DL sues Republic for excessive cancellations

[WorldTraveler]

http://www.ibj.com/articles/55195-delta-sues-republic-airways-over-flights-lost-to-pilot-dispute

"Deltas lawsuit, heavily redacted to conceal contract information, said Shuttle America operates 71 aircraft for Delta Connection, a mix of 50-seat, 70-seat and 76-seat Embraer SA planes. Delta faults the company for making its pilot shortage worse by agreeing in September 2014 to take on additional flying for United Continental Holdings Inc.s regional operation."

seemed certain to happen.

 

[robbedagain]

given the pilot shortage at Republic  not to mention a potential CH11  its not looking good for Repub as it is     

 

[WorldTraveler]

I KNEW we would something to agree on.

 

[eolesen]

Not sure what DL is hoping to achieve here other than get out of its contract before RJET drops it in court.

When they do file (I think the situation is well past "if"), RJET might decide it's better to drop some of the contracts with the three majors. All but two are long term agreements and may or may not be economically sustainable under the new contract with the IBT.


Some percentage of the aircraft RJET is currently operating for the widget have place options, which dumps the liability for the aircraft onto DL. That's why antagonizing Bedford just doesn't make sense to me. The UA agreements also have put/pull triggers. Not sure about AA.

It's probably a toss up to see how quickly RJET, AirWis and Great Lakes all wind up filing. Oddly, Mesa seems to be in better shape than those three combined.

 

[WorldTraveler]

Given that you believe that RJET is a "goner" then it absolutely does matter for DL to make a claim now in the event that BK occurs.

Who knows what DL can get out of it but I don't think they would be disappointed if the RJ fleet is shrunk not just for DL but for other carriers.


and let's keep in mind that any of the regional carriers that end up in BK will be much less attractive for employees.

Notably, reports seem to indicate that DL is accelerating its domestic growth plan even though some people think all of those aircraft that DL is taking delivery of are just replacement aircraft.

DL is simply further along in moving more of its network to mainline flying from regional carrier flying and AA and UA are both very dependent on being able to restructure their networks over the next couple years to more large RJs.

The domestic market is strong, growth in the US makes sense right now given fairly firm pricing and low fuel prices, and regional carriers have pilots which all 4 of the major carriers will need not too many years from now.

 

[FWAAA]

I know all of the arguments against owning your own regional airline(s) but this situation is one of the reasons in favor of owning your regionals: they can't over-extend themselves by making commitments to your competitors and thereby (allegedly) failing in their obligations to you. I know I'm probably out to lunch on this issue but if I were the CEO of a big airline, owning my own regional airlines would make my life less stressful.

That's one reason I attacked DumbAss Parker when he demanded additional nit-picking concessions from the Envoy (fka American Eagle Airlines) pilots immediately after they gave concessions during the Eagle Ch 11 bankruptcy. He was handing out hundreds of millions of dollars to buy labor peace with the mainline flight crews but was demanding additional nickels and dimes from the Eagle pilots and playing them against the PSA and Piedmont pilots.

In my view, that was a very short-sighted approach. He should have added a few dollars to the Eagle, PSA and Piedmont contracts, including higher starting pay, made those pilots happy and ensured himself of a steady supply of regional pilots for AA's expanding regional fleet. And a deep bench of happy regional pilots equals a good source of flow-through candidates when you need mainline pilots.

I realize that I'm probably wrong and that the arguments against owning your regionals probably outweigh the arguments in favor, but DL's suit against Republic is one thing you wouldn't have to worry about if most all of your regional feed was wholly-owned. They wouldn't cancel your IND-ORD flight so they could fly UA's IND-ORD flight.

 

[BABABOOY]

Wholly owned regional didn't quite work out for Delta.   Comair was wholly owned by Delta, and look what happened.

 

[robbedagain]

E  I thought MESA did CH 11 back in the mid 2000s??   I do agree they seem to be doing better.    Bababooy  PSA and Piedmont are still wholly owned   although with the DASHs timing out over the next couple of years I would not be shocked to see them become a ground handler for AA and other carriers   But PSA is getting a number of the new GEN CRJ900s   not sure how many    But if any of the wholly owned survives Id say a good bet would be PSA   Not sure why DL closed Comair  but didn't it happen shortly after their crash at LEX?   and if so did that hurt them to the point?

 

[WorldTraveler]

Let's be honest in that Comair outlived its usefulness to DL and AE has for AA in part because their costs went thru the roof.

Comair was a fairly high quality wholly owned; ASA also was but was the complete opposite.

Endeavor or whatever their name is this year falls in the same category and DL does have more control of them but they also have staffing issues but can manage to fly the schedule that DL gives them - even if it keeps moving.

