MCI transplant
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<_< ----Hey aa! You screwed up! You Capitalized "TW"!!!! 😛
This is "HARD" to say...
- Thread starter NewHampshire Black Bears
- Start date
WorldTraveler
Corn Field
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DL Flyer 31,
I had taken you to be a DL pilot. Thus the comments. You do seem to be less optimistic than before, though.
You do raise valid points and there is no doubt that the industry is very tough.
I also agree that DL management was not without fault…. Primarily Mullin believed that the billions that DL and other airlines made in the late 90s was the norm – and they allowed costs, including the pilot contract, to be based on that perception. Yes, swings in the industry happen very quickly.
I continue to believe that DL has benefited from being one of the last airlines to restructure and has learned from what others did. They are simply not getting stuck on some of the issues that UA got stuck on – and in many respects, DL and UA’s bankruptcies are more alike in terms of their similar size and network, culture, and age of their fleet than other US airlines. While people don’t talk about it much, Air Canada also did a Herculean job of turning their company around and I believe they have been as much of a model for DL as any US airline has been. If nothing else, note that AC has now ordered lots of new planes which is not like anything any US airline has done coming out of BK. AC is not just like the US airlines nor is US and Canadian BK law the same, but they are more close than not.
Debt levels are a real issue but you may have heard Ed Bastian say that his target is for DL to come out of BK with $10 billion in debt – way below what DL has now and way below what any other airline of its size has. I believe the reason DL is trying so hard to turn the company around so dramatically is because they want to convince investors that taking an equity stake in DL is worthwhile instead of just asking for debt. It is a sad fact that UA was never able to sustain consistent profits in BK and thus had to resort to all debt financing to get out. I believe DL will fare much better in that regard, as likely will NW who has also been much more profitable in BK.
Despite all the rumors, I don’t really expect DL to order billions and billions of dollars of airplanes. I expect they will take the rest of their 5 777 orders as LRs and may add the 2 remaining options they have for a total of 7 more 777s as LRs; I believe they will take at least some new 737NGs because they can’t defer them indefinitely; and I believe they will order some EMB190/195s and possibly some Q400s both of which have been rumored. Other than the LRs, those are not huge expensive planes for an airline of DL’s size assuming they don’t order them by the dozens which I don’t think they’ll do. There are rumors that DL is looking for some used 777ERs and I could see where a half dozen would be useful and affordable. All of that put together, including the 10 used 757s DL is buying from AA amounts to about amounts to about 75 aircraft worth $3-3.5B. And I expect that DL will take that amount over a 5 year period from 2007-2012.
They might well order the 787 and start getting them as early as 2010 but I would be surprised if they get many delivery slots that early, so most of the deliveries would be 2011 or after.
Considering that AA, DL, and UA bought as much as $3B a year in the late 90s on aircraft, this kind of capital spending hardly seems excessive – although it is unique in that most BK US airlines have ordered very little in new aircraft during the 5 years coming out of BK.
As for profitability, remember that DL is pushing its int’l growth to the max – and they are undoubtedly not getting near as high of revenues as they could if they grew at a slower pace but they still are managing to report overall profits. And even in a downturn, DL might not be hurt as bad since many of the new routes are to cities that do not have US air service at all so they would be less likely to face increased competitive pressure.
As for network reach, I believe that except for Chicago, DL and AA will have pretty comparable networks when DL is through with its restructuring and DL has clearly grown more in NYC than AA of late but still has a necessary size in all of the key markets except for Chicago. DL is still growing in the west but neither AA or DL is going to be terribly strong in East Asia absent an acquisition of some kind, although DL will probably have more of a presence in South and southwest Asia. DL will have the advantage to Europe while AA will have it to Latin America, even though DL currently serves almost all of the cities AA does but with less frequency.
Despite all my optimism, I really do look at the big picture and don’t deny the challenges ahead of DL. However, remember that there were many, many people who predicted DL’s complete demise not very many months ago - scrolling down the index page would show anyone those posts.
I still believe DL has made and will continue to make one of the most dramatic turnarounds in the industry. They were loud and noisy as they fought bankruptcy but ultimately slid into it and they will be just as noisy coming out because they have changed so dramatically, from a network, customer service, and financial standpoint. Given what they’ve accomplished, I think they have a right to toot their own horn.
I had taken you to be a DL pilot. Thus the comments. You do seem to be less optimistic than before, though.
You do raise valid points and there is no doubt that the industry is very tough.
