Downhill Delta

Delta Air Lines announced today, it is selling 11 Boeing 767-200 aircraft and pulling Delta mainline service from 9 markets also serviced by Delta Connection carriers. The result will be a Delta mainline service reduction of 26% at the Cincinnati/Northern-Kentucky International Airport.

Apparently a final bid at a rapid restructure.

http://news.yahoo.com/s/nm/20050907/bs_nm/airlines_delta_dc

Yes ... seems a toss up between Delta or Northwest going under first. Theire problems have gone all quiet but they are still in chapter 11 (as is United) and losing billions between them.

Originally posted by slinky09
Yes ... seems a toss up between Delta or Northwest going under first. Theire problems have gone all quiet but they are still in chapter 11 (as is United) and losing billions between them.

Neither DL or NW have filed chapter 11 as of yet... and I've heard from people within the company, that United is preparing to exit chapter 11.

But I wouldn't be suprised if we see NW or DL file before November, and I wouldn't be suprised if DL sold off Comair. If they keep downsizing CVG much, it won't be worth keeping Comair, as thats our primary hub.

Hmmmm... wonder if it would be worthwile for DL and NW to merge? The AmericaWest/US merger seems like it will be quite good for the folks at US- at least thats what I think from talking to their people at my airport.

[preiffer]

ft.com have picked up on it. Word from "over there" in the US is that DL will file for Ch.11 by the end of this week.

I work for Comair, we're owned by DL, and I heard on Monday, that both NW and DL could file as early as Wednesday... lots of trouble for the whole industry!

With both NW and DL being SkyTeam members, and already working very closely with codeshare flights, etc. I wonder if there's any chance of us merging somewhere down the road...

The US Airways/America West merger is looking really well, according to the US Airways people at my airport- the two airlines banding together has really helped them to start getting key issues corrected (although America West was in a good financial position prior to the start of the merger- that must have helped).

[preiffer]

Originally posted by webdes03
With both NW and DL being SkyTeam members, and already working very closely with codeshare flights, etc. I wonder if there's any chance of us merging somewhere down the road...

I'm no financial advisor, but I'm pretty sure merging one bankrupt airline with another bankrupt airline is not going to finish with a happy ending...?

Originally posted by preiffer

Originally posted by webdes03
With both NW and DL being SkyTeam members, and already working very closely with codeshare flights, etc. I wonder if there's any chance of us merging somewhere down the road...

I'm no financial advisor, but I'm pretty sure merging one bankrupt airline with another bankrupt airline is not going to finish with a happy ending...?

Well said - that was my first thought too:) - Might result in some cheap fares though [:o)]

Phil (Buffy)

Delta Air Lines Files For Bankruptcy
Delta Air Lines has filed for bankruptcy protection from its creditors.

MORE DETAILS:

[preiffer]

Originally posted by AlanA
MORE DETAILS:

Well, according to that link, Northwest just have too.

So another two join the line-up of airlines against the wall.

[honey lamb]

D*mn! You two beat me to it!!

Received this email from DL overnight:

AS ALWAYS, DELTA AT YOUR SERVICE

Dear mcuth

Delta Air Lines has filed for a Chapter 11 reorganization in the United States in accordance with U.S. law. A U.S. based company that seeks to reorganize under Chapter 11 continues normal business operations during the reorganization process.

On behalf of the tens of thousands of Delta employees worldwide who look forward to welcoming you onboard every day, I want to assure you Delta is open for business as usual:

Your travel plans are secure - We are operating our full schedule of
flights, honoring tickets and reservations as usual, and making normal
refunds and exchanges. You can count on the convenience and choice
you've come to expect from the more than 7,500 daily flights to 502
destinations in 88 countries that we, along with our SkyTeam(R) and
codeshare partners, provide worldwide.

Your SkyMiles(R) are secure - The award-winning SkyMiles program has not been affected, and you can continue to enjoy the opportunity to earn and redeem miles on the thousands of flights offered by SkyTeam and our vast network of global airline alliances.

