Any "Latest & Greatest" about Delta?
10-28-2010, 02:59 PM
Gets Weekends Off
Joined APC: Jun 2008
Posts: 3,716
By Darren Shannon, Andrew Compart
Dublin , Washington
A revival in international yields and a commitment to shareholder value produced some of the best third-quarter results on record for U.S. legacy carriers, but behind the grandiose statements there lurks the specter of another fuel-price hike that could destroy this newfound momentum.
Expenses in the third quarter were relatively stable, marking the industry’s focus on cost control and the shift to ancillary revenues rather than increased production to generate higher yields. However, each carrier’s third-quarter report noted increased fuel costs, with some pointing out that without this expense, unit costs would have declined.
And importantly, there are indications that fuel prices are expected to rise even more in the last three months of the year.
American Airlines President Gerard Arpey was the most vocal during the quarterly round of analyst conference calls, pointing out that “fuel costs [are] still historically high,” and that the quarter’s average of $2.24 a gallon despite hedges increased the line item to just $119 million shy of its labor costs. Arpey added that third-quarter fuel costs were up $123 million over the same period in 2009 and more than 250% over 2003 levels, and that the carrier’s fourth-quarter average is expected to rise to $2.41 a gallon.
This alone is concern enough, but American’s decision to avoid bankruptcy has kept its labor costs higher than its competitors, a disadvantage often cited by the airline. Should fuel become the carrier’s main expense, the company’s restructuring—based on building strength at its “cornerstone” markets in Chicago, Dallas, Los Angeles, Miami and New York—could collapse.
But Arpey was not the only executive concerned about fuel. United Continental Chief Financial Officer Zane Rowe, reporting a 14.4% rise in consolidated fuel costs in the third quarter on 4.2% more consumption, noted a spike in oil prices since August, while US Airways Chairman/CEO Doug Parker highlighted the per-barrel oil price increase to more than $80 as he assessed the airline’s third-quarter performance and prospects for the final three months of the year.
According to JP Morgan’s Jamie Baker, while some legacy carriers expect a fourth-quarter profit, fuel costs could push United Continental into the red for that quarter. Aside from this, smaller carriers such as Hawaiian Airlines recorded fuel increases in excess of 20% in the three months to Sept. 30.
Yet rising fuel costs were overshadowed by the jubilance of high—or in US Airways’ case, unprecedented—profits for the reporting period. International performance increased markedly in the quarter, with Asia-Pacific region revenues and yields up dramatically—as much as 54% and 45%, respectively, at Delta Air Lines—while transatlantic and South American growth reached well into double digits. And while domestic operations failed to reach these dizzying heights, ancillary revenues compensated for much of this shortcoming.
This performance, buoyed by a well-timed Air Transport Association report noting a 13% rise in domestic passenger revenue and 32% in international markets, prompted some optimistic comments. Delta President Ed Bastian, saying third-quarter revenue performance “exceeded our expectations,” confirmed the airline is withholding more seats for late, higher-yield bookings, while US Airways’ Parker evangelically announced a “fundamental change” in the industry.
Lower-than-expected declines in fourth-quarter unit revenue due to improved leisure sales also compelled analysts such as Morgan Stanley’s William Greene to forecast a bullish future for the industry.
According to Parker, the country’s airlines, aided by the stability provided from consolidation, no longer fall into the “boom and bust” cycles that long plagued the industry, and they will continue to keep tight control on capacity. “This is real,” Parker asserts, adding, “never before have airlines made profits when other industries are not.”
Parker’s assessment appears accurate. All of the major carriers plan minimal capacity growth in 2011, most just 2-3% although American is eyeing 4%, and this predominantly focuses on that booming international sector. Questioned by analysts, United Continental President/CEO Jeffery Smisek said any growth will be dictated by demand, while Delta’s CEO Richard Anderson noted that his company’s 1-3% anticipated increase in capacity next year illustrates that “capital-intensive capacity growth is not in our plans.”
