongoing salary dispute between Delta Air Lines (NYSE: DAL - News) and its pilots. On the one hand, you have a struggling airline whose own CEO says that unless drastic changes are made, the company is headed for bankruptcy. On the other hand, you have hardworking pilots trying to put food on the table for their families and being asked to take a massive 35% salary cut. To add insult to injury, the pilots have already offered what would ordinarily be considered an extraordinary concession -- a 23% salary cut -- and been turned down.
So who's right? It is hard to come down on management's side. These guys are responsible for keeping the airline in business, the employees employed, the shareholders enjoying profits -- and they appear to be failing miserably on every score. Now they say the pilots, the very heart of the company, must take pay cuts to save the company from the damage the executives failed to prevent over years of raking in mid-six-figure (and up) salaries themselves. Since 2001, Delta has lost well more than $5.5 billion.

As for the pilots, I think a lot of newspapers are doing them a disservice by quoting their salaries as ranging from $50,000 to $280,000, making Delta's pilots sound like spoiled millionaires when they complain about proposed salary cuts. But I suspect that "$280,000" number is a red herring, and your average Delta pilot doesn't rake in a quarter mil a year. Still, even if the number is closer to $100,000, that would be an awfully large sum for an "average" salary figure in any healthy company -- and Delta, like competitors United and American Airlines (NYSE: AMR - News), Continental (NYSE: CAL - News) and Northwest (Nasdaq: NWAC - News), are far from "healthy" companies.

In all likelihood, the outcome for Delta's pilots will be one of three. They will accept severe wage cuts; they will leave Delta for a competitor; or they will refuse to accept the wage cuts. In each case, the Delta pilots will end up with roughly the same size paycheck. The only variable will be whether they work for a lower salary at the perpetually struggling Delta; leave for a lower-paying job at a healthier company such as JetBlue (Nasdaq: JBLU - News), AirTran (NYSE: AAI - News), or Southwest (NYSE: LUV - News); or help their executives drive Delta into the ground. In which case, post-layoff, they will eventually find new jobs at whatever airline emerges to take the place of the defunct Delta -- whether that is one of the other companies named above or an airline still to be created.

:lol:
 
The last paragraph contains the final analysis which essentially comes to the same point: DL pilots will end up making essentially the same amount of money whether they stay with Delta and take concessions, join a competitor, or ride Delta to the end and then fly for someone else in the future. The reality, however, is that as long as the pilots get some pension benefits from DL, there is a strong incentive for them both to stay there and to keep the company viable and out of bankruptcy.

I disagree with the 2nd paragraph in which it is said that it is hard to be sympathetic to management. The reality is that DALPA has dragged their feet for months now; some of my friends who fly for Delta are of the opinion that DALPA should have given up much more a long time ago. DALPA has forced the critical nature of Delta’s existence right now and there really is no room for missteps by either side or the results could be catastrophic for all DL stakeholders.

No one likes being told that they will have to give up 35% of their pay plus enough other ingredients to equate to a 45-50% pay cut. However, DALPA somehow thought that they would control the process. WRONG. The process is now completely in control of Delta management and they are now pretty much free to dictate whatever concession they want as long as it doesn’t exceed what the pilots could expect to get in bankruptcy. Using that yard stick, Delta pilots could expect even bigger cuts and the likely forced cut of pension benefits.

DALPA has a modicum of control left but it is fast fleeting. As the summer travel season winds down, all of the airlines will start bleeding cash, or in Delta’s case will bleed it very heavily and unsustainably.

Like US, Delta’s future will probably be decided by Sept. 15. The Delta pilots would do well to make sure they end up in a better situation than US pilots who have given and given and given and still have no security. Delta’s strategic initiatives will give a very clear idea of whether the company has a plan to turn Delta around from the revenue side; they are supposed to be revealed in the next couple weeks. I doubt very seriously that they will wait much longer to turn around the cost side of the company.
 
