Delta files for bankruptcy protection

Atlanta Journal-Constitution ^ | 9-16-2005 | Russell Grantham

[Turbopilot]

And as I recall, Delta was hemorrhaging when oil was below $30 per barrel.

They were unprofitable at that time, but the current CEO has only been in the top seat about a year and a half. In that time they've realized huge cost savings both from labor and from other fairly radical initiatives. The only problem is that fuel is their biggest cost, and it's up over 50% from a year ago, so all the gains they make in efficiency, labor costs, and even increased ticket prices get eaten up in fuel.

Delta held on as long as it did hoping that fuel prices would start to drop, or at least not continue to rise, while their cost savings were realized. Once Katrina hit and it appeared oil prices would be stuck high for a while, they realized they couldn't wait on their savings to materialize.

[Xenophobic Alien]

Delta and Northwest airlines was supposed to merge into one airline come November.. I wonder what they will do now..

[ordinaryguy]

Wow. I bet the troubled airlines have never even thought of that idea. It probably has nothing to do with covering fixed costs, and the immediate loss of customers if they raise their prices. Nope, I'm pretty sure raising prices has simply never crossed their minds.

[StolarStorm]

At what pay level do you prefer to be laid off, get your package and find another job? Another 20%? I'll find something else to do.

Of course, I know the pilots and other seniority based union guys are in a different situation as they get locked in. It's a travesty how the whole seniority thing works. It keeps you attached to one company. You can't just up and leave and retain your seat and aircraft.

I may get paid peanuts compared to the pilots but at least I can leave and improve my pay rather than get stapled to the bottom of a seniority list. The unions really need to rethink how this gets handled for their own good.

[johnb838]

I dunno, you have an empirical observation. Mine is that I don't wish to have my papers scrutinized by the SS and be body cavity searched to travel, so I'd prefer not to fly. Also, I think it best for national security to keep my body out of the airport to make it easier to spot terrorists.

In general, I think I've seen a trend that people would prefer to stay closer to home these days.

I know they say the numbers of travelers are up these days. Maybe so, maybe not, and if so I'd question the causation and composition of the travelers. Traveling by air has become a big pain in the you know what.

[Turbopilot]

Where in the world did you hear that?

[PositiveCogins]

"unions have
artificially inflated wages above market levels." Thats what unions seem to do best. I was thinking about the outgoing
ceo's sorta reminds me of that guy from Fannie May. I may be wrong about the ceo's but they always seem to come out on top no matter what happens.

[elfman2]

Sounds like you’re better informed on this that me.

[Turbopilot]

At what pay level do you prefer to be laid off, get your package and find another job? Another 20%? I'll find something else to do.

The problem is that at the top levels (captains with 12+ years) the income/workload ratio is really quite pleasant. I believe the pay scale tops out at right around $200k, and an international 767/777 captain will fly out on (say) Monday night, land in Europe Tuesday morning, have a day to rest in Europe, and fly back Wednesday morning, returning Wednesday afternoon. That's the work week. Of course there are other requirements as far as training, preparation, etc., but it still wouldn't be a bad deal at even half the wages (not to mention the number of qualified people who would give an arm to do it at half the wages).

The people it really hurts are the junior first officers, who make much less and are first to be furloughed. But considering how difficult it is to even get that junior FO job with a major, these guys are thrilled to have a regular schedule, benefits, and any kind of real salary. Their "other job" is flying checks or blood samples overnight, probably in ratty airplanes and terrible weather, sometimes for less than they could make as a retail clerk. So their threshold for pay cuts is probably very high.

[showme_the_Glory]

Unionism at it finest. We showed those management bustards.

[Turbopilot]

I follow Delta news closely from a business angle, and I have immediate family as well as friends who are very, very long-term Delta employees.

[ordinaryguy]

Do you fly for a major carrier?

[Turbopilot]

Nope. Pilots are the only ones unionized, and they gave Delta what they asked for. Like the analyst in the article said, there are only three things to blame: fuel, fuel, fuel.

[Xenophobic Alien]

I'm sorry I was reading northwest thinking america west.. need more sleep.

[ordinaryguy]

there are only three things to blame: fuel, fuel, fuel.

Is that really true? Delta is paying the same amount for fuel as the discount airlines are paying - or at least had the chance at the same fuel contracts. Yet Jet Blue, for instance, is turning a profit while Delta isn't.

[Turbopilot]

No; see my #31. I thought about pursuing that path, but I love flying too much to trust someone else to pay me to do it :-p

[Turbopilot]

1) The discounters have very different business models: complete fleet commonality (just one type of plane saves on maintenance and training costs - majors that serve many different types of routes can't do that) and they don't go international or into secondary markets, among other issues. Discounters have tried and failed at those areas.

2) Cash is king. Delta had to sell its fuel hedges for operating costs when things started looking bad. It seems like a bad idea now, but cheap gas in the future won't pay your workers today.

3) Even with those factors, we haven't seen quarterly reports from the discounters since oil's been consistently above $60/bbl. They may very likely be unprofitable also at that level. They also may not be able to buy (or to afford) hedging contracts.

[patton]

"• Delta could follow United in seeking to terminate its pension plans, now underfunded by about $5.3 billion, shifting the responsibility for payments onto the quasi-federal Pension Benefit Guaranty Corp. "

Nobody is paying attention.

[wiley]

Where did you hear this? NWA is decidedly unfriendly towards us Delta frequent fliers. If such a deal was in the works it had to be a hostile venture.

[meyer]

You can't just up and leave and retain your seat and aircraft.

Now that's a thought - independent airplane owner/pilots kind-of like the independent truckers. Of course, who can afford to buy a large plane?

Never mind.