Delta Air Grounds Expansion Plans For Its Song Uni

[downline7]

ATLANTA -- Delta Air Lines (DAL, news) is playing a different tune with its low-fare Song unit, putting a much-anticipated expansion on hold as the company conducts an operational review to find more ways to cut costs companywide, Thursday's Wall Street Journal reported.

The nation's No. 3 carrier had promised a January cross-country rollout from New York of its stylish airline-within-an-airline experiment, as it faces an assault from low-fare carrier JetBlue Airways (JBLU, news) and other low-cost rivals. Song currently flies mostly from the Northeast to leisure destinations in Florida.

Those plans for Song have been shelved on orders from new Chief Executive Gerald Grinstein, who wants to determine whether pursuing that strategy makes sense, company officials said. The review, expected to be completed by June, extends across the entire loss-plagued Delta operation, officials say. Meanwhile, Delta is in tense talks with its powerful pilots union, seeking wage concessions that the company says it needs to stay competitive with rivals.

Launched last April, Song was formed to operate at lower costs while providing perks such as leather seats and in-flight entertainment. Some of the lower costs are achieved with shorter aircraft turnaround times at airports, borrowing a strategy from low-cost carriers that get greater use of their aircraft than so- called hub-and-spoke carriers such as mainline Delta.

Wall Street Journal Staff Reporter Evan Perez contributed to this report.

(link to this article: http://www.quicken.com/investments/news_ce...r&column=P0DFP)

 

[HPearlyretiree]

Boy, there's a big suprise, guess Delta didn't know anything about Continental Lite, Metrojet, etc....

Maybe they put down the Bong pipe and realized that trying to run a low fare carrier at the same time you are running a regular carrier won't work? Never has, never will.

 

[magsau]

IMO, Song had the same problem the UAL shuttle had after Contract 2000. In that agreement the UA pilots that flew the shuttle were brought into parity with the mainline pilots (there was never a difference for F/A's and Mechanics or CSR's). Over night the cost advantage to UAL was taken away.

In the case of Song they have had the same rates of pay for the 757 pilots flying Song versus Mainline. With no cost savings the only advantage comes in having more seats to sell and that in turn drives down the CSM a bit, but not enough to offset the cost of the operation.

Perhaps if DL was able to negotiate with the pilots a reduction in the Song pilots wages and mainline pilots the cost structure could perhaps justify the continued use of Song as a tool to compete with JB

 

[Diesel8]

I think you have a point Magsau. I also think, this is scheming by mgnt., putting further pressure on the pilots wrt. taking a paycut. I am sure, they will soon see a presentation, that will say that if we had X pay we could have Y profit, so you see, you must take a paycut and we will grow.

 

[Speedbird]

I believe part of the problem lies with the choice of equipment by Song. The B757 is a great airplane, but cannot compete in some markets as cost effectively as JBLU can with the A320. David Neeleman pointed this fact out in jetBlue's latest CC when he used Sep 03 data to show that jetBlue was maintaining a substantial load factor advantage over Song and that the B757 trip costs were 40% higher than the A320. It may be that with 36 airplanes Delta has tapped out its true market opportunities under its current cost structure.

 

[Flying Titan]

TED.... Are you watching?

 

[WNrforlife]

You poor saps at Delta should just give up and file Chapter 11. All of the low fare carriers are going to put you out of business anyway. The sooner that you accept that fact, the better

 

[coolflyingfool]

I was stunned by the announcment. I do believe that SONG did a good job of marketing, but that costs money. I liked the new paint scheme, but that costs money. I liked the more seats aspect, but those First Class seats generate a lot of revenue. It does seem like Delta spent a lot of money to try and compete. Delta needs to go back to who they were when I worked for them. My friends and family were always saying that Delta was the head of the class for the airline industry. Delta can regain that, I believe. I am long gone from Delta, but feel it can be turned back in to the head of the class by concentrating on F/C, amenities and some business sense. Contracts do need to be reworked and everything should be on the table for tweaking. I don't want to see any one else lose their job in the industry. There has been enough lives ruined already.

 

[spinproof]

The airline maybe called SONG but management is doing a "Dance" :down:

 

[michael707767]

For the record folks, Delta did not say they were ending Song, or even stopping expansion permanently. Everything is on hold now while they do a top to bottom review. At the end of that review Song may shrink, grow, or stay the same. They don't know yet, nor do you. Wait to see what happens.

 

[Farley]

Keeping Song around in any form is a long shot in my opinion. It may have been a good testing ground for ideas, but it was an expensive little foray as well.

 

[JS]

I believe part of the problem lies with the choice of equipment by Song. The B757 is a great airplane, but cannot compete in some markets as cost effectively as JBLU can with the A320. David Neeleman pointed this fact out in jetBlue's latest CC when he used Sep 03 data to show that jetBlue was maintaining a substantial load factor advantage over Song and that the B757 trip costs were 40% higher than the A320. It may be that with 36 airplanes Delta has tapped out its true market opportunities under its current cost structure.

The 757 per-seat-mile costs are 40% higher than the A320?

Quit hogging that joint! I want some!

 

[DLFlyer31]

The 757 per-seat-mile costs are 40% higher than the A320?

Quit hogging that joint! I want some!

He said trip costs, not seat-mile costs. Apparently, you've been hogging the joint.


I do agree though that the 757's are a little too big. Sure, DL can fill up a 757 flying JFK-FLL on Friday afternoon, but what about Tuesday where loads on Song often hover in the 40's?

 

[JS]

He said trip costs, not seat-mile costs. Apparently, you've been hogging the joint.


I do agree though that the 757's are a little too big. Sure, DL can fill up a 757 flying JFK-FLL on Friday afternoon, but what about Tuesday where loads on Song often hover in the 40's?

I know what he said. My point is that comparing trip costs between different sizes of aircraft is nothing more than an exercise in arithmetic. Otherwise, why not employ LearJets to fly the JFK-LGB route? They're even more comfortable than an A320, and the PER TRIP cost is really low! Dude!

The reason most people use per-seat-mile costs rather than per-trip costs is because people buy an airline ticket for one seat, not a whole plane. If you fly more seats in the sky, costs are higher but revenue is higher as well.

Regarding the generally well known fact that Fridays are busier than Tuesdays for flying, is JetBlue immune to this effect as well?

Gimme some of that Blue Koolaid! This coffee isn't doing it for me!

 

[Blue Dude]

I think the ultimate point was that if you're going to carry the same number of passengers, the airplane that does the job for the lowest trip cost wins even if the unit cost is higher. Which in this case, it isn't anyway. Only if given the same load factor (and revenue) does the lowest unit cost win. Song's extra 43 seats are nice if you can fill them, but since that's not usually the case, they're just a full-time expense with a very part-time benefit. If a typical load is 130 passengers, would you rather fly them on a plane with 156 seats, or one with 199 seats that costs 40% more for the trip?