Any "Latest & Greatest" about Delta?
10-31-2011, 11:18 AM
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10-31-2011, 11:23 AM
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10-31-2011, 11:24 AM
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10-31-2011, 11:32 AM
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If you had $200,000 in the bank and a $200,000 mortgage, your net debt is zero. You could take the money out of the bank and pay off your mortgage and your net worth would not have changed. You could then take another mortgage on your house and get $200,000 cash and your net worth still hasn't changed.
Delta needs to have cash on hand to deal with day to day operations and they also have reserve cash to deal with unforeseen events. They also have cash on hand to be able to take advantage of any investment opportunities that are available or will be available.
Right now they have about $3.3 billion in real cash and another $1.8 in a revolver (like a revolving home equity loan, except a lot bigger) that they can draw on whenever they like. In order to report net debt, they subtract the $3.3 billion from their real debt number to deal with the fact that, theoretically, they could take all that cash and use it to reduce debt.
That is why "cash on hand" is often reported, but it is a next to useless statistic most of the time. In a case like American, sitting on the doorstep of the bankruptcy court, the cash can make all the difference in the world. Delta right now is producing a lot of free cash flow and they look to continue to produce that cash flow well into the future, so their cash on hand is lower, percentage-wise, than many other carriers. Delta could borrow more money and increase their cash on hand but that wouldn't affect their financial condition one iota other than to increase interest payments. Delta's focus on reducing debt is reducing their monthly interest payments which increases profits. That is smart in my opinion.
Delta needs to have cash on hand to deal with day to day operations and they also have reserve cash to deal with unforeseen events. They also have cash on hand to be able to take advantage of any investment opportunities that are available or will be available.
Right now they have about $3.3 billion in real cash and another $1.8 in a revolver (like a revolving home equity loan, except a lot bigger) that they can draw on whenever they like. In order to report net debt, they subtract the $3.3 billion from their real debt number to deal with the fact that, theoretically, they could take all that cash and use it to reduce debt.
That is why "cash on hand" is often reported, but it is a next to useless statistic most of the time. In a case like American, sitting on the doorstep of the bankruptcy court, the cash can make all the difference in the world. Delta right now is producing a lot of free cash flow and they look to continue to produce that cash flow well into the future, so their cash on hand is lower, percentage-wise, than many other carriers. Delta could borrow more money and increase their cash on hand but that wouldn't affect their financial condition one iota other than to increase interest payments. Delta's focus on reducing debt is reducing their monthly interest payments which increases profits. That is smart in my opinion.
But they wouldn't have let you write them anyways because if you make it too good kids pass and there is never a need for another expensive updated edition.
10-31-2011, 11:39 AM
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I agree...very difficult...but doable, given the right team.
Furthermore, since we will have given the co. at least a bil/year for 8 years, by 01jan13, it is time for said co. to reciprocate.
Btw, we have DPA because our bargaining agent can't seem to say the restoration word in public. We would not have 25% of the group fractured, if DALPA would make it clear at every opportunity, that we will be seeking significant improvements in all areas of the CBA, period!
Unfortunately, I sincerely believe you will not see any statements from our current group, that are even remotely close to this. I hope I am proven wrong.
Furthermore, since we will have given the co. at least a bil/year for 8 years, by 01jan13, it is time for said co. to reciprocate.
Btw, we have DPA because our bargaining agent can't seem to say the restoration word in public. We would not have 25% of the group fractured, if DALPA would make it clear at every opportunity, that we will be seeking significant improvements in all areas of the CBA, period!
Unfortunately, I sincerely believe you will not see any statements from our current group, that are even remotely close to this. I hope I am proven wrong.
So I think, while they are starting to provide a little window dressing here and there (maybe partly because of the pressure from DPA?), we are probably still stuck with the same old falling apart house, badly in need of major repairs, and no real plan or even intention to fix the major problems.
10-31-2011, 11:50 AM
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After reading the post on staffing I'm assuming they will not not need to hire for 2012 staffing unless early retirements pick up. Is this true? I have read on here that hiring for the following year (busy time = Summer) is always in the fall.
10-31-2011, 12:13 PM
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If you had $200,000 in the bank and a $200,000 mortgage, your net debt is zero. You could take the money out of the bank and pay off your mortgage and your net worth would not have changed. You could then take another mortgage on your house and get $200,000 cash and your net worth still hasn't changed.
Delta needs to have cash on hand to deal with day to day operations and they also have reserve cash to deal with unforeseen events. They also have cash on hand to be able to take advantage of any investment opportunities that are available or will be available.
Right now they have about $3.3 billion in real cash and another $1.8 in a revolver (like a revolving home equity loan, except a lot bigger) that they can draw on whenever they like. In order to report net debt, they subtract the $3.3 billion from their real debt number to deal with the fact that, theoretically, they could take all that cash and use it to reduce debt.
That is why "cash on hand" is often reported, but it is a next to useless statistic most of the time. In a case like American, sitting on the doorstep of the bankruptcy court, the cash can make all the difference in the world. Delta right now is producing a lot of free cash flow and they look to continue to produce that cash flow well into the future, so their cash on hand is lower, percentage-wise, than many other carriers. Delta could borrow more money and increase their cash on hand but that wouldn't affect their financial condition one iota other than to increase interest payments. Delta's focus on reducing debt is reducing their monthly interest payments which increases profits. That is smart in my opinion.
Delta needs to have cash on hand to deal with day to day operations and they also have reserve cash to deal with unforeseen events. They also have cash on hand to be able to take advantage of any investment opportunities that are available or will be available.
Right now they have about $3.3 billion in real cash and another $1.8 in a revolver (like a revolving home equity loan, except a lot bigger) that they can draw on whenever they like. In order to report net debt, they subtract the $3.3 billion from their real debt number to deal with the fact that, theoretically, they could take all that cash and use it to reduce debt.
That is why "cash on hand" is often reported, but it is a next to useless statistic most of the time. In a case like American, sitting on the doorstep of the bankruptcy court, the cash can make all the difference in the world. Delta right now is producing a lot of free cash flow and they look to continue to produce that cash flow well into the future, so their cash on hand is lower, percentage-wise, than many other carriers. Delta could borrow more money and increase their cash on hand but that wouldn't affect their financial condition one iota other than to increase interest payments. Delta's focus on reducing debt is reducing their monthly interest payments which increases profits. That is smart in my opinion.
Thanks Alfa, great explanation and that was my first impression. Nothing tangible just shifting columns on a spreadsheet...
But I am wondering about the underlying reasons for the accounting change. And the industry speculation seems to revolve around some type of future investment...
Cheers
George
10-31-2011, 01:54 PM
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The word I got re: hiring was don't expect anything in 2012, take it with a grain of salt!
10-31-2011, 02:56 PM
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10-31-2011, 03:06 PM
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