Maybe the guy that wrote this can explain the process by which a DAL pilot leaves for the competetion and resumes his 100k salery. Everyone is an airline expert, and everyone, including the M. Fools, completely understands the dynamics of the pilot profession....NOT. Greeter.
 
Delta ratchets up bankruptcy warning
By Caroline Daniel in Chicago
Published: August 9 2004 18:21 | Last updated: August 9 2004 18:21

Delta on Monday added to fears that without cost reductions it could
be forced to file for bankruptcy later this year after it warned it expected
to use up far more of its cash reserves in the second half than it had
forecast six months ago.


In December, Delta said it expected that its annual cash flows from
operations would be sufficient to fund its daily operations and its
non-fleet capital expenditures in 2004. However, the first-half drop in
domestic passenger yields and soaring fuel prices, which drove up its annual
fuel costs by $680m from a year ago, have lead it to warn that its actual
cash flows would fall below expectations.

"We plan to use a portion of our cash reserves to pay certain
obligations that we previously anticipated would be paid from cash flows
from operations," Delta explained. "Accordingly, we expect our cash and cash
equivalents to decline during the remainder of 2004 at a level consistent
with the decline during the first half of the year."

Delta's cash balances fell from $2.7bn at the end of December to $2bn
at the end of June. If it does use up a further $700m in cash in the second
half, that could trigger a liquidity crisis as Delta has few unencumbered
assets it could use to raise financing.

"Except for our existing commitments to finance our purchase of
regional jet aircraft, we have no available lines of credit," it said.

The airline has demanded a minimum of $1bn in cost concessions from
its pilots, but the talks have become increasingly hostile. Last week John
Malone, head of Delta's Air Line Pilots Association, called the demands
excessive, and offered $655m to $705m in concessions in return for an equity
stake in the airline.

In its first quarter filing with the Securities and Exchange
Commission, Delta said: "If we cannot make substantial progress in the near
term toward achieving a competitive cost structure that will permit us to
regain sustained profitability and access the capital markets on acceptable
terms, we will need to seek to restructure our costs under Chapter 11."

Delta, like American Airlines a year ago, is seeking to use the threat
of bankruptcy to secure concessions from all its stakeholders.

Mark Streeter, credit analyst at JP Morgan, said: "The biggest wild
card is not if and when the pilots come to the table ready to deal but
rather how Delta will approach creditors ... the Delta 'game of chicken'
hinges on creditors, not labour."


Mr Streeter estimated that Delta had $20bn in debt, including $4.7bn
in unsecured bonds and $8bn to $9bn in aircraft leases.




I guess there is at least one analyst out there who agrees with me that ALPA is not the true source of the problem. Interesting to note that Streeter is a credit analyst.
 
Why is the primary focus on 'Pilots' with no mention of the remaining labor groups. Doesn't seem ethical to blame one group without approaching the entire company work force for an even cut across the board. Is DAL mgt going after other groups as well?
 
Whaledriver, maybe because much of the labor (reservations,ramp,gate agents) has been farmed out to the lowest bidder resulting in layoffs of permanent employees. The remaining labor groups don't get paid well enough to take anymore money from. When you deduct taxes/healthcare/401k from a $50,000 paycheck there is enough for utilities/mortgage and food but not much for living. Remember, we're supposed to work for a living-not live for working!

Now, what really isn't ethical is management (who managed to get the airline into thisposition) is focusing only on the pilots but not themselves.
 
Mark Streeter, credit analyst at JP Morgan, said: "The biggest wild
card is not if and when the pilots come to the table ready to deal but
rather how Delta will approach creditors ... the Delta 'game of chicken'
hinges on creditors, not labour."



Yeah,
That will work. Go to your creditors for concessions before getting concessions from you highest paid workforce. The creditors will be lining up to offer to take a hit........NOT!!

Perhaps management is full aware that creditors won't give concessions until labor does.
 
WNrforlife said:
Mark Streeter, credit analyst at JP Morgan, said: "The biggest wild
card is not if and when the pilots come to the table ready to deal but
rather how Delta will approach creditors ... the Delta 'game of chicken'
hinges on creditors, not labour."