Also remember that DL diversified regional carriers at each hub in the aftermath of the OH strike.

and I do agree with you to an extent, FWAAA.

but part of the whole RJ issue is that legacy carriers want them when they can deliver cheap, reliable transportation... but when their costs become too high, they are no longer desirable.

 

[Kev3188]

YV did go through BK... still weird to see the words "better shape" to describe them...

As for S5/RP, it's been a long time since I've worked an ERJ-145. If it never happens again, I'd be okay with it...

 

[WorldTraveler]

I'd say the same thing about flying one. same for a CRJ-200

 

[700UW]

Endeavor is wholly owned by DL.

 

[FWAAA]

Wholly owned regional didn't quite work out for Delta.   Comair was wholly owned by Delta, and look what happened.

While DL did eventually shut down Comair over cost issues, Delta could have kept Comair alive. It's not like Comair's death was pre-ordained and DL was powerless to do anything about it - as a wholly-owned sub, DL was in control.

Continental kicked off the divestment movement several years earlier when it sold a stake in Express Jet in an IPO and then funded its annual pension fund contributions with additional XJET stock for several years at a fairly high valuation. Brilliant strategy by CO management in the wake of Sept 11, 2001, as it helped CO conserve cash and enabled it grow its fleet, as CO was the only legacy that grew in the four years after Sept 11. The sale of XJET to its pension funds may have helped CO avert a Ch 11 filing.

In an attempt to raise cash on the eve of its Ch 11 filing, DL sold ASA to XJET for $425 million, not an impressive sum compared to the XJET valuation that CO had used. Still, it was better than nothing. DL also tried to market Comair in 2005 but found no buyers. Presumably, Comair's costs should have been fixed in Ch 11, as Comair joined DL in the 2005 bankruptcy filings. I never understood why Comair's costs were out of whack given that it had been in bankruptcy along with its parent, Delta. But costs were the reasons cited when DL shut down Comair:

http://www.nytimes.com/2012/07/28/business/comair-regional-delta-carrier-will-close-in-september.html

As AA languished with the highest labor costs and Arpey's personal aversion to corporate bankruptcy, AA finally decided to get on the regional divestment train but by time AA acted, the train had long left the station and there were zero buyers for regional jet operators like Eagle.

When AMR filed its Ch 11 petiton, it was joined by Eagle. Presumably, its cost issues should have been fixed with its concessions in 2012. That's why I thought Parker was taking the wrong tack by trying to squeeze the Eagle/Envoy pilots for a few more cents while heaping riches on the mainline pilots. Especially since we already knew about the new FARs that would put a dent in the supply of new pilots for a few years (primarily the higher minimum hours requirement to get the ATP).

 

[eolesen]

I know all of the arguments against owning your own regional airline(s) but this situation is one of the reasons in favor of owning your regionals: they can't over-extend themselves by making commitments to your competitors and thereby (allegedly) failing in their obligations to you. I know I'm probably out to lunch on this issue but if I were the CEO of a big airline, owning my own regional airlines would make my life less stressful.

Yes and no.

The flipside of the RJET situation is when the parent company is raking in billions in profits, the unions at the wholly-owneds try to get their cut as well, and the majors try to replicate the admin structure and policies, resulting in lots of bloat. Eventually, the major is left propping up a high cost subsidiary while the CPA carriers are running lean & mean, and at rates that the other majors can afford far more than the insourced-wholly-owned.

That's essentially what happened with Comair, and to a lesser degree ASA & Eagle/Envoy. Unfortunately there wasn't enough willpower to get the wholly owned airlines competitive with the independents. Part of it was weak management, the other part of it was the "me-too" attitude of the unions.

I suspect this isn't the last time we'll see the whipsawing of regional divestitures followed by majors taking control of their regionals...

 

[WorldTraveler]

that wasn't happened at all with Comair.

Comair was dissolved long before the current period of high profits in the industry and at DL and Comair pilots struck because they wanted to be paid like mainline pilots. They began a senior airline just like Eagle and their costs went up. Senior airlines can't compete on the same basis as new airlines.

the only reason why DL took control of Pinnacle in bankruptcy was to ensure that DL had some control over the transition of equipment from small to large RJs which was part of the reason for even restructuring Pinnacle/Endeavor.

The same reason still exists for other carriers but AA has continually awarded large RJ flying to other carriers instead of to AA which makes it doubtful how much longer they will use the same strategy.

EV followed a different path since they were merged and bought with one of the independent regionals and SkyWest does have a better track record of adapting to industry changes and in delivering what it has promised than the regional carrier industry as a whole