I tend to think that if US disappears it will only delay tough decisions that will still need to be made at Delta. While it will provide a sudden influx of revenue, the fundamental problem of Delta's costs versus LCCs will still exist and the LCCs will move in on US Airways bones quickly creating a potentially worse situation for DL.
Will Us Ch11/7 Prevent Ch11 For Delta?
- Thread starter enilria
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WorldTraveler
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If it's chapter 11, which is likely for at least a couple weeks or months, DL revenue may not improve much.
DL mgmt also realizes that the cost problem doesn't improve, even w/ an improvement in revenue. I don't think it is any coincidence that DL mgmt is closely aligning its demands for completing DL cost reduction to US timeframe and vice versa. It is in essence the same type of pattern bargaining that ALPA has done to the airlines in the past except that the airlines are now in control.
DL will get the cost cuts it wants and needs US or not. The best scenario for DL is if US dramatically shrinks but does not totally liquidate to allow LCCs to take over the heart of its network. Ultimately, I don't believe that strategy will work for US but it will send additional revenue to DL fairly quickly and limit LCC growth in markets that compete directly with DL.
DL mgmt also realizes that the cost problem doesn't improve, even w/ an improvement in revenue. I don't think it is any coincidence that DL mgmt is closely aligning its demands for completing DL cost reduction to US timeframe and vice versa. It is in essence the same type of pattern bargaining that ALPA has done to the airlines in the past except that the airlines are now in control.
DL will get the cost cuts it wants and needs US or not. The best scenario for DL is if US dramatically shrinks but does not totally liquidate to allow LCCs to take over the heart of its network. Ultimately, I don't believe that strategy will work for US but it will send additional revenue to DL fairly quickly and limit LCC growth in markets that compete directly with DL.
mrfish3726
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AND, I don't think that ANY LCC except maybe SWA will be willing to try new routes, start new operations, or add more capacity till the revenue and fuel enviroments settle themselves down. Remember we are headed into the worst months of the flying season. You haven't heard any one carrier bragging of having their reservations in place to warrant an increase in flying. If anything you'll see more and more reduce capacity for the worst of the travel season.
wings396
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Don't kid yourself here, As DL is in Deep Doo-doo even IF US goes away. AirTran, JetBlue, and SWA are not going away. These LCC's will be all over DL as they taste your blood in the water as well. Don't be shocked when DL files CH-11, and all the ramp and CS people are taken down to $15 an hour or less. This is an INDUSTRY trend, not just an islolated problem at US. There will be no pensions, and no Medical plan for you after retiremnet. I believe that DL has $10 Billion worth of Debt from what I read today. So in short, don't count on the Demise of US to save your own Butts.....
The demise of US would have a the very least a huge effect on Delta and every other airline flying to LGA, DCA & BOS. THE slots, the Shuttle, gates & the LGA terminal. There will be a feeding frenzy unlike anything seen since the BK of Pan Am & Eastern.
Jet Blue could buy all the LGA assets of US and rule LGA. I think AA would love to get the Shuttle and the US terminal too. A fine dinner it would be.
Jet Blue could buy all the LGA assets of US and rule LGA. I think AA would love to get the Shuttle and the US terminal too. A fine dinner it would be.
aislehopper
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Wings has a point. We have to get our act together regardless of what happens to our competition. To have a business plan that is contingent on one or more legacy carriers failing would not ensure our long term viability.
LiveInAHotel
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aislehopper said:
AH you're the biggest Kool-Aid drinker of them all! All of the non-union woek groups at Delta are:
TheDog2004
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If US Airways had liquidated 6 months ago, then I think it would have helped Delta.
Now it may not have much of an impact. Delta's problem is that it has some serious debt and pension payments to make, and doesn't have the cash on hand to meet these obligations. Any revenue windfall Delta might get due to a US Airways liquidation would simply not be enough to meet these obligations. It may be too late to even talk to the pilots anymore.
Now it may not have much of an impact. Delta's problem is that it has some serious debt and pension payments to make, and doesn't have the cash on hand to meet these obligations. Any revenue windfall Delta might get due to a US Airways liquidation would simply not be enough to meet these obligations. It may be too late to even talk to the pilots anymore.
mrfish3726 said:
Air Tran has a lot capacity on order and is negotiating with ATA for their 737-800 according to newspaper reports. They have shown interest in PIT/PHL before, although are not a risk for a CLT hub. JetBlue has a million airplanes on order and could do anything even a CLT hub. Finally, it is crystal clear Branson has a deal with Bronner for assets and this has been alluded to by both Branson and Bronner in newspaper quotes. I think everything except PIT is likely to gain the capacity back, PIT is tougher because there are so many midwest hubs, but Air Tran/HP/B6/WN will probably put in 50-100 departures combined.
