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If you're too lazy to read it, don't ask for a paraphrase.
If you're too lazy to read it, don't ask for a paraphrase.
Thursday, March 16, 2006
Delta - Theater of the Absurd
"If you have integrity, nothing else matters. If you don't have integrity, nothing else matters."
-- Alan Simpson
"Our distrust is very expensive."
-- Ralph Waldo Emerson
"Every time history repeats itself, the price goes up."
-- Unknown
There are two very distinct and different shows playing on stage right now at Delta Air Lines.
One is external - on the road -- in Washington, DC.
The other is internal - at home -- in Atlanta.
One is being played before a 3-man arbitration board.
The other is playing out before 50,000 loyal, active employees and another 40,000 retirees - all watching and waiting - to see if Delta Air Lines goes out of business - as the company continues to warn unless they get the maximum additional demands and concessions from the pilots.
The playwrights themselves -- Delta management -- wonder why there is little trust among the audience - an audience of faithful workers -- from every department -- generally regarded as smarter viewers than the average bear - and not easily fooled.
One must then ask, how can two very different simultaneous stage shows be a truthful and fair representation -- when they are vastly different in both script and content.
Observe and draw your own conclusions:
Two weeks ago (2/28) -- COO Jim Whitehurst told a packed house of 700+ employees at the GICC that in 2005, if Delta had just been an average legacy carrier -- we would have brought in another $2.5 billion in additional revenue.
In other words, if Delta had the same relative RASM numbers (revenue per available seat mile) as our competitors -- AMR, United, Northwest, USAir and Continental -- we would have been not only the most profitable - but the only profitable legacy carrier among the majors in 2005.
Jim told the standing room only crowd -- of mostly non-contract employees -- that we had a very good chance the airline would be "in the black" operationally in the next 12-18 months. I was in the audience. I did not mistake what Jim said or what I heard spoken on stage.
One then asks: How much is just being average worth to Delta? Again, Jim says it would yield an additional $2.5 billion in revenue if we just catch up - and be on par with the other guys - who pay for the same fuel and have competitors of their own.
Next observation:
On Delta's website -- is a copy of the most current interview from the December NewsDigest with Glen Hauenstein, Delta's new Executive VP of Network and Revenue Management - whom we hired away from Continental in 2005, along with Bob Cortelyou - also from Continental.
Both gentlemen came to Delta because they saw an extensive opportunity to shine -- not suffer defeat. In fact, listening to and watching Glen Hauenstein, there is a certain "glee" in his optimism about the potential he feels certain we can and should achieve and thus, surpass the competition.
Jim, Glen, and Bob each project a "fight's on" attitude. They appear motivated to not rest until we succeed. Their mantra? We will not tolerate or accept any more excuses about our past failure to produce better results. We have the routes and the assets. We will do better.
From the December 5th interview with Glen, he clearly states that during the first nine months of 2005, Delta only achieved 85% of the RASM realized by the other network/legacy carriers. That additional 15% "shortfall" is worth -- in his estimate -- the same $2.5 billion in additional revenue to Delta - that Jim spoke of two weeks ago on stage at the GICC in Atlanta.
Jim and Glen - both agree on the numbers and the potential already being realized with the latest changes to our scheduling and increased route efficiencies - day to day.
Closing the gap on that 15% shortfall and additional $2.5 billion is what Glen and Bob Cortelyou were hired to do. Thus far, they appear to be making positive strides toward achieving parity with our competitors and "getting it done".
In January, Delta's year over year revenue jumped by 14% from the preceding year. By chance? By luck? No. By being smarter.
As Jim pointed out two weeks ago at the GICC, Delta had built the best route structure in the industry..for the last century. A large fleet of RJs were a good feeder mechanism to the hubs - until everyone else started getting them too.
The parallel focus on increasing our International flying from 20% to 35% of the total will also significantly help close the gap with respect to increased RASM. The moves at JFK, designed to feed our newly proclaimed International "hub" with more passengers is the kind of productivity and increased efficiency that wasn't being done prior to the arrival of these newly hired, motivated thinkers - who've joined the team.
These guys are on a mission to succeed - the fresh blood we needed to feel hungry again. It's the same reason a JetBlue or Song becomes successful -- and popular.
There is a sense of purpose in every action and decision made - a driving desire to excel, to be the best -- and prove it -- with actions - each day. At the same time, those kinds of employees are building pro-active trust and respect with action - not words.
So this is one very important scene -- Act I -- being played out in Atlanta - live and on stage every day. Sounds promising and not at all similar to the doom and gloom being heard in the nation's capital this past week.
The other act -- Act II -- also live and on stage - is being played out in Washington, DC the next few weeks.
How very different is the script being heard by the audience watching and listening to Act II at the Marriott hotel in DC. Tickets are still vaialble.
In fact, is it possible we are watching the same play about the same company?
While COO Whitehurst and VP of Revenue Hauenstein are touting increasing our numbers by a couple billion - if we can just manage to achieve "average" status among our peers -- the company negotiators/lawyers are telling the world, the press, and three arbitrators that Delta is doomed if the company doesn't secure more deep sacrifices -- another 1/3 of a billion dollars -- from the pilots -- those lowly harbingers of destruction and greed.