I also agree that DL management was not without fault…. Primarily Mullin believed that the billions that DL and other airlines made in the late 90s was the norm – and they allowed costs, including the pilot contract, to be based on that perception. Yes, swings in the industry happen very quickly.
I continue to believe that DL has benefited from being one of the last airlines to restructure and has learned from what others did. They are simply not getting stuck on some of the issues that UA got stuck on – and in many respects, DL and UA’s bankruptcies are more alike in terms of their similar size and network, culture, and age of their fleet than other US airlines. While people don’t talk about it much, Air Canada also did a Herculean job of turning their company around and I believe they have been as much of a model for DL as any US airline has been. If nothing else, note that AC has now ordered lots of new planes which is not like anything any US airline has done coming out of BK. AC is not just like the US airlines nor is US and Canadian BK law the same, but they are more close than not.
Debt levels are a real issue but you may have heard Ed Bastian say that his target is for DL to come out of BK with $10 billion in debt – way below what DL has now and way below what any other airline of its size has. I believe the reason DL is trying so hard to turn the company around so dramatically is because they want to convince investors that taking an equity stake in DL is worthwhile instead of just asking for debt. It is a sad fact that UA was never able to sustain consistent profits in BK and thus had to resort to all debt financing to get out. I believe DL will fare much better in that regard, as likely will NW who has also been much more profitable in BK.
Despite all the rumors, I don’t really expect DL to order billions and billions of dollars of airplanes. I expect they will take the rest of their 5 777 orders as LRs and may add the 2 remaining options they have for a total of 7 more 777s as LRs; I believe they will take at least some new 737NGs because they can’t defer them indefinitely; and I believe they will order some EMB190/195s and possibly some Q400s both of which have been rumored. Other than the LRs, those are not huge expensive planes for an airline of DL’s size assuming they don’t order them by the dozens which I don’t think they’ll do. There are rumors that DL is looking for some used 777ERs and I could see where a half dozen would be useful and affordable. All of that put together, including the 10 used 757s DL is buying from AA amounts to about amounts to about 75 aircraft worth $3-3.5B. And I expect that DL will take that amount over a 5 year period from 2007-2012.
They might well order the 787 and start getting them as early as 2010 but I would be surprised if they get many delivery slots that early, so most of the deliveries would be 2011 or after.
Considering that AA, DL, and UA bought as much as $3B a year in the late 90s on aircraft, this kind of capital spending hardly seems excessive – although it is unique in that most BK US airlines have ordered very little in new aircraft during the 5 years coming out of BK.
As for profitability, remember that DL is pushing its int’l growth to the max – and they are undoubtedly not getting near as high of revenues as they could if they grew at a slower pace but they still are managing to report overall profits. And even in a downturn, DL might not be hurt as bad since many of the new routes are to cities that do not have US air service at all so they would be less likely to face increased competitive pressure.
As for network reach, I believe that except for Chicago, DL and AA will have pretty comparable networks when DL is through with its restructuring and DL has clearly grown more in NYC than AA of late but still has a necessary size in all of the key markets except for Chicago. DL is still growing in the west but neither AA or DL is going to be terribly strong in East Asia absent an acquisition of some kind, although DL will probably have more of a presence in South and southwest Asia. DL will have the advantage to Europe while AA will have it to Latin America, even though DL currently serves almost all of the cities AA does but with less frequency.
Despite all my optimism, I really do look at the big picture and don’t deny the challenges ahead of DL. However, remember that there were many, many people who predicted DL’s complete demise not very many months ago - scrolling down the index page would show anyone those posts.
I still believe DL has made and will continue to make one of the most dramatic turnarounds in the industry. They were loud and noisy as they fought bankruptcy but ultimately slid into it and they will be just as noisy coming out because they have changed so dramatically, from a network, customer service, and financial standpoint. Given what they’ve accomplished, I think they have a right to toot their own horn.
michael707767
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Thanks for the insight but EVERYONE is doing better now. Without a looming war, fuel prices, SARS and a downturn in airline traffic they would be Ch 7 now if they were reporting like UA had during BK. Delta also lost a LOT of money during the same time (as did everyone else). That point always seems to be lost on you. Do you brag to your Daddy that you make more than he did when he was 40? (comparing 1950 wages to 2006?)
But wait, didn't Delta lose money in August? Hmmm, everyone else made money. Please tell us again (novel not imperative) why Delta is better than everyone else. Is the goal to lose the most money? If so, Delta wins.