Photo Credit: Erik Simonsen
Third-Quarter Major U.S. Airline Results
($ millions)
Airline Revenue Net Profit Change in Net Compared to 3Q,2009
American $5,842 $143 $502
Continental 3,953 354 372
Delta 8,950 363 524
United 5,394 387 444
US Airways 3,179 240 320
Dublin , Washington
A revival in international yields and a commitment to shareholder value produced some of the best third-quarter results on record for U.S. legacy carriers, but behind the grandiose statements there lurks the specter of another fuel-price hike that could destroy this newfound momentum.Expenses in the third quarter were relatively stable, marking the industry’s focus on cost control and the shift to ancillary revenues rather than increased production to generate higher yields. However, each carrier’s third-quarter report noted increased fuel costs, with some pointing out that without this expense, unit costs would have declined.
And importantly, there are indications that fuel prices are expected to rise even more in the last three months of the year.
American Airlines President Gerard Arpey was the most vocal during the quarterly round of analyst conference calls, pointing out that “fuel costs [are] still historically high,” and that the quarter’s average of $2.24 a gallon despite hedges increased the line item to just $119 million shy of its labor costs. Arpey added that third-quarter fuel costs were up $123 million over the same period in 2009 and more than 250% over 2003 levels, and that the carrier’s fourth-quarter average is expected to rise to $2.41 a gallon.
This alone is concern enough, but American’s decision to avoid bankruptcy has kept its labor costs higher than its competitors, a disadvantage often cited by the airline. Should fuel become the carrier’s main expense, the company’s restructuring—based on building strength at its “cornerstone” markets in Chicago, Dallas, Los Angeles, Miami and New York—could collapse.
But Arpey was not the only executive concerned about fuel. United Continental Chief Financial Officer Zane Rowe, reporting a 14.4% rise in consolidated fuel costs in the third quarter on 4.2% more consumption, noted a spike in oil prices since August, while US Airways Chairman/CEO Doug Parker highlighted the per-barrel oil price increase to more than $80 as he assessed the airline’s third-quarter performance and prospects for the final three months of the year.
According to JP Morgan’s Jamie Baker, while some legacy carriers expect a fourth-quarter profit, fuel costs could push United Continental into the red for that quarter. Aside from this, smaller carriers such as Hawaiian Airlines recorded fuel increases in excess of 20% in the three months to Sept. 30.
Yet rising fuel costs were overshadowed by the jubilance of high—or in US Airways’ case, unprecedented—profits for the reporting period. International performance increased markedly in the quarter, with Asia-Pacific region revenues and yields up dramatically—as much as 54% and 45%, respectively, at Delta Air Lines—while transatlantic and South American growth reached well into double digits. And while domestic operations failed to reach these dizzying heights, ancillary revenues compensated for much of this shortcoming.
This performance, buoyed by a well-timed Air Transport Association report noting a 13% rise in domestic passenger revenue and 32% in international markets, prompted some optimistic comments. Delta President Ed Bastian, saying third-quarter revenue performance “exceeded our expectations,” confirmed the airline is withholding more seats for late, higher-yield bookings, while US Airways’ Parker evangelically announced a “fundamental change” in the industry.
Lower-than-expected declines in fourth-quarter unit revenue due to improved leisure sales also compelled analysts such as Morgan Stanley’s William Greene to forecast a bullish future for the industry.
According to Parker, the country’s airlines, aided by the stability provided from consolidation, no longer fall into the “boom and bust” cycles that long plagued the industry, and they will continue to keep tight control on capacity. “This is real,” Parker asserts, adding, “never before have airlines made profits when other industries are not.”
Parker’s assessment appears accurate. All of the major carriers plan minimal capacity growth in 2011, most just 2-3% although American is eyeing 4%, and this predominantly focuses on that booming international sector. Questioned by analysts, United Continental President/CEO Jeffery Smisek said any growth will be dictated by demand, while Delta’s CEO Richard Anderson noted that his company’s 1-3% anticipated increase in capacity next year illustrates that “capital-intensive capacity growth is not in our plans.”
