Any "Latest & Greatest" about Delta?
12-05-2011, 09:37 AM
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So,complaining now does little good and is Monday morning quarterbacking.When are members suppose to talk about it?Before the neg comm signed it?Don't think we had the chance?Before mem rat?Don't think we had the chance.And now you say we shouldn't discuss it after the fact,so I guess you are saying we should just let ALPA run the show as a few people see fit.
12-05-2011, 09:56 AM
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ALFA, (ACL and Carl too),
What Carl says pretty much parallels the analysis done by the Boyd Group. Here's a link:http://www.aviationplanning.com/Imag...%20Reality.pdf
You may disagree with Boyd's conclusions, but Carl is not "out in left field", so to speak, with his comments as you asserted so aggressively.
My prediction is rather than admit Carl was on to something you will follow the DALPA tactic of trying to discredit the messenger (Boyd).
What Carl says pretty much parallels the analysis done by the Boyd Group. Here's a link:http://www.aviationplanning.com/Imag...%20Reality.pdf
You may disagree with Boyd's conclusions, but Carl is not "out in left field", so to speak, with his comments as you asserted so aggressively.
My prediction is rather than admit Carl was on to something you will follow the DALPA tactic of trying to discredit the messenger (Boyd).
Boyd's analysis shows AMR spending $700-800 million a year in interest expense which he touts as the largest non-operating cost. Delta has interest expense exceeding $1 billion per year. If American gets rid of 20% of their debt (which is probably unattainable, but I will be generous) they will reduce their interest expense about $140-160 million per year. They are going to lose $1,400 million this year. So get rid of the $150 million in interest and where does the rest of the $1,250 million or so come from? Labor? No way. That hole is too big. Their pension expense is about $500 million per year. Even if they terminate every defined benefit plan they still don't get there.
American's debt is pretty much in line with Delta's on a relative size basis. They will get some temporary relief in Ch 11. They can scrape off all of their teeny (less than 50 seat) rj's. They can get a little in lease costs and accelerating MD-80 retirements. They will get their piece of labor but it won't be $1 billion or more. I still see them having a giant hole in the P+L that can only be filled by more revenue.
What Boyd doesn't address is why Delta gained 11% PRASM and American is about half that at 5.8%. Carl doesn't address it either. Why are we able to pay for our rising fuel costs and American can't. That is not about debt that is about revenue. American has always been an industry leader in RASM performance and now they are close to last place. What has changed in the last five years to make that happen?
So I am not trashing Boyd, but his analysis is superficial and factually incorrect in many facets. How can Delta support a debt load and pension expense that is larger than American's (proportionally the same size) and yet be doing quite well? Is it really debt and pension, or are those just the things you can attack in Chapter 11? Without revenue gains those won't be enough to make American profitable.
12-05-2011, 09:56 AM
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If you haven't received the pop up message yet, it's likely they haven't put it on your schedule yet. I'm going in January so I'm guessing they loaded it on there so I can bid accordingly.
12-05-2011, 10:00 AM
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So I am not trashing Boyd, but his analysis is superficial and factually incorrect in many facets. How can Delta support a debt load and pension expense that is larger than American's (proportionally the same size) and yet be doing quite well? Is it really debt and pension, or are those just the things you can attack in Chapter 11? Without revenue gains those won't be enough to make American profitable.
12-05-2011, 10:39 AM
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You have that right. I have the right to post actual data and analysis. Unfortunately, alfaromeo also has opportunity to spin and deflect arguments to shield the MEC from it's obvious incompetence. All while on full FPL.
Carl
12-05-2011, 10:43 AM
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So,complaining now does little good and is Monday morning quarterbacking.When are members suppose to talk about it?Before the neg comm signed it?Don't think we had the chance?Before mem rat?Don't think we had the chance.And now you say we shouldn't discuss it after the fact,so I guess you are saying we should just let ALPA run the show as a few people see fit.
Carl
12-05-2011, 11:01 AM
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There's too many distractions going on with this thread ... we need to keep our eyes on the ball -- educating the masses about contract 2012.
12-05-2011, 11:15 AM
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I read Boyd's analysis and he makes some glaring errors. First he claims that no other carriers have defined benefit costs. That is wrong, Delta and United both have defined benefit plans even though they are frozen. Frozen does not equal free. Boyd also says that airlines don't need Chapter 11 to drop unprofitable flying. They can drop a route anytime but there are costs left behind even if they drop the route (gates, aircraft, etc.). Bankruptcy allows you to drop out of markets and get rid of those fixed costs.