NewHampshire Black Bears
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World Traveler,
You keep using all "these terms" to describe DL, such as "BK....Bankruptcy...Exit Financing".
These "terms" are FOREIGN to me. 🙄
What do they mean ??
NH/BB's 🙂
You keep using all "these terms" to describe DL, such as "BK....Bankruptcy...Exit Financing".
These "terms" are FOREIGN to me. 🙄
What do they mean ??
NH/BB's 🙂
WorldTraveler
Corn Field
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While AA has not had to deal with BK, they have surely passed out pay and benefit cuts just as aggressively as other airlines. I could pull up dozens of posts from AA employees about the cuts that AA employees endured at a time when other airline employees were still living high on the hog. And despite the passage of 3 years, it sounds like from the AA forum that an aweful lot of AA employees are still struggling to adapt to the new reality.
Of course DL lost a lot of money. But one thing that people fail to comprehend is that DL had the largest unsecured debt load in the industry at $4B – 4 X higher than UA had when it filed. When they filed for BK, they wiped $4B off their balance sheet. DL had the ability to wait longer to file and effectively was able to wipe out about 2 years of operating losses by eliminating its unsecured debt. And incidentally, DL tried 2 times to get its unsecured debt holders to renegotiate their debt and yet most balked. Now they will likely get less than 10 cents on the dollar in equity in the reorganized DL.
Since no other airline besides DL and NW reports monthly financial reports, we don’t and won’t know who made money in August. Based on AA’s results released just hours ago, there was a downturn that surely impacted other airlines. DL didn’t warn that its revenues were weakening going into August. In fact despite the terrorist threat in August, DL’s RASM growth was still well above average for the US industry.
Of course DL lost a lot of money. But one thing that people fail to comprehend is that DL had the largest unsecured debt load in the industry at $4B – 4 X higher than UA had when it filed. When they filed for BK, they wiped $4B off their balance sheet. DL had the ability to wait longer to file and effectively was able to wipe out about 2 years of operating losses by eliminating its unsecured debt. And incidentally, DL tried 2 times to get its unsecured debt holders to renegotiate their debt and yet most balked. Now they will likely get less than 10 cents on the dollar in equity in the reorganized DL.
Since no other airline besides DL and NW reports monthly financial reports, we don’t and won’t know who made money in August. Based on AA’s results released just hours ago, there was a downturn that surely impacted other airlines. DL didn’t warn that its revenues were weakening going into August. In fact despite the terrorist threat in August, DL’s RASM growth was still well above average for the US industry.
NewHampshire Black Bears
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StraaightTaalk
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As much as WT can annoy me sometime, at the very least, WT's posts are thought-provoking. FLy contributes nothing, on other hand, other than her typical b*tchy stewardess-type barbs.
I'm sure most of what WT posts is over Fly's head anyway.
WorldTraveler
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I make it a personal point not to comment on service levels I receive on different carriers because a) the people on here are not the people I encounter when I travel (although Fly and I have "shared a moment or two" in the mid-galley over the Atlantic LATE at night. 🙂 B) noone here signed up for the job of on-line customer service queens/kings c) the reality is that there aren't too many instances of horrible service in the industry.... it got hairy during the worst periods for each carrier but for the most part there isn't now a huge difference in service between carriers under normal circumstances. There is a difference in abnormal circumstances, for sure, but I have been fortunate to have relatively little of it... or my standards have slipped to the point where nothing looks terribly bad anymore.
quote name='StraaightTaalk' date='Oct 19 2006, 12:27 PM' post='423570']
As much as WT can annoy me sometime, at the very least, WT's posts are thought-provoking. FLy contributes nothing, on other hand, other than her typical b*tchy stewardess-type barbs.
__________________________________________________________
catfight!
As much as WT can annoy me sometime, at the very least, WT's posts are thought-provoking. FLy contributes nothing, on other hand, other than her typical b*tchy stewardess-type barbs.
__________________________________________________________
catfight!
WorldTraveler
Corn Field
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sorry, but there will be no catfight. I consider Fly a friend in whatever way you make friends over the internet.
She and I come from different perspectives but at our core we're interested in the same things - peace in the world, a little economic security for oureslves, and a desire to be respected by those in our lives.
She and I come from different perspectives but at our core we're interested in the same things - peace in the world, a little economic security for oureslves, and a desire to be respected by those in our lives.