Photo Credit: Erik Simonsen
Third-Quarter Major U.S. Airline Results
($ millions)
Airline Revenue Net Profit Change in Net Compared to 3Q,2009
American $5,842 $143 $502
Continental 3,953 354 372
Delta 8,950 363 524
United 5,394 387 444
US Airways 3,179 240 320
Last edited by iceman49; 10-28-2010 at 03:11 PM.
10-28-2010, 03:22 PM
Gets Weekends Off
Joined APC: May 2007
Posts: 593
Heyas,
Glad Slow posted this as this only proves my point how you can skew the numbers.
1) Pull small RJs off city pairs that haven't seen mainline service in decades, if ever.
2) Use the statistics to claim that we are reducing RJ ASMs and numbers
3) Quietly replace mainline city-pairs with large RJs, directly outsourcing mainline jobs.
4) Total RJ ASM and hulls still lower, but now mainline pilots now effectively outsourced.
5) Repeat
6) Profit!
Nu
Glad Slow posted this as this only proves my point how you can skew the numbers.
1) Pull small RJs off city pairs that haven't seen mainline service in decades, if ever.
2) Use the statistics to claim that we are reducing RJ ASMs and numbers
3) Quietly replace mainline city-pairs with large RJs, directly outsourcing mainline jobs.
4) Total RJ ASM and hulls still lower, but now mainline pilots now effectively outsourced.
5) Repeat
6) Profit!
Nu
The number of regional hulls has decreased from 716 this time last year to 654 today. I hardly think that those 4 CRJ 70s will be able to fill that void.
CMR's fleet is going to be dramatically cut down to 16 CRJ200s by 2012 with no new orders on the books. It looks like DCI capacity will continue to shrink.
10-28-2010, 03:31 PM
Back on TDY
Joined APC: Apr 2008
Position: 747-400 Captain
Posts: 12,487
Sad isn't it? I married a French Canadian, they know beauty in France, what the heck happened?
Although Irish... black Irish women are well...
Here is one thing to think about and correct me if I'm wrong but we're locked into long term contracts with regional airlines for airplanes that are deemed unprofitable.
That is a threat no matter where you stand on the rj issue. In a sense, it is a threat to all from the Delta pilots to the RJ lifers its just a matter of how long until it bites you in the posterior or worse.
In house means you dump what you don't want anymore and buy what you do. I don't think it takes a rocket scientist to figure out in business you need to be as flexible and adaptive as you possibly can be.
Although Irish... black Irish women are well...
Here is one thing to think about and correct me if I'm wrong but we're locked into long term contracts with regional airlines for airplanes that are deemed unprofitable.
That is a threat no matter where you stand on the rj issue. In a sense, it is a threat to all from the Delta pilots to the RJ lifers its just a matter of how long until it bites you in the posterior or worse.
In house means you dump what you don't want anymore and buy what you do. I don't think it takes a rocket scientist to figure out in business you need to be as flexible and adaptive as you possibly can be.
1. What will ALPA's position on this be? and,
2. If ALPA's position continues to be that RJ's are good for everyone, will our local reps' best intentions be able to overcome ALPA's position?
Carl
PS: Thanks for the pics...as always!
10-28-2010, 03:34 PM
No longer cares
Joined APC: Mar 2008
Position: 767er Captain
Posts: 12,109
10-28-2010, 03:37 PM
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NWA320, no kidding, we are just a line on the ledger, I mean that. That is also why thorough and in depth analysis is needed. The cost of each item is needed, so we can compare apples to apples.
Restoration will not even be a possibility unless we have a unified group.
Restoration will not even be a possibility unless we have a unified group.
Carl
10-28-2010, 03:41 PM
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Carl
10-28-2010, 04:08 PM
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One leading candidate for MEC Chairman told me, and I quote, "Scope does not matter." His opinion is based, like yours, on the fact that economic trends are resulting in management pulling down RJ flying. Therefore we do not need to "invest" in job protection provisions which are not needed.
What scares me is that many completely fail to grasp what this is about. It is about UNITY. It is about a union powerful enough to come to the table and say "we represent pilot labor. You can not operate your airline without us." Every job outsourced makes this statement less and less true.