ALPA and the company have been haggling over a couple hundred million for months - the equivalent of less than 2% of the company's operating revenue in a single year.
At this point, if the reported numbers are anywhere close - ALPA says they are offering an additional $140 million -- today -- on top of the $1 billion already contributed by the pilots in the past 12-15 months.
The company says they still need an additional $305 million. Or all bets are off.
Something was rotten in Denmark - and now in DC and Dixie.
Between the intelligent efforts being put forth to significantly increase revenue being touted in Atlanta and the dire straits of a sinking ship being portrayed by company attorneys at the Marriot Hotel in DC - there is a major disconnect between Act I and Act II.
And folks wonder why trust has been an issue the past couple years???
The two sides are now only supposedly $165 million apart on securing a deal.
How about the large amount of money the company saved six months ago, as well as now, by not making the required payments into the pilot's Defined Benefit retirement fund? Have we seen any credit given for that sacrificial lamb?
How about the additional savings realized by abruptly stopping all "Unqualified" dollars being paid to pilot retirees who earned every dollar of that money. What value has been contributed to the company pot by denying those promises to these men and women?
Or don't those dollars count towards the effort because they were "Unqualified"?
Every contract negotiated during a Delta pilot's career included the value of those "Unqualified" dollars, lest anyone forget that fact.
There's something else that deserves clarification and more attention with respect to those retirement dollars referred to as "Unqualified".
"Unqualified" is a bad term. Makes it sound like they weren't earned or were given out as extra compensation -- like a goodwill bonus or maybe a SERP -- or not really part of the benefits due to those retirees. Nothing could be further from the truth. The term "Unqualified" projects the wrong connotation of that well-earned value promised to those folks in retirement. Somebody along the way -- with the integrity and power to do so -- needs to right that wrong when we make money again.
But like every other crisis situation at Delta, those retired pilots have swallowed that bitter pill in stride - and continue to hope for the best. Many I talk with are not only saddened but have moved into the realm of both disgust and disbelief - a dark place they said they never thought they could ever go in their hearts and minds with regard to Delta.
At some point - which may be the crux of ALPA's current stance - there is a breaking point where you have to stop subsidizing bad decisions and a lack of good faith.
One might also ask - how much is being frittered away on legal fees and other resources? How much revenue has already been lost with book-aways over the last 3 months?
Arbitrator Richard Bloch's assessment with Monday's opening remarks was that both sides have failed at the collective bargaining process. Appropriate assessment - except I believe it to be one side not negotiating -- not both -- knowing the players in the play.
How much time and effort is being spent on squeezing every last nickel from our Delta pilot group vs. focusing on the real enemy - JetBlue, AirTran, AMR, and United?
Deep down, many want to see us avoid a strike, focus on crushing the competition, and be successful again. Who doesn't? (Other then a large contingent of our F/O's -- who feel cheated and lied to - repeatedly. Last time we told them we were going to grow the airline we ordered a large fleet of RJs. Who can blame them? They know what they see.)
As I've mentioviablened many times, the same Marriottstrong personalities we specifically hired to be our future Captains and leaders are the same folks who are now willing to draw a line in the sand. It should be no surprise why.
Even a casual observer would have to ask how two very different scenes at the same company are being played on these two stages.
During testimony in DC before the arbitration panel this week, Ed Bastian, Delta's CFO, made it sound as though Delta is so fragile -- on literal egg shells -- that if we don't get the additional sacrifices from the pilots - the equivalent of about 2% of our total operating revenue in a single year - that it's over. The fat lady's warming up.
Shutter the doors. Send the airplanes to the bone yard. We're barely keeping her afloat. People are up at night wondering how we're possibly getting through the next day without the additional dollars from the pilots.
Something's not adding up here with respect to the true, honest, forthright health of the patient.
If we don't survive it won't be because the company didn't squeeze that last $305 million from the pilots - 2% of the company's total $15 billion size.
Delta Air Lines is a $15 billion company. It takes roughly $40 million a day to run Delta. $40 million x 365 days = $14.6 billion.
The difference between the company demands ($305 million) and what ALPA is offering ($140 million) is about four days' revenue.
There is still $2 billion in DIP financing available and revenue coming in daily. Are GE, Citibank, JP Morgan, Merrill, and Boeing really going to sit idle and let Delta close the doors -- for good?
A spade is a spade. And someone in a management/leadership position needs to call it.
It's the only way to start re-building the trust - at every level.
If we don't survive the current stand-off and continuing uncertainty, it will be because ultimately we lost all trust in the leadership, and consequently -- the spirit and the will to compete in a tough business - where your employees make the difference.
It will be because our leaders forgot the intrinsic value of the most valuable resource at any company -- its people.
Too many family livelihoods and futures are at stake.
This is not how Delta Air Lines grew up resolving differences -- and prospered.
Richard Bloch is right. We have failed at the collective bargaining process - at the increasing expense of the morale and faith of our current employees and retirees.
As has always been the case throughout Delta's history - the deal gets done when the company wants it to get done.
Shame on those who have the experience, the knowledge, the resources, and most of all -- the power -- to make the difference.
"God sells us all things at the price of labor."
--Leonardo da Vinci
"There is no truth. There is only perception."
-- Gustave Flaubert
Respectfully, Mike Stark
I hope the pilots fight for a better QOL.
