Dl Sees Large '05 Loss
- Thread starter magsau
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WorldTraveler
Corn Field
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- Dec 5, 2003
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So glad you missed me. I JUST returned from a trip to Brazil where I witnessed first hand the reshuffling of the airline deck in that country. For years, Varig was a respectable airline; now, Varig planes are in the minority while TAM has planes everywhere and, based on my experience, full planes and good (if at least expected) service. VASP stopped flying while I was there. My point: the industry is being restructured around the world - everywhere except in the US where anything w/ a pulse is resuscitated ad infinitum.
I have just read that LH is looking at Swiss again.
I have also read that a couple analysts have said that there really is nothing new in DL's filing and the selloff in DL's stock was overblown. DL is far from out of the woods but no one expects that DL will face a cash crunch before winter based on current projections.
Whether you like the strategy or not, DL has done a very good job of inducing panic through gloom and doom in order to reduce costs. While I don't doubt that DL's costs are not coming down because of fuel, DL was able to extract substantial concessions (mostly from their employees) during last fall's restructuring because of their doom and gloom scenario. DL didn't get all of the financial relief it wanted and still has substantial debt and pension obligations due this year that they would undoubtedly like to delay. Given that the strategy worked for them in the fall, it worked for AA almost 2 years ago, and most recently was used by Independence - I fully expect DL will continue to scream loud enough to extract the concessions it needs/wants in order to stay out of bankruptcy. Everyone knows that bankruptcy helps absolutely no one - creditors could face billions in losses if DL dumps unsecured debt while aircraft lessors could see significant airplane leases rejected. While I think DL does damage by continuing to use these scare tactics, they obviously think they are necessary.
A chapter 11 filing is an admission that a company can no longer control their business. DL's noisy attempts at restructuring its finances shows that it is going to fight ending up in bankruptcy - and will probably succeed based on recent evidence. No one wants an airline to end up in bankruptcy; everyone is better served by restructuring outside of bankruptcy.
There is another element to this story. Fly knows I cannot possibly talk about the industry without talking about UA and this is no exception. As a result of the PBGC's takeover of UAL's pensions, DL now has the most underfunded pensions. DL wants and needs pension reform legislation. No one should be surprised that they will continue to race the threat of Chapter 11 until pension funding regulations are changed to DL's benefit.
As I have said, oil prices may finally be the force that pushes some airlines over the edge. Unless the federal government is willing to prop up alot of companies inside and outside of aviation, there will be no help in controlling soaring fuel prices.
No, I won't put flowers around DL's SEC filing. I will continue to assert that DL is in control of its situation. The industry continues to be in a chaotic downward spiral. DL has very precarious finances but I would assert that DL's finances are not much more precarious than CO although CO has a culture of convincing everyone that they are doing just fine. NW and AA have enough cash on hand that it is unlikely that they will get any help w/ their finances. And, of course the bankrupt duo of UA and US will continue to struggle to turn things around in an industry where bankruptcy is tantamount to a death sentence. For the past five years, however, all death sentences in the US have been commuted but the world aviation scence proves that eventually someone has to fall off the cliff. By virtue of being out of bankruptcy, DL is ahead of UA and US in the process, on par w/ CO, and behind NW and AA. Until the industry stabilizes, I doubt that DL wants to be in the front of the pack.
I have just read that LH is looking at Swiss again.
I have also read that a couple analysts have said that there really is nothing new in DL's filing and the selloff in DL's stock was overblown. DL is far from out of the woods but no one expects that DL will face a cash crunch before winter based on current projections.
Whether you like the strategy or not, DL has done a very good job of inducing panic through gloom and doom in order to reduce costs. While I don't doubt that DL's costs are not coming down because of fuel, DL was able to extract substantial concessions (mostly from their employees) during last fall's restructuring because of their doom and gloom scenario. DL didn't get all of the financial relief it wanted and still has substantial debt and pension obligations due this year that they would undoubtedly like to delay. Given that the strategy worked for them in the fall, it worked for AA almost 2 years ago, and most recently was used by Independence - I fully expect DL will continue to scream loud enough to extract the concessions it needs/wants in order to stay out of bankruptcy. Everyone knows that bankruptcy helps absolutely no one - creditors could face billions in losses if DL dumps unsecured debt while aircraft lessors could see significant airplane leases rejected. While I think DL does damage by continuing to use these scare tactics, they obviously think they are necessary.
A chapter 11 filing is an admission that a company can no longer control their business. DL's noisy attempts at restructuring its finances shows that it is going to fight ending up in bankruptcy - and will probably succeed based on recent evidence. No one wants an airline to end up in bankruptcy; everyone is better served by restructuring outside of bankruptcy.
There is another element to this story. Fly knows I cannot possibly talk about the industry without talking about UA and this is no exception. As a result of the PBGC's takeover of UAL's pensions, DL now has the most underfunded pensions. DL wants and needs pension reform legislation. No one should be surprised that they will continue to race the threat of Chapter 11 until pension funding regulations are changed to DL's benefit.
As I have said, oil prices may finally be the force that pushes some airlines over the edge. Unless the federal government is willing to prop up alot of companies inside and outside of aviation, there will be no help in controlling soaring fuel prices.
No, I won't put flowers around DL's SEC filing. I will continue to assert that DL is in control of its situation. The industry continues to be in a chaotic downward spiral. DL has very precarious finances but I would assert that DL's finances are not much more precarious than CO although CO has a culture of convincing everyone that they are doing just fine. NW and AA have enough cash on hand that it is unlikely that they will get any help w/ their finances. And, of course the bankrupt duo of UA and US will continue to struggle to turn things around in an industry where bankruptcy is tantamount to a death sentence. For the past five years, however, all death sentences in the US have been commuted but the world aviation scence proves that eventually someone has to fall off the cliff. By virtue of being out of bankruptcy, DL is ahead of UA and US in the process, on par w/ CO, and behind NW and AA. Until the industry stabilizes, I doubt that DL wants to be in the front of the pack.
WorldTraveler
Corn Field
- Joined
- Dec 5, 2003
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- 21,709
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- 10,662
I didn't run down the entire industry changes, WH, but yes Gol is a big reason why the Brazilian airline is changing; and Gol's idea of low fares is laughable from a US perspective - WN would be worth ten times more than they do if they could get by with charging the fares that Gol is able to charge in Brazil. Varig is barely hanging on because the Brazilian gov't isn't ready to have just one international carrier - and TAM has just a couple international routes as it is.
