RDU Jetblast
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Yeah, Yeah, yeah. How many times has this event been predicted? Three times I thimk.
Delta In Chapter 11 By Sept '05
- Thread starter Beer Guzzler
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WorldTraveler
Corn Field
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The single determining factor in whether DL and NW will file for bankruptcy is whether the US governmnent provides meaningful pension relief for airlines. Since 9/11, US airlines have succeeded in restructuring every aspect of their business outside of bankruptcy except for pension obligations. Current US law makes it all but necessary to go into bankruptcy to terminate pensions. There is no reason for DL or any other airline to enter bankruptcy other than to terminate pensions or if they run out of money by failing to manage their obligations against their cash flow. Financial institutions would far rather give airlines help now outside of bankruptcy rather than run the risk of letting them go into bankruptcy where they could eliminate far more costs and do far more damage to creditors.
The measure passed this week in the House was the first step in reforming pensions at all companies. The next step is defining pension reform law for all companies and shortly after that specific help for the airlines.
You can bet NW and DL will both report horrendous financial results at least until they get help from Congress.
And Congress is fully aware that DL and NW will both file for bankruptcy this fall if they do not help out the airline industry with specific relief. Filings by both DL and NW will almost certainly result in filings by both AA and CO.
And if DL and NW file, dumping the pension plans will almost certainly be the primary goal. However, bankruptcy does provide the opportunity to cut billions in other costs just as UA and US have done. Given that DL and NW have historically done a better than average job of controlling costs than the rest of the industry, AA and CO will be very frightened if DL and NW are able to further reduce costs through bankruptcy and get rid of their pension liabilities.
It is also certain that if even more legacy airline files for bankruptcy, industry consolidation will almost certainly accelerate. Unlike UA, neither DL or NW have a complete well-rounded route system. There would be alot of incentive for DL or NW to clean themselves and combine with another carrier or each other as part of restructuring and with the help of outside forces.
There is no doubt that the coming months are incredibly pivotal for all of the industry. The US government truly holds the cards for the industry. The first choice for Congress is whether they want to help DL and NW specifically or allow them to dump their pensions on the PBGC in a process that will cascade throughout the entire legacy industry. I personally think Congress could not face the American people if they allow another industry to dump its pensions despite years of requests by airlines for relief. If bankruptcy filings begin, consolidation will almost certainly accelerate through the industry. The only process that could slow consolidation between US airlines is if the government allows foreign airlines to buy a controlling interest in US airlines - something that would make a DL or NW palatable to foreign airlines in their present size. If the process begins, the US will probably end up with 2-3 megacarriers which will be controlled by US citizens or there will still be five or more smaller airlines but they will have to substantially owned by foreign airlines. The choice is obvious.
Airline employees who care about their jobs should be writing to Congress fighting for an industry that can support most of the present airlines and one that will allow airlines to consolidate under normal forces rather than through bankruptcy. You can bet other airline related interests such as aircraft lessors and lenders as well as municipalities would far rather have airlines get pension relief now than face having to move significant portions of the industry's assets in a multiple bankruptcy scenario.
The measure passed this week in the House was the first step in reforming pensions at all companies. The next step is defining pension reform law for all companies and shortly after that specific help for the airlines.
You can bet NW and DL will both report horrendous financial results at least until they get help from Congress.
And Congress is fully aware that DL and NW will both file for bankruptcy this fall if they do not help out the airline industry with specific relief. Filings by both DL and NW will almost certainly result in filings by both AA and CO.
And if DL and NW file, dumping the pension plans will almost certainly be the primary goal. However, bankruptcy does provide the opportunity to cut billions in other costs just as UA and US have done. Given that DL and NW have historically done a better than average job of controlling costs than the rest of the industry, AA and CO will be very frightened if DL and NW are able to further reduce costs through bankruptcy and get rid of their pension liabilities.
It is also certain that if even more legacy airline files for bankruptcy, industry consolidation will almost certainly accelerate. Unlike UA, neither DL or NW have a complete well-rounded route system. There would be alot of incentive for DL or NW to clean themselves and combine with another carrier or each other as part of restructuring and with the help of outside forces.