MCI transplant
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<_< Dog----Keep one thing in mind here! US is in Chap.11, United has been there for two years now! US is not talking Chap.7, liquidation,"YET"! Your question should be: How long can Delta hold out before they see some benifit from the US BK????TheDog2004 said:
hp_fa
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wings396 said:
Excuse me for being blunt, but not too long ago the legacy carriers were knocking off new airlines like crazy because they would retaliate in the markets at fares, service and frequency levels way below cost. The startup would fail and prices would go up, service would drop and frequency would go back down.
AWA is the only long-term survivor from post-deregulation, and it appears Jet Blue will (or has) join the club.
I'm not trying to be mean, just reminding you that the legacy carriers used to be the ones that smelled blood.
jimntx
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The assets that UAIR has at LGA are the landing slots. As has been pointed out on other threads, the UAIR terminal is owned by CO. With the prominence that LGA has gained in the NYC market, I doubt seriously that CO is going to let anyone else have the terminal unless they fail totally at buying some or all of those landing slots.
I don't think AA is interested in the Shuttle, per se. As some of the UAIR people have pointed out, it ain't the money maker it once was. AMR already has a Shuttle competitor up and running through AE. They might try to add a bigger a/c, such as the 100-seat Embraer to the routes, but my guess is that they would use any slots they could get for additional mainline service.
Piecing out usair already? Get your own house in order.
How true, Hula. I understand how these employees desperately want to know things will be ok with Delta, their PAY and WORKING conditions. Few lives in this industry are feeling normal, right now.
Article, many believe the LCC's would benefit:
Sorting out the winners, if U doesnt survive:
UsAirways' second trip to bankruptcy court holds both promise and peril for the nation's other major airlines.
US Airways' decision to seek Chapter 11 protection on Sunday could jolt unions at Delta, Continental and Northwest to make wage and benefits concessions, executives at the carriers said yesterday.
But at the same time, they acknowledged that there was little chance US Airways' probable contraction, and possible demise, would solve the overcapacity that is plaguing the industry.
In fact, a liquidation of US Airways could have the opposite effect: Low-fare airlines like JetBlue and Southwest could step up their already aggressive plans to expand their fleets and routes to capture its customers before its bigger rivals do. That might be easily accomplished. According to documents filed with the United States Bankruptcy Court in Alexandria, Va., yesterday, US Airways' assets include 290 gates in 14 cities, a cargo operation in Philadelphia and hundreds of slots that enable the airline to schedule flights from La Guardia Airport and Reagan National in Washington.
JetBlue, which begins service from La Guardia on Friday, might be a ready customer.
"If, all of a sudden, there is some real estate available, we would have to take a good hard look at it," JetBlue's president, David Barger, said.
So instead of helping the traditional carriers, US Airways' troubles could make their own even worse, analysts said.
At least on the labor front, there is some optimism. Delta, Continental and Northwest are trying to reach agreements on pay and benefit cuts with the Air Line Pilots Association, which traditionally takes the lead in labor talks.
Some analysts think a decision by some union leaders to block pilots from voting on US Airways' contract proposal was the crucial factor in the airline's decision to file for bankruptcy protection. The message companies may attempt to send to unions, they said, is: Do not let that happen to you.
"All the airlines will now be playing off each other, and what each one gets will be the minimum for the next one," said Gary L. Chaison, professor of industrial relations at Clark University in Worcester, Mass.
Pilots "have got to be looking at this and thinking, we'd be better off with an out-of-court solution, given that our brethren at US Airways are facing liquidation," added William T. Warlick, senior airline analyst with Fitch Ratings.
John Mazor, a spokesman for the national pilots' union, disagreed, saying, "We hope that management would get the message that airline workers are tired of handing over concessions that disappear right down the drain because management hasn't fixed the broken business model." Mr. Mazor's union is based in Washington.
Such a sense could be the reason for the standoff at Delta, where its chief executive, Gerald A. Grinstein, has warned for months that the airline is likely to seek its own bankruptcy filing, absent $1 billion in concessions from its pilots, if it is unable to clean up its debt-laden balance sheet.
Delta's pilots have offered cuts valued at $655 million to $705 million, but they are upset with the company's plan to terminate their retirement program and replace it with a less-generous plan, echoing a threat also made by United Airlines, which is also in bankruptcy court.
Yesterday, Mr. Grinstein said that the US Airways bankruptcy takes away two psychological impediments he thought could be keeping airline pilots from cutting deals. First, the Chapter 11 filing came amid the strongest air traffic in years, he said, so it cannot be blamed on the business cycles that routinely shake the industry.
