- Dec 5, 2003
- 21,709
- 10,721
The first round of information regarding DL’s transformation is out:
http://biz.yahoo.com/prnews/040908/clw033_1.html
There are clearly significant pieces of the plan which have not been revealed as evidenced by statements that the airline will grow while simultaneously eliminate 4 fleet types; there clearly are plans to obtain used aircraft since the flight counts don’t support grounding any 4 of DL’s fleet types. Additionally, details of the debt restructuring were noticeably absent as were details of the employee cutbacks.
Enough details were revealed to determine that:
1. The plan is comprehensive. While not earth shattering in any detail, it does cover all aspects of the way Delta operates. It is noticeably different from any other legacy airline turnaround plan that has been announced in its completeness.
2. Today’s details are more revenue focused with only high-level information on the cost side. Obviously, the cost side is still being worked out but Delta’s plan is clearly not one that involves solely employee cuts without any change in the fundamentals of the business. Delta clearly intends to restructure the revenue side of the business by opening new markets just as much as it intends to cut costs. That is clearly not a plan that is designed to send Delta into oblivion and is distinctly different from the plans that have been announced at most other airlines other than American.
3. There is a clear desire to improve the product as evidenced by a willingness to invest money in spite of the precarious financial position. Such a plan clearly indicates a desire for Delta to survive and thrive. As a passenger, I salute Delta for recognizing that the fundamental airline product must change for the customer’s benefit.
4. Song is not dead. Clearly there are positive signs there and indications that it is an effective tool to compete.
5. Clearly DL employees will make sacrifices and probably a good deal of that will be at DFW. DL employees have long been some of the highest paid employees in the industry and even with these changes are not likely to be anywhere near the humiliating levels being asked of US employees. And clearly UA employees are going to be asked for more so if Delta is talking about 10-15% cuts off of a base that has not largely been touched since 9/11, that is considerably less that what other airlines have made or are expected to make. Further, the cuts will be accompanied by incentives and rewards right off the bat. Quite frankly, DL will accomplish what airline management has tried to do for decades and a big part of what makes Southwest profitable – tie employee pay to company success. Kudos to Delta for the paradigm shift.
6. There is a clear shift in Delta’s network to the east. Although there are few mainline flights left at DFW, the significant shift is in RJs to the east, esp. NYC, BOS, and FLA. That says that DL will use RJs more for point to point flying and less for hub development, although there obviously will be hub growth at ATL, CVG, and SLC for both the connection carriers and mainline.
7. The pilot contract rework and debt restructuring are clearly not easy tasks but setting a date when the negotiations will end or else will go a long way to ensuring success.
8. SLC is not closing despite fears to the contrary. Interestingly, there were no details about SLC’s growth but it wouldn’t take too much to guess that there will be an improvement in service to cities in the SE and SW that previously were served through DFW.
9. International growth is apparently going to come but details are sketchy except for China which we could have guessed. I believe DL previously applied for JFK-China service so I wouldn’t be surprised if they dust that application off and resubmit it.
10. DFW and SLC were really redundant all along. It was never realistic to expect that DL would get rid of both but one was not necessary. Expecting passengers to choose DL by flying RJ to RJ connections over DFW when AA offered at least one mainline flight on their DFW connections was a recipe for failure. It is hard to see DL pull out of DFW given its history there but there is not much about the airline industry that is comfortably rooted in history any more.
There are obvious competitive implications. DL’s plan is clearly not targeted at any one airline but on building on DL’s strengths and on taking advantage of DL growth opportunities.
1. Addition of RJ service from JFK clearly is preemptive with respect to JetBlue’s E190s. DL has a very good history of defending territory with the RJ.
2. The ATL restructure puts pressure on AirTran who is equally constrained in their ability to grow. DL will be adding capacity, presumably including in key FL markets, while FL has no opportunity to grow without restructuring its operations.
3. DL’s circle around CVG is growing with more flights from CMH and DAY. DL obviously intends to own the Ohio Valley.
4. NYC and BOS growth will bump into AA, CO, and US. It is interesting that the verbiage is that JFK will be expanded while BOS will be defended.
5. Leaving DFW clearly leaves a big problem for AA. DFW is the largest traditionally priced hub left. It is a given that another carrier – likely an LCC – will move into DFW’s spot. DL is undoubtedly on the phone right now hawking those gates to AirTran, JetBlue, Southwest, America West…. Someone will bite and whoever it is will undoubtedly be a tougher competitor to AA than DL has been. Given that I still think AA and DL are the most likely two carriers to assume industry leadership, this is a very smart move on DL’s part to throw AA a curve ball – although one which they will overcome but which will cost money.
6. DL is well positioned to take advantage should any other carriers fail: US’s operation is surrounded with the only real DL absence in the intraNE markets which DL has shown no interest in going after. Alitalia is on the ropes which isn’t bad for DL given that they have a considerable lead in Italy over any other US competitor.
I’m sure we will hear more details about DL’s transformation in the next few days and weeks. The announcements today clearly indicate that DL knows what it’s doing, is building an airline for the future and one that is customer focused, and is not expecting its employees to singularly bear the brunt of restructuring the airline. DL’s plan is at least as comprehensive as AA’s which no one considers on the verge of failure any longer. I for one believe DL is well-positioned to succeed. Sadly, the world is too full of pessimists and short-sighted people who cannot recognize a viable plan when they see it. Delta has one. Hooray!
http://biz.yahoo.com/prnews/040908/clw033_1.html
There are clearly significant pieces of the plan which have not been revealed as evidenced by statements that the airline will grow while simultaneously eliminate 4 fleet types; there clearly are plans to obtain used aircraft since the flight counts don’t support grounding any 4 of DL’s fleet types. Additionally, details of the debt restructuring were noticeably absent as were details of the employee cutbacks.