There is no doubt that the coming months are incredibly pivotal for all of the industry. The US government truly holds the cards for the industry. The first choice for Congress is whether they want to help DL and NW specifically or allow them to dump their pensions on the PBGC in a process that will cascade throughout the entire legacy industry. I personally think Congress could not face the American people if they allow another industry to dump its pensions despite years of requests by airlines for relief. If bankruptcy filings begin, consolidation will almost certainly accelerate through the industry. The only process that could slow consolidation between US airlines is if the government allows foreign airlines to buy a controlling interest in US airlines - something that would make a DL or NW palatable to foreign airlines in their present size. If the process begins, the US will probably end up with 2-3 megacarriers which will be controlled by US citizens or there will still be five or more smaller airlines but they will have to substantially owned by foreign airlines. The choice is obvious.
Airline employees who care about their jobs should be writing to Congress fighting for an industry that can support most of the present airlines and one that will allow airlines to consolidate under normal forces rather than through bankruptcy. You can bet other airline related interests such as aircraft lessors and lenders as well as municipalities would far rather have airlines get pension relief now than face having to move significant portions of the industry's assets in a multiple bankruptcy scenario.
Beer Guzzler
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The writing on the wall is becoming more & more evidant... Today Delta general counsel headed to local law firm. ..
Is it not a bad sign that the attorneys that have been working for Delta for 20+ years are all of the sudden "abandoning ship"?
The June #'s are going to be the final nail in the bankruptcy coffin. Those numbers will be released later this week..
We shall see..
Is it not a bad sign that the attorneys that have been working for Delta for 20+ years are all of the sudden "abandoning ship"?
The June #'s are going to be the final nail in the bankruptcy coffin. Those numbers will be released later this week..
We shall see..
I was speaking with a former Eastern Airline f/a who has been with AA for awhile now and she said that after airlines file for BK, it takes about 15 years for them to die, so they have awhile to go yet until their demise. As for us AA, there was a rumor last year that if the fuel cost kept going up, then, we'd be filing for BK in February of this year, but it hasn't happened, so I don't know what's going to happen. I guess we'll find out!kiowa said:
Beer Guzzler
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You have fuel, you have pension funding .. Now add new bankruptcy reorganization laws that go live 10/17/05..
Law could trigger Chapter 11 surge
WNrforlife
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DL's definitely goin' CH11, and most likely CH7 soon after.
Ain't no stoppin it. <_< <_<
Ain't no stoppin it. <_< <_<
WorldTraveler
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You'll remember that DL went through the same motions last fall and had C11 papers ready to go. That's usually what it takes to get what you want. Today, it's pension reform from Congress and debt restructuring from lenders.
DL will get what it wants outside of BK because the results for everyone is far worse in BK than outside. It makes no sense to force a company to seek bankruptcy when it can be avoided, and it can in the case of DL and NW.
DL will get what it wants outside of BK because the results for everyone is far worse in BK than outside. It makes no sense to force a company to seek bankruptcy when it can be avoided, and it can in the case of DL and NW.
WorldTraveler said:
I wouldn't be too sure of that. DL will get pension reform, but it's not going to be what they are asking for. Congress has already turned a deaf ear to DL's request for a 25 year catch-up period. DL will probably get 7-10 years which means DL will have to make some significant pension payments in the next few years.
As for debt restructuring, DL will get some short-term relief, but it will only serve to exacerbate DL's long-term problems. Instead of reducing debt, DL will only be able to delay it and likely at higher interest rates. Interest payments alone will significantly eat into DL's margins for many, many years to come.
I don't see how DL can effectively compete against LCC's while lugging around $21 Billion in debt. It's a disadvantage that is too large to overcome.
WorldTraveler
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While I don't disagree that DL's debts are unsustainable, chapter 11 is not really an answer either. All chapter 11 does is restructure debt - it doesn't eliminate it. The only alternative for DL or any legacy airline to survive is to cut their costs low enough to service their debt. And survival will come to the airlines that cut their costs and are able to compete with LCCs. Bankruptcy doesn't reduce fuel costs which is the biggest threat to the airlines right now.
