New Arizona, Il Duce/Warlord
Ed Bastian at NATCO 18Nov08.
Yesterday, Ed Bastian, NWA CEO and DAL President came to NATCO (NWA Training building in Minneapolis) and held a "Town Hall Meeting." I took pretty copious notes but don't claim that I got everything 100% correct. There were a few things I wrote verbatim - I'll put those things in quotes. The rest is either paraphrased or my interpretation of what he said. My comments are in [Brackets]
While we waited for Bastian to show up, Bill Lentsch who is NWA's Sr. VP of flight operations and SOC spoke. Just a few things:
>1st NWA jet to get DAL's paint scheme will be (of course) a -400. Goes to the paint barn in Dec. The plan is to do the rest of the fleet in 15months. About 1 jet every 2-3 days.
>Uniform change for all "customer contact" personnel is 30Mar09.
>Plan to begin "cross fleeting" in Apr09. Cross fleeting is putting a NWA jet on a DAL route or vice-versa. The example he gave was ATL-NRT. Currently served by wussie little 777. In April, will become (super premium) -400. Flight will be marketed and sold by DAL (and code share partners), will fly from current DAL gates, boarded by DAL CSA's. Flight will be NWA crew and ground crew. Dispatched by NWA SOC in MSP. He said the original plan was to do a lot of this prior to SOC (Single Operating Cert.) but it turns out it is harder to do then they had originally planned. Plan is to do this on about 14 total routes. No major change in block hours anticipated.
[If you have never heard Lentsch speak, he is a very impressive guy. He looks like he is about 23 years old, recognizes his people's hard work, and seems to genuinely care about his folks. I've heard him speak three times now. Most of the time he knows the name of everyone in the room - I saw him address about 50 NATCO "building people" (non-pilots) and he called everyone who spoke to him by name. He can speak on any subject with supporting facts and seems to have a good command of our business. Reminds me a little bit of Richard. He wears his belt backwards, but hey, we can't all be squared away Marine Corps trained Naval Aviators, can we?]
Then Bastian spoke. The NWA people in the room had never heard anyone in Sr. Management say some of the things he said (at least not without them lying.)
>"We must take care of the people who will take care of our employees"
>The future is bright. Our opportunities are incredible.
>We are going to re-brand NWA to DAL. New paint, new Uni's, new everything. But we don't want to loose all the great things NWA brings to the table. [I wonder if this means that NWA will actually clean the inside of our planes and our terminals?]
>We have some oil hedges in the $100-120/bbl range. He didn't say how much is hedged or for how long.
>Revenue for 09 will probably be down about 10%. Capacity will probably be lower. Most capacity cuts will be Intl. Domestic has already been cut in response to high oil, we just won't bring it back as fast as we would have. Despite capacity cut and revenue loss, he thinks if Oil stays in the 50's we should post a profit in 2009.
>We are already seeing a downturn in bookings. Many people are putting off vacations and company business flying. Then he told a story about how his wife told him they needed to put off a purchase that they were contemplating, so he knows what that is all about. [He made $4.6M last year. What could he not purchase, an island?]
>Financially, we have $6B in cash. [About $4B of which came from NWA!] "We are positioned to be aggressive." We will be flexible and nimble.
>We are obligated to the pensions that NWA brings to the merger. "We are absolutely committed to honoring those pensions."
>With the exception of HQ functions, we are absolutely committed to our presence in MSP. There is currently no plan to sell any buildings in MSP.
>They are working to re-negotiate the $250M bond with MAC. He said they had the cash to pay it off, but MAC would be stupid to force them to do that because it would release them from the obligations for an MSP presence stipulated in the bond. He also pointed out that paying off the bond would be of no benefit to the MAC or the people of Minnesota, because the bonds are all held by Wall Street.
[If you are NWA, you need to sit down before you read these next couple of items.]
>"Our employees are not being paid what they should be paid."
>"This merger was made possible by employee sacrifice."
>"You should be the best paid employees in the industry." The way to get our employees to the highest pay tiers is to pay a competitive wage and then share the profits that they help generate.
>"We have got to get out of the business of putting our hands in employee's pockets when times get tough."
>2-3 years from now he thinks our airline will be 50% international. (Currently about 40%.)
>We are #1 US carrier to Asia, Europe, and #2 to South America.
Then he took questions. I am paraphrasing most of the answers.
Q: What are our fleet plans?
A: Too early to tell. Having many different types/sizes of A/C can be a glass half-full/half-empty thing. Downside is cost to maintain and train. Upside is the ability to put the exact right-size jet on each route.
787 is overweight, under specs, and late. "We have serious negotiations coming up with Boeing" over 787. Good news is we are a mostly Boeing carrier and can work this to our advantage. [I read that to mean we will get a good deal on other Boeing stuff to not cancel our order.] Airbus is "frothing a the mouth" at the prospect of selling to DAL. [BTW, current rumor at NATCO is order for 10 A330's about to be announced at a good price.]
Q: What will happen with our competitors? Will there be more mergers?
A: I don't know - I thought there would be more, but now it looks like for the time being, it will just be more alliances/code shares. If there is another merger United will be at the center of it.
United is hurting. Badly. Their employees can't stand working for their leadership and their leadership can't figure out what to do. The funniest thing he said all day: "We keep expecting United to show up on eBay."
Q: Are we in a financial position to defend our turf? Specifically, SWA in MSP? [In other words, are we going to give up one of our fortress hubs like DAL did with AirTran in ATL?]
A: "Oh, we've got a nice welcome party for SWA." We are doubling capacity on MSP-ORD and MSP-MDW a month before they begin service. [I think he said we are matching fares also, but I might have miss heard that.]
Q: What is going on with DC-9's? There are rumors.
A: When oil was >$140/bbl, the DC-9 was not really cost effective to operate. The thought at the time was we would retire them "sooner rather than later." Now the metrics have changed. "Later rather than sooner." DC-9 fills the 100 seat niche currently unfilled at DAL. [Rumors flying around NATCO about DC-9 shuttle operation out of ATL or up and down east coast.]
>"No more RJ's" "We have too many 50 seaters." DAL is out of the RJ buying business.
Q: Hedges for future?
A: I don't want to be too aggressive with hedges, because I think that the price of oil will be influenced by airline performance in the next year. (i.e. I think it will go down) Plan to hedge about 80% going out 18 months and 25% going out 3 years. At the first sign oil takes a serious upswing, well get in more.
Q: Are Delta pilots all sackless, company-hack, crapweasels who have never stood up to DAL about anything?
[I may have mis-heard the question]
My take: Despite the bad economic times - the future looks bright. DAL is getting some cash and a lesson in operational discipline from NWA. NWA has shed Steenland, Cohen, Rainey, and the other morons who ran us into the ground, ruined our brand, and couldn't lead their way out of a paper bag. Richard is the same old Richard - smart, savvy, and recognizes the pilot group as the leaders of the company's labor groups. I think they will be aggressive in defending our hubs and taking on our rivals (PIT-CDG (Paris) for example).
If our two SLI teams (Seniorority List Integration) would do their jobs and come up with a list, we will be ready to kick ass.