If scope has no value, then that should cut either way. If it does not matter, the management should not care if we close the loopholes in our contracts as the contracts they permit expire.
Of course it does matter. By minimizing scope's importance it prepares expectations for the next big scope sale. Richard Anderson now publicly draws the line at 100 seats and is talking more about the C Series engine being a games changing tech. Our Company publishes a 100 seat line with no rebuttal from ALPA. We've already outsourced a 122 seat platform that is restricted to an arbitrary seat limit which could easily vanish under economic stress. The C Series waits with no firm orders (except at "regional" airlines) as everyone waits to see who's going to operate the thing. I sit here with a Delta seniority number wondering too.
Of course the biggest storm cloud on the horizon is economic. Can we afford to replace our MD88 and 757 fleet? The 88's life could be extended, but the 757's structural limits are more finite.
Further, if "scope does not matter" then by extrapolation neither do our pilots' jobs. That is a terrible political position. We need to renounce our support for outsourcing in unequivocal terms. Sorry if that ties your hands, but unity is job one in a union.
What scares me is that many completely fail to grasp what this is about. It is about UNITY. It is about a union powerful enough to come to the table and say "we represent pilot labor. You can not operate your airline without us." Every job outsourced makes this statement less and less true.
If scope has no value, then that should cut either way. If it does not matter, the management should not care if we close the loopholes in our contracts as the contracts they permit expire.
Of course it does matter. By minimizing scope's importance it prepares expectations for the next big scope sale. Richard Anderson now publicly draws the line at 100 seats and is talking more about the C Series engine being a games changing tech. Our Company publishes a 100 seat line with no rebuttal from ALPA. We've already outsourced a 122 seat platform that is restricted to an arbitrary seat limit which could easily vanish under economic stress. The C Series waits with no firm orders (except at "regional" airlines) as everyone waits to see who's going to operate the thing. I sit here with a Delta seniority number wondering too.
Of course the biggest storm cloud on the horizon is economic. Can we afford to replace our MD88 and 757 fleet? The 88's life could be extended, but the 757's structural limits are more finite.
Further, if "scope does not matter" then by extrapolation neither do our pilots' jobs. That is a terrible political position. We need to renounce our support for outsourcing in unequivocal terms. Sorry if that ties your hands, but unity is job one in a union.
Carl
10-28-2010, 04:12 PM
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Position: 747-400 Captain
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I understand what he is trying to say here.. and maybe it is a lowered expectation... but i don't want a number that the company will be looking to take away once there is a blip in the economy... that being said, i don't believe that dalpa truly knows what that number is.
Carl
10-28-2010, 04:21 PM
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Just a friendly reminder to everyone:
IF DALPA GIVES DELTA MANAGEMENT THE 100 SEATER AT THE REGIONAL LEVEL, GENERALLY EVERYONE POSTING ON THIS BOARD WILL BE WITH OUT A JOB FOR MANY YEARS. YOU WILL BE FURLOUGHED IF YOU WERE HIRED AFTER 2000! MAKE NO MISTAKE, THIS IS A REAL POSSIBILITY, I IMPLORE EACH OF YOU TO PLEASE CONTINUE TO MAKE THIS KNOWN TO YOUR REPS!!! YOUR JOB FAMILY AND CAREER DEPEND ON IT!!!
IF DALPA GIVES DELTA MANAGEMENT THE 100 SEATER AT THE REGIONAL LEVEL, GENERALLY EVERYONE POSTING ON THIS BOARD WILL BE WITH OUT A JOB FOR MANY YEARS. YOU WILL BE FURLOUGHED IF YOU WERE HIRED AFTER 2000! MAKE NO MISTAKE, THIS IS A REAL POSSIBILITY, I IMPLORE EACH OF YOU TO PLEASE CONTINUE TO MAKE THIS KNOWN TO YOUR REPS!!! YOUR JOB FAMILY AND CAREER DEPEND ON IT!!!
Carl
10-28-2010, 05:11 PM
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Joined APC: Feb 2008
Position: Urban chicken rancher.
Posts: 6,070
Hey ACL, check your PMs.
Thanks.
Thanks.
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