Second, no investors have stepped forward to rescue US Airways, which will be operating on its cash and ticket revenues until it has the chance to craft a restructuring plan. The airline's filing "peels away those two elements," Mr. Grinstein said in an interview yesterday.
Mr. Mazor, in turn, saw a message sent to management by the filing: "They need to look at US Airways and decide if they are going to let their own operations slide into that position."
At Northwest, which has been talking to its pilots about concessions for more than a year, the chief executive, Richard Anderson, said the US Airways situation would heighten the sense of urgency to get a deal quickly. "This is a commodity market, and you have to have low costs to mark at market prices," Mr. Anderson said in an interview.
Mr. Anderson said Northwest could not ignore what was happening at other carriers. "We live in a parity world," he said.
Mr. Mazor said he had heard such threats many times during his 25-year career as a union official. "That's a time-honored game," he said.
But Professor Chaison said US Airways had upset the dynamic of negotiations by following through on its Chapter 11 filing. "They can walk out of a room any time," he said of management, "and that will be it."
Also upsetting the industry balance has been the growth of low-fare carriers, led by Southwest, the industry's sixth-largest airline, which has more employees than US Airways - about 33,000 to 28,000 - and JetBlue, which is on track to become a similar size within the next decade, up from about 7,000 employees now.
Both airlines have ordered dozens of new aircraft - Boeing 737's for Southwest, and a mix of Airbus jets and Embraer regional jets for JetBlue.
Mr. Barger, whose airline does not have unions, expressed sympathy for US Airways, which he said faced "incredibly difficult circumstances." But the battle between the airline and its unions over $800 million in wage and benefit concessions was no surprise, he said, given the labor problems that crippled other airlines in the past.
Ticking off a list of carriers that did not survive bankruptcy, Mr. Barger said, "What don't you understand about Pan Am, TWA and Eastern?"
How true, Hula. I understand how these employees desperately want to know things will be ok with Delta, their PAY and WORKING conditions. Few lives in this industry are feeling normal, right now.
Article, many believe the LCC's would benefit:
Sorting out the winners, if U doesnt survive:
UsAirways' second trip to bankruptcy court holds both promise and peril for the nation's other major airlines.
US Airways' decision to seek Chapter 11 protection on Sunday could jolt unions at Delta, Continental and Northwest to make wage and benefits concessions, executives at the carriers said yesterday.
But at the same time, they acknowledged that there was little chance US Airways' probable contraction, and possible demise, would solve the overcapacity that is plaguing the industry.
In fact, a liquidation of US Airways could have the opposite effect: Low-fare airlines like JetBlue and Southwest could step up their already aggressive plans to expand their fleets and routes to capture its customers before its bigger rivals do. That might be easily accomplished. According to documents filed with the United States Bankruptcy Court in Alexandria, Va., yesterday, US Airways' assets include 290 gates in 14 cities, a cargo operation in Philadelphia and hundreds of slots that enable the airline to schedule flights from La Guardia Airport and Reagan National in Washington.
JetBlue, which begins service from La Guardia on Friday, might be a ready customer.
"If, all of a sudden, there is some real estate available, we would have to take a good hard look at it," JetBlue's president, David Barger, said.
So instead of helping the traditional carriers, US Airways' troubles could make their own even worse, analysts said.
At least on the labor front, there is some optimism. Delta, Continental and Northwest are trying to reach agreements on pay and benefit cuts with the Air Line Pilots Association, which traditionally takes the lead in labor talks.
Some analysts think a decision by some union leaders to block pilots from voting on US Airways' contract proposal was the crucial factor in the airline's decision to file for bankruptcy protection. The message companies may attempt to send to unions, they said, is: Do not let that happen to you.
"All the airlines will now be playing off each other, and what each one gets will be the minimum for the next one," said Gary L. Chaison, professor of industrial relations at Clark University in Worcester, Mass.
Pilots "have got to be looking at this and thinking, we'd be better off with an out-of-court solution, given that our brethren at US Airways are facing liquidation," added William T. Warlick, senior airline analyst with Fitch Ratings.
John Mazor, a spokesman for the national pilots' union, disagreed, saying, "We hope that management would get the message that airline workers are tired of handing over concessions that disappear right down the drain because management hasn't fixed the broken business model." Mr. Mazor's union is based in Washington.
Such a sense could be the reason for the standoff at Delta, where its chief executive, Gerald A. Grinstein, has warned for months that the airline is likely to seek its own bankruptcy filing, absent $1 billion in concessions from its pilots, if it is unable to clean up its debt-laden balance sheet.