Enough details were revealed to determine that:
1. The plan is comprehensive. While not earth shattering in any detail, it does cover all aspects of the way Delta operates. It is noticeably different from any other legacy airline turnaround plan that has been announced in its completeness.
2. Today’s details are more revenue focused with only high-level information on the cost side. Obviously, the cost side is still being worked out but Delta’s plan is clearly not one that involves solely employee cuts without any change in the fundamentals of the business. Delta clearly intends to restructure the revenue side of the business by opening new markets just as much as it intends to cut costs. That is clearly not a plan that is designed to send Delta into oblivion and is distinctly different from the plans that have been announced at most other airlines other than American.
3. There is a clear desire to improve the product as evidenced by a willingness to invest money in spite of the precarious financial position. Such a plan clearly indicates a desire for Delta to survive and thrive. As a passenger, I salute Delta for recognizing that the fundamental airline product must change for the customer’s benefit.
4. Song is not dead. Clearly there are positive signs there and indications that it is an effective tool to compete.
5. Clearly DL employees will make sacrifices and probably a good deal of that will be at DFW. DL employees have long been some of the highest paid employees in the industry and even with these changes are not likely to be anywhere near the humiliating levels being asked of US employees. And clearly UA employees are going to be asked for more so if Delta is talking about 10-15% cuts off of a base that has not largely been touched since 9/11, that is considerably less that what other airlines have made or are expected to make. Further, the cuts will be accompanied by incentives and rewards right off the bat. Quite frankly, DL will accomplish what airline management has tried to do for decades and a big part of what makes Southwest profitable – tie employee pay to company success. Kudos to Delta for the paradigm shift.
6. There is a clear shift in Delta’s network to the east. Although there are few mainline flights left at DFW, the significant shift is in RJs to the east, esp. NYC, BOS, and FLA. That says that DL will use RJs more for point to point flying and less for hub development, although there obviously will be hub growth at ATL, CVG, and SLC for both the connection carriers and mainline.
7. The pilot contract rework and debt restructuring are clearly not easy tasks but setting a date when the negotiations will end or else will go a long way to ensuring success.
8. SLC is not closing despite fears to the contrary. Interestingly, there were no details about SLC’s growth but it wouldn’t take too much to guess that there will be an improvement in service to cities in the SE and SW that previously were served through DFW.
9. International growth is apparently going to come but details are sketchy except for China which we could have guessed. I believe DL previously applied for JFK-China service so I wouldn’t be surprised if they dust that application off and resubmit it.
10. DFW and SLC were really redundant all along. It was never realistic to expect that DL would get rid of both but one was not necessary. Expecting passengers to choose DL by flying RJ to RJ connections over DFW when AA offered at least one mainline flight on their DFW connections was a recipe for failure. It is hard to see DL pull out of DFW given its history there but there is not much about the airline industry that is comfortably rooted in history any more.
There are obvious competitive implications. DL’s plan is clearly not targeted at any one airline but on building on DL’s strengths and on taking advantage of DL growth opportunities.
1. Addition of RJ service from JFK clearly is preemptive with respect to JetBlue’s E190s. DL has a very good history of defending territory with the RJ.
2. The ATL restructure puts pressure on AirTran who is equally constrained in their ability to grow. DL will be adding capacity, presumably including in key FL markets, while FL has no opportunity to grow without restructuring its operations.
3. DL’s circle around CVG is growing with more flights from CMH and DAY. DL obviously intends to own the Ohio Valley.
4. NYC and BOS growth will bump into AA, CO, and US. It is interesting that the verbiage is that JFK will be expanded while BOS will be defended.
5. Leaving DFW clearly leaves a big problem for AA. DFW is the largest traditionally priced hub left. It is a given that another carrier – likely an LCC – will move into DFW’s spot. DL is undoubtedly on the phone right now hawking those gates to AirTran, JetBlue, Southwest, America West…. Someone will bite and whoever it is will undoubtedly be a tougher competitor to AA than DL has been. Given that I still think AA and DL are the most likely two carriers to assume industry leadership, this is a very smart move on DL’s part to throw AA a curve ball – although one which they will overcome but which will cost money.
6. DL is well positioned to take advantage should any other carriers fail: US’s operation is surrounded with the only real DL absence in the intraNE markets which DL has shown no interest in going after. Alitalia is on the ropes which isn’t bad for DL given that they have a considerable lead in Italy over any other US competitor.
I’m sure we will hear more details about DL’s transformation in the next few days and weeks. The announcements today clearly indicate that DL knows what it’s doing, is building an airline for the future and one that is customer focused, and is not expecting its employees to singularly bear the brunt of restructuring the airline. DL’s plan is at least as comprehensive as AA’s which no one considers on the verge of failure any longer. I for one believe DL is well-positioned to succeed. Sadly, the world is too full of pessimists and short-sighted people who cannot recognize a viable plan when they see it. Delta has one. Hooray!
Wow, no other airline did anything like that before...... :huh: ummmm, right! good luck
