More bad news @ DAL


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Delta Loss Widens, New Furloughs Set

Thursday, April 17, 2003; 9:53 AM

By Julie MacIntosh

NEW YORK (Reuters) - Delta Air Lines posted the airline industry's biggest loss yet for the first quarter on Thursday, and said it will furlough 200 pilots as the sector grapples with a crippling downturn.

Atlanta-based Delta, the No. 3 U.S. air carrier, said it was facing "the greatest financial crisis" in its history, and said the war in Iraq had depressed travel demand further.

The airline reported a net loss of $466 million, or $3.81 a share, compared to a loss of $397 million, or $3.25 per share, a year earlier.

"Delta's first quarter results were weak, but in line with expectations," Lehman Brothers analyst Gary Chase said.

Northwest Airlines and Continental Airlines have already reported $617 million in combined losses this week, as the tepid economy, the war in Iraq, and the spread of Severe Acute Respiratory Syndrome (SARS) in Asia sacked business.


Delta's results put the U.S. airline sector's net losses for the latest quarter well over the $1 billion mark.

But industry watchers say Delta, whose first-quarter revenue rose slightly to $3.2 billion from $3.1 billion, is better-prepared than most of its rivals to survive the industry's downward spiral.

"We continue to believe that the company is best positioned to weather the current downturn," Chase said. "Revenue was well ahead of our estimates."

Shares of Delta rose 39 cents, or 3.7 percent, to $10.88 in early trade on the New York Stock Exchange.

Before items, Delta reported a loss of $426 million, or $3.49 per share. Wall Street analysts had expected a loss of $3.51 per share, with estimates ranging from a loss of $3.16 to $3.95 per share, according to Thomson First Call.

Delta said lower travel demand caused by the war in Iraq will require it to furlough 200 pilots during April and May, in addition to an 18 percent cut in its total work force that began after Sept. 11, 2001.

Delta in February asked its pilots, its only major unionized group, to start talks on changes to their contracts that could save labor costs.

Industry leader American Airlines, owned by AMR Corp. narrowly avoided a massive bankruptcy filing on Wednesday after its flight attendants, the only group that had not ratified its part of a $1.8 billion concessions package aimed at saving the carrier, voted in favor of the cuts.

Delta's pilots are currently reviewing Delta's finances, and will present their findings to a group of pilot representatives within the next few weeks, a spokesman for the union said on Wednesday.

"Given that American was able to wring meaningful concessions outside of bankruptcy, Delta may have more leverage in the negotiations with its union," Chase said.

No official talks between pilots and the airline have begun, the spokesman said.


The U.S. Department of Transportation approved in March a revised proposal from Delta, No. 4 carrier Northwest, and No. 5 Continental to sell seats on each others' flights and offer reciprocal frequent flyer perks. Such marketing agreements, or "codeshare" alliances, boost badly-needed revenue for the airlines involved.

Delta said it expects the marketing agreement to eventually yield an extra $150 million to $200 million per year in revenue.

Delta said it ended the quarter with $2.5 billion in cash and short-term liquidity, with unrestricted cash accounting for $1.9 billion of the total.

Many U.S. airlines are facing severe liquidity crises. Analysts look to a carrier's cash level for proof it can withstand unusual events that might hurt its results.

Delta said it was able to arrange for $900 million in incremental financing this month to replace facilities that will expire later this year. It also generated nearly $400 million in new aircraft-backed financing using enhanced equipment trust certificates (EETCs).

© 2003 Reuters
Tough luck. I hope that Doug won't be affected. I know a couple of guys who probably will.

I see this as another mistake by airline management. Shrinking capacity becomes a self-fulfilling prophecy. Because there are fewer flights, and many of the remaining flights are on smaller express carriers, passengers don't have the convenience that they once had. More will end up going to competitors than would have otherwise.

As I've stated before, the majors and the LCCs are apples and oranges, but the majors do need to adopt at least one part of the LCC concept. They need to take profitable routes and add as many flights as they can sell tickets for.

A DAL captain that I jumpseated (jumpsat?) with from IAD to MCO described the current problem. Delta cuts back on the number of flights in hopes that a smaller supply will drive up prices. What actually happens is that an LCC jumps in to fill the vacuum. DAL then ends up selling fewer seats at the same price that they had before. How many times does this have to happen before they realize that it isn't working? At least once more apparently.
I'm not really into the inner workings of airlines...

So does this affect ASA and Comair first, and then the mainline, or is this just exclusively Delta?
It sounds like it will just be Delta at this point. ASA, Comair, and ACA will probably pick up some flying that was previously done by main line DAL.
Actually, it was a pooly written press release. Delta marked 200 pilots for furlough last month and 57 went out April 1st in anticipation of a 12% reduction, mostly in international routes.

Today, even after letting 57 pilots go, we supposedly dangerously short on 737 pilots in most categories. Also, they're trying to beg for contractural relief because 70% of our 777 training department pretty much gave Delta "the finger" and are retiring early on top of our senior 777 and 767-400 crews.

I've been flying with many senior (but under mandatory retirement age) pilots that are saying 'to hell with it' and retiring early.

"Wall Street" loves furloughs and loves airlines that walk in lock step with one another.

I can't say I blame them. If my six years of seniority would get me a lump sum, I'd retire too, in a heartbeat.

Anyway, it's interesting how Leo says our costs are way too high, but we have a CSM of about 8.8, whereas American after massive concessions is down to about 8.6.

I think everyone's getting a good lesson in the true greed of corporate America, whereas AMR laid off 2,500 more pilots took massive pay cuts while managers are going to get retention bonuses and a protected retirement.

I'd better dust off my copy of Orwell's "Animal Farm" and refresh myself on the idea that some animals are more equal than other!
In other words, "we want the same labor deals UA, U and AA are getting, and this is the beginning of our scare campaign to get them."
In other words, "we want the same labor deals UA, U and AA are getting, and this is the beginning of our scare campaign to get them."

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Exactly. I couldn't have said it better myself!
I think everyone's getting a good lesson in the true greed of corporate America, whereas AMR laid off 2,500 more pilots took massive pay cuts while managers are going to get retention bonuses and a protected retirement.

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And you noticed where the Wall Street Journal, that pilot/union bashing paper, buried the story, don't you? Page A3. Of course, they had their so called "aviation expert" write about how now AMR's costs are in line with some other traditional carriers but still more expensive than so called "non-union" airlines like Southwest.

But nah, it's okay, according to the Journal, for execs to get special pensions while the employees who actually do the work get shafted when the execs steer their company into chapter 11.
You also have to keep in mind the source and audience....The WSJ is notoriously pro-company and could usually not care less about the "working man". The paper is catered towards the "corporate-type" so naturally they would spin it that way
As a taxpayer, I just get tired of the airlines always coming to the government trough and begging for sustinence when their respective CEOs pull 5 and 6 figure bonuses for themselves.

Not the fault of the employees in any way, but seems to me that some of these CEOs are simply Frank Lorenzo wannabes.

To give McCain a little credit, I did hear that his proposal for airline relief would put caps on management compensation.