Delta's pilots have offered cuts valued at $655 million to $705 million, but they are upset with the company's plan to terminate their retirement program and replace it with a less-generous plan, echoing a threat also made by United Airlines, which is also in bankruptcy court.
Yesterday, Mr. Grinstein said that the US Airways bankruptcy takes away two psychological impediments he thought could be keeping airline pilots from cutting deals. First, the Chapter 11 filing came amid the strongest air traffic in years, he said, so it cannot be blamed on the business cycles that routinely shake the industry.
Second, no investors have stepped forward to rescue US Airways, which will be operating on its cash and ticket revenues until it has the chance to craft a restructuring plan. The airline's filing "peels away those two elements," Mr. Grinstein said in an interview yesterday.
Mr. Mazor, in turn, saw a message sent to management by the filing: "They need to look at US Airways and decide if they are going to let their own operations slide into that position."
At Northwest, which has been talking to its pilots about concessions for more than a year, the chief executive, Richard Anderson, said the US Airways situation would heighten the sense of urgency to get a deal quickly. "This is a commodity market, and you have to have low costs to mark at market prices," Mr. Anderson said in an interview.
Mr. Anderson said Northwest could not ignore what was happening at other carriers. "We live in a parity world," he said.
Mr. Mazor said he had heard such threats many times during his 25-year career as a union official. "That's a time-honored game," he said.
But Professor Chaison said US Airways had upset the dynamic of negotiations by following through on its Chapter 11 filing. "They can walk out of a room any time," he said of management, "and that will be it."
Also upsetting the industry balance has been the growth of low-fare carriers, led by Southwest, the industry's sixth-largest airline, which has more employees than US Airways - about 33,000 to 28,000 - and JetBlue, which is on track to become a similar size within the next decade, up from about 7,000 employees now.
Both airlines have ordered dozens of new aircraft - Boeing 737's for Southwest, and a mix of Airbus jets and Embraer regional jets for JetBlue.
Mr. Barger, whose airline does not have unions, expressed sympathy for US Airways, which he said faced "incredibly difficult circumstances." But the battle between the airline and its unions over $800 million in wage and benefit concessions was no surprise, he said, given the labor problems that crippled other airlines in the past.
Ticking off a list of carriers that did not survive bankruptcy, Mr. Barger said, "What don't you understand about Pan Am, TWA and Eastern?"
WorldTraveler
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The LCCs have a lot of capacity coming in the next couple years and they aren’t parking them. There are a few obvious places to put them giving major carrier downsizing. While I agree that there will be an unbelievable fight to obtain LGA and DCA slots if US were to fail, it is very likely that US or its successor will continue to control access to those prime markets whether the current US restructures or if it is liquidated and the assets sold to a new airline (which I can easily see Bronner investing in).
NW’s unions in particular will find the pressure on them to turn things around. Once DL restructures, NW will be in the very uncomfortable position of being the only high-cost legacy airline not in the process of restructuring either inside or outside of bankruptcy. Although NW has the luxury of having less LCC competition that most of the other legacies, that too is likely to change. CO is in relatively good shape from a cost perspective but will become at cost parity rather than advantage with AA, DL, and potentially US (or its successor).
It is a bit early to write US off although they will not likely be large enough under any scenario to be a long-term standalone player. If they truly become an LCC, they will have to fairly aggressively move into growth mode in order to gain a nationwide presence or will be in good shape to be acquired by another airline – LCC or legacy. Growing into being a nationwide LCC carrier will be a tough order so it is probably more likely to believe that US will merge with another carrier down the road. Compared with what US has been through so far, a merger (more likely of equals rather than the takeover mindset of AA-TW) will be relatively easy to deal with when compared with what US will have to go through in the next couple months to become a viable carrier.
NW’s unions in particular will find the pressure on them to turn things around. Once DL restructures, NW will be in the very uncomfortable position of being the only high-cost legacy airline not in the process of restructuring either inside or outside of bankruptcy. Although NW has the luxury of having less LCC competition that most of the other legacies, that too is likely to change. CO is in relatively good shape from a cost perspective but will become at cost parity rather than advantage with AA, DL, and potentially US (or its successor).
It is a bit early to write US off although they will not likely be large enough under any scenario to be a long-term standalone player. If they truly become an LCC, they will have to fairly aggressively move into growth mode in order to gain a nationwide presence or will be in good shape to be acquired by another airline – LCC or legacy. Growing into being a nationwide LCC carrier will be a tough order so it is probably more likely to believe that US will merge with another carrier down the road. Compared with what US has been through so far, a merger (more likely of equals rather than the takeover mindset of AA-TW) will be relatively easy to deal with when compared with what US will have to go through in the next couple months to become a viable carrier.