Yeah,
That will work. Go to your creditors for concessions before getting concessions from you highest paid workforce. The creditors will be lining up to offer to take a hit........NOT!!

Perhaps management is full aware that creditors won't give concessions until labor does.
[post="167298"][/post]​

Nobody claimed the creditors would be approached before labor. ALPA will give, and so will the rest of the employee groups, but all of that combined will do little to keep DL of out BK unless the creditors play ball. The creditors will either line up or be subjected to the whims of BK, just like the pilots. These press releases are two fold in that they serve notice to the pilots and the creditors. Do you not agree with that?
 
whaledriver said:
Why is the primary focus on 'Pilots' with no mention of the remaining labor groups. Doesn't seem ethical to blame one group without approaching the entire company work force for an even cut across the board. Is DAL mgt going after other groups as well?
[post="167271"][/post]​
The pilots are the only significant labor group that is unionized. So they don't have to "approach" the F/As, CSRs, mechanics, etc. in an organized manner. They just announce that "Effective December 1, your pay will be reduced 20%," or "The scheduling policy will now be xxx," the way they did a couple of years ago when they eliminated everyone's defined benefit pensions (except for the pilots', that is).
 
AA labor and yes the pilots included took some of the biggest cuts in this industry. renogotiated with leasors, vendors, etc....and yet they are still not out of the woods. oil is now over $44.00 a barrel and it will not likely ever come down enough to offset the dire situiation until this global war on terror is complete :unsure: things will most likely get worse before they get better, management must come up with a major shift in their planning, strategy, operations, and yes they will also have to make a huge sacrifice or as they say down south "that dog won't hunt"!
 
whaledriver said:
Why is the primary focus on 'Pilots' with no mention of the remaining labor groups. Doesn't seem ethical to blame one group without approaching the entire company work force for an even cut across the board. Is DAL mgt going after other groups as well?
[post="167271"][/post]​

Delta can just take any amount they want from all other owrk groups. They don't have to approach them for and ask for concessions, because all the other groups are stupid to be non-union!
 
luv2fly said:
Nobody claimed the creditors would be approached before labor. ALPA will give, and so will the rest of the employee groups, but all of that combined will do little to keep DL of out BK unless the creditors play ball. The creditors will either line up or be subjected to the whims of BK, just like the pilots. These press releases are two fold in that they serve notice to the pilots and the creditors. Do you not agree with that?
[post="167304"][/post]​

I thought the article seemed to minimize the fact that the Pilots need to agree to the 1billion in concessions soon in order to reduce the cash burn and give management some leverage with the creditors.
 
The pilots made a huge concessions offer and good ole' greedy Grinch didn't accept it. The pilots have done thier part to help out with the offer they made. It's time for DL to look at other options to save money.
 
LiveInAHotel said:
Delta can just take any amount they want from all other owrk groups. They don't have to approach them for and ask for concessions, because all the other groups are stupid to be non-union!
[post="167320"][/post]​
There you go again.
What does being unionized have to vdo with it? We will all taKE THE CUTS REGARDLESS OF OUR STATUS. You would seem alot more credible if you would drop the union mantra and deal in reality. Not just for DAL employees but for all airline employees. Union or not, the crap is going to hit the fan and there isn't anything any union or non union employee can do about it. THAT is a fact!
 
Vikedog64 said:
There you go again.
What does being unionized have to vdo with it? We will all taKE THE CUTS REGARDLESS OF OUR STATUS. You would seem alot more credible if you would drop the union mantra and deal in reality. Not just for DAL employees but for all airline employees. Union or not, the crap is going to hit the fan and there isn't anything any union or non union employee can do about it. THAT is a fact!
[post="167346"][/post]​

Typical response from a Kool-Aid drinker from Delta. A union can negotiate for you and offer less then what the company wants. Please tell us how as a non-union employee you plan to negotiate paycuts without a union?

Do you eat, sleep and dream kissing Delta's a$$?