Boyd's analysis shows AMR spending $700-800 million a year in interest expense which he touts as the largest non-operating cost. Delta has interest expense exceeding $1 billion per year. If American gets rid of 20% of their debt (which is probably unattainable, but I will be generous) they will reduce their interest expense about $140-160 million per year. They are going to lose $1,400 million this year. So get rid of the $150 million in interest and where does the rest of the $1,250 million or so come from? Labor? No way. That hole is too big. Their pension expense is about $500 million per year. Even if they terminate every defined benefit plan they still don't get there.
American's debt is pretty much in line with Delta's on a relative size basis. They will get some temporary relief in Ch 11. They can scrape off all of their teeny (less than 50 seat) rj's. They can get a little in lease costs and accelerating MD-80 retirements. They will get their piece of labor but it won't be $1 billion or more. I still see them having a giant hole in the P+L that can only be filled by more revenue.
What Boyd doesn't address is why Delta gained 11% PRASM and American is about half that at 5.8%. Carl doesn't address it either. Why are we able to pay for our rising fuel costs and American can't. That is not about debt that is about revenue. American has always been an industry leader in RASM performance and now they are close to last place. What has changed in the last five years to make that happen?
So I am not trashing Boyd, but his analysis is superficial and factually incorrect in many facets. How can Delta support a debt load and pension expense that is larger than American's (proportionally the same size) and yet be doing quite well? Is it really debt and pension, or are those just the things you can attack in Chapter 11? Without revenue gains those won't be enough to make American profitable.
Boyd's analysis shows AMR spending $700-800 million a year in interest expense which he touts as the largest non-operating cost. Delta has interest expense exceeding $1 billion per year. If American gets rid of 20% of their debt (which is probably unattainable, but I will be generous) they will reduce their interest expense about $140-160 million per year. They are going to lose $1,400 million this year. So get rid of the $150 million in interest and where does the rest of the $1,250 million or so come from? Labor? No way. That hole is too big. Their pension expense is about $500 million per year. Even if they terminate every defined benefit plan they still don't get there.
American's debt is pretty much in line with Delta's on a relative size basis. They will get some temporary relief in Ch 11. They can scrape off all of their teeny (less than 50 seat) rj's. They can get a little in lease costs and accelerating MD-80 retirements. They will get their piece of labor but it won't be $1 billion or more. I still see them having a giant hole in the P+L that can only be filled by more revenue.
What Boyd doesn't address is why Delta gained 11% PRASM and American is about half that at 5.8%. Carl doesn't address it either. Why are we able to pay for our rising fuel costs and American can't. That is not about debt that is about revenue. American has always been an industry leader in RASM performance and now they are close to last place. What has changed in the last five years to make that happen?
So I am not trashing Boyd, but his analysis is superficial and factually incorrect in many facets. How can Delta support a debt load and pension expense that is larger than American's (proportionally the same size) and yet be doing quite well? Is it really debt and pension, or are those just the things you can attack in Chapter 11? Without revenue gains those won't be enough to make American profitable.
Brilliant! Very insightful and knowledgable analysis. Your breakdown and reasoning into this makes your report on American's woes the conclusive statement.
Great work!
12-05-2011, 11:24 AM
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Alfa,
Thanks for your reasoned analysis...
My recollection from DAL's bankruptcy is that Delta tried pretty hard to drive a hard bargain for lease rates on aircraft. Again, this is from memory but most lessors went along and cut their rates, in some cases dramatically. I also believe that we lost three 767-ERs and the leasing companies placed them with Hawaiian-who was willing to pay more. At the time we had 15 MD-90s and I was surprised we didn't try and dump them as they were such a small fleet.
In bankruptcy a carrier can drive hard bargains, and if they get court approval, simply walk away from various real estate agreements. In fact I read one of AMR's first legal moves was to terminate it's obligations with respect to the maintenance facility at MCI they acquired when they bought TWA.
I think Delta successfully got out of some real estate obligations at LAX, but I don't remember specifically what they were (the old Western Airlines offices?).
This is just speculation on my part, but from first glance AMR is going about this smarter than Delta did. AMR went into chapter 11 with enough cash to avoid DIP financing and the loss of control that goes with that. Delta on the other hand made several "pacts with the devil" to gain additional financing. Two that come to mind are the one-sided long term agreement with SkyWest, and accepting some 70 seat RJs from GE capital under lousy terms.
Thanks for your reasoned analysis...