And as for LCCs, DL has been very aggressive at competing with them. You may recall that ATL is one - if not the only - city JetBlue has pulled out of. WN has not grown in SLC. Most significantly, B6's move today to move to EWR says they really aren't able or interested in expanding JFK right now. While I agree one day's announcements don't make a trend, it is clear that B6 is facing stiff competition from both AA and DL at JFK.
Finally, don't forget that, for decades, DL has historically done a better job of controlling costs than any other airline in the legacy sector of the industry. There were five years under Mullin's reign that DL lost its cost focus and competitiveness but the current administration is now working double time to get costs back time. However, the current management team at DL understands the industry very well and will leave DL better than they found it.
The bottom line is that bankruptcy really only happens to companies that fail to manage their cash or choose to eliminate some costs that simply can't be cut in the normal course of business (such as pensions). However, DL has said and lengthy discussions on the AA board here have shown that defined benefit plans can actually be cheaper than defined contribution plans. Lenders have consistently been willing to loan airlines money - at a price for sure - to keep them afloat. But being in bankruptcy doesn't require any less money.
And as for LCCs, DL has been very aggressive at competing with them. You may recall that ATL is one - if not the only - city JetBlue has pulled out of. WN has not grown in SLC. Most significantly, B6's move today to move to EWR says they really aren't able or interested in expanding JFK right now. While I agree one day's announcements don't make a trend, it is clear that B6 is facing stiff competition from both AA and DL at JFK.
Finally, don't forget that, for decades, DL has historically done a better job of controlling costs than any other airline in the legacy sector of the industry. There were five years under Mullin's reign that DL lost its cost focus and competitiveness but the current administration is now working double time to get costs back time. However, the current management team at DL understands the industry very well and will leave DL better than they found it.
The bottom line is that bankruptcy really only happens to companies that fail to manage their cash or choose to eliminate some costs that simply can't be cut in the normal course of business (such as pensions). However, DL has said and lengthy discussions on the AA board here have shown that defined benefit plans can actually be cheaper than defined contribution plans. Lenders have consistently been willing to loan airlines money - at a price for sure - to keep them afloat. But being in bankruptcy doesn't require any less money.
Walmartgreeter
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However, DL has said and lengthy discussions on the AA board here have shown that defined benefit plans can actually be cheaper than defined contribution plans.
So true, especially in the long run. Bugsy at U was so hot on dumping the DB plans, he pretty much blew it.....A DC plan is funded FOREVER at a contracted rate, no matter what the market does. A DB plan, however, when carefully managed, can actually MAKE money in the long run and actually go through periods where no funding whatsoever is required. Hang in there Traveler, you guys at DL have the best shot at making it though this as a surviving legacy carrier. Best to you, a down on his luck U pilot!
So true, especially in the long run. Bugsy at U was so hot on dumping the DB plans, he pretty much blew it.....A DC plan is funded FOREVER at a contracted rate, no matter what the market does. A DB plan, however, when carefully managed, can actually MAKE money in the long run and actually go through periods where no funding whatsoever is required. Hang in there Traveler, you guys at DL have the best shot at making it though this as a surviving legacy carrier. Best to you, a down on his luck U pilot!
Beer Guzzler
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Beer Guzzler
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In statement by, now former DL CFO Michael Palumbo stated "it (Delta) prepared to record another hefty loss amid persistently high fuel prices".
"There is growing urgency to its transformation efforts".
Delta Replaces Chief Financial Officer
"There is growing urgency to its transformation efforts".
Delta Replaces Chief Financial Officer
jimntx
Veteran
"Also Wednesday, Delta announced the creation of a chief operating officer position, which will be filled by Jim Whitehurst, currently senior vice president and chief network and planning officer"
Gee, just what every airline needs in order to cut costs--another executive. I know that Whitehurst is already on board, but let's see if his current position is eliminated or if everyone moves up one slot.
Gee, just what every airline needs in order to cut costs--another executive. I know that Whitehurst is already on board, but let's see if his current position is eliminated or if everyone moves up one slot.
TheDog2004
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they're screwed.