My recollection from DAL's bankruptcy is that Delta tried pretty hard to drive a hard bargain for lease rates on aircraft. Again, this is from memory but most lessors went along and cut their rates, in some cases dramatically. I also believe that we lost three 767-ERs and the leasing companies placed them with Hawaiian-who was willing to pay more. At the time we had 15 MD-90s and I was surprised we didn't try and dump them as they were such a small fleet.
In bankruptcy a carrier can drive hard bargains, and if they get court approval, simply walk away from various real estate agreements. In fact I read one of AMR's first legal moves was to terminate it's obligations with respect to the maintenance facility at MCI they acquired when they bought TWA.
I think Delta successfully got out of some real estate obligations at LAX, but I don't remember specifically what they were (the old Western Airlines offices?).
This is just speculation on my part, but from first glance AMR is going about this smarter than Delta did. AMR went into chapter 11 with enough cash to avoid DIP financing and the loss of control that goes with that. Delta on the other hand made several "pacts with the devil" to gain additional financing. Two that come to mind are the one-sided long term agreement with SkyWest, and accepting some 70 seat RJs from GE capital under lousy terms.
12-05-2011, 11:31 AM
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Posts: 12,109
I read Boyd's analysis and he makes some glaring errors. First he claims that no other carriers have defined benefit costs. That is wrong, Delta and United both have defined benefit plans even though they are frozen. Frozen does not equal free. Boyd also says that airlines don't need Chapter 11 to drop unprofitable flying. They can drop a route anytime but there are costs left behind even if they drop the route (gates, aircraft, etc.). Bankruptcy allows you to drop out of markets and get rid of those fixed costs.
Boyd's analysis shows AMR spending $700-800 million a year in interest expense which he touts as the largest non-operating cost. Delta has interest expense exceeding $1 billion per year. If American gets rid of 20% of their debt (which is probably unattainable, but I will be generous) they will reduce their interest expense about $140-160 million per year. They are going to lose $1,400 million this year. So get rid of the $150 million in interest and where does the rest of the $1,250 million or so come from? Labor? No way. That hole is too big. Their pension expense is about $500 million per year. Even if they terminate every defined benefit plan they still don't get there.
American's debt is pretty much in line with Delta's on a relative size basis. They will get some temporary relief in Ch 11. They can scrape off all of their teeny (less than 50 seat) rj's. They can get a little in lease costs and accelerating MD-80 retirements. They will get their piece of labor but it won't be $1 billion or more. I still see them having a giant hole in the P+L that can only be filled by more revenue.
What Boyd doesn't address is why Delta gained 11% PRASM and American is about half that at 5.8%. Carl doesn't address it either. Why are we able to pay for our rising fuel costs and American can't. That is not about debt that is about revenue. American has always been an industry leader in RASM performance and now they are close to last place. What has changed in the last five years to make that happen?
So I am not trashing Boyd, but his analysis is superficial and factually incorrect in many facets. How can Delta support a debt load and pension expense that is larger than American's (proportionally the same size) and yet be doing quite well? Is it really debt and pension, or are those just the things you can attack in Chapter 11? Without revenue gains those won't be enough to make American profitable.
Boyd's analysis shows AMR spending $700-800 million a year in interest expense which he touts as the largest non-operating cost. Delta has interest expense exceeding $1 billion per year. If American gets rid of 20% of their debt (which is probably unattainable, but I will be generous) they will reduce their interest expense about $140-160 million per year. They are going to lose $1,400 million this year. So get rid of the $150 million in interest and where does the rest of the $1,250 million or so come from? Labor? No way. That hole is too big. Their pension expense is about $500 million per year. Even if they terminate every defined benefit plan they still don't get there.
American's debt is pretty much in line with Delta's on a relative size basis. They will get some temporary relief in Ch 11. They can scrape off all of their teeny (less than 50 seat) rj's. They can get a little in lease costs and accelerating MD-80 retirements. They will get their piece of labor but it won't be $1 billion or more. I still see them having a giant hole in the P+L that can only be filled by more revenue.
What Boyd doesn't address is why Delta gained 11% PRASM and American is about half that at 5.8%. Carl doesn't address it either. Why are we able to pay for our rising fuel costs and American can't. That is not about debt that is about revenue. American has always been an industry leader in RASM performance and now they are close to last place. What has changed in the last five years to make that happen?
So I am not trashing Boyd, but his analysis is superficial and factually incorrect in many facets. How can Delta support a debt load and pension expense that is larger than American's (proportionally the same size) and yet be doing quite well? Is it really debt and pension, or are those just the things you can attack in Chapter 11? Without revenue gains those won't be enough to make American profitable.
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