We are committed to our international markets and look forward to adding new routes and destinations around the world as we continue to transform Delta to be even better for you. You can learn more about our reorganization by visiting delta.com/restructure.

Click here:
(remove personalised link)

Today, as always, you can rely on the excellent service Delta's proud
team of dedicated professionals provides. We appreciate your loyalty and the opportunity to meet your personal and business travel needs - now and in the future.

Thank you for choosing Delta.

Sincerely,

Gerald Grinstein
Chief Executive Officer

Cheers

Michael

Seems I was premature in earlier statement, but perhaps that was a crystal ball. Now three of the top four US airlines are in bankruptcy - can this be a sustainable position I wonder. We might admire chapter 11 for enabling businesses to reorganise themselves and derisk from going under, but haven't United been in it for 3+ years now. And they've had billions in US government support. So, wouldn't surprise me if one or more went under completely, and sad though that is for investors and staff perhaps it might be good for the industry as a whole and enable others to differentiate and find ways of regaining their service quality.

Originally posted by preiffer
I'm no financial advisor, but I'm pretty sure merging one bankrupt airline with another bankrupt airline is not going to finish with a happy ending...?

That hasn't stopped companies from trying in the past, and it does distract the investors from the real troubles .


Cheers
sky

[ChuckC]

Perhaps the ultimate irony for DL: does anyone remember not all that many years ago when DL employees raised money and gave a Boeing 757 to the airline to say "thank you" for being a great employer? Seriously!

I believe we now have 4 bankrupt airlines since 9/11. And yes, slinky09, it does seem that UA has been in bankruptcy nearly forever. As airlines go it was perhaps the "sickest", having a bloated route and maintenance structure and many, many long-serving employees carrying a significant unfunded pension liability. Add to that UA's appetite for gate space at major airports and the exorbitant landing fees charged by domestic airport authorities, and the infrastructure improvements required for the introduction of the 777, and then ... 9/11. The irony here IMHO is that the airlines, including UA, created most of the conditions for their future financial failures, long before 9/11.

Ahead of yesterday's announcements by DL and NW, there was an interesting article in Time this week concerning AirTran and its formula for survival when the "big boys" are falling all around it.

Regards,
Chuck-

[Scrooge]

A very interesting read Chuck,thanks for the link.

A lot of what is said is true,in the US we do need to lose one or two of the majors just to reduce capacity to a more rational level,where every airline can make money.

Let them both die!

[preiffer]

Originally posted by bostonbrit
Let them both die!

Hmm... I would have thought you'd be one of the last ones wishing that - given flight 1 and flight 2...? [:0]

[ChuckC]

Originally posted by jetwet1
A very interesting read Chuck,thanks for the link.

A lot of what is said is true,in the US we do need to lose one or two of the majors just to reduce capacity to a more rational level,where every airline can make money.

Dave,
You make the point that many rational folks have been trying to make, ever since Alfred Kahn, deregulation "czar" in the Carter administration, took fare-setting authority away from the government: let the marketplace set its own fares. Updating Kahn's argument: let the marketplace determine how it wants to be flown, and what it's willing to pay for the privilege.

What Kahn and the government failed to foresee (at least I hope they didn't plan for this to happen) is that massive organizations -- particularly those accustomed to having the government as a "boss" -- can't morph into simpler, leaner structures without a commitment by all stakeholders to work together toward a major transformation. Heck, our federal government is a perfect example of how difficult it is to achieve such a feat, if one is even tempted to try.

Not to preach on about this, but IMHO the airlines like Southwest, or even Delta's "Song", or Jet Blue, AirTran and a few others, "get" it only because they had the ability to become very flexible as other, larger carriers tried, and mostly failed, to change their business model. Thus went away vast carriers such as TWA and Pan Am. United is no longer the proud bird it once was; American has done a better job of adapting but is not totally out of the woods.

Time will tell, but DL and NW may not survive. Dave's point will thus be proven.

Regards to all.

Chuck-

Chuck-

[Scrooge]

There was an article in the motely fool a while ago going into how the US airline industry is run and how it manages to get through the down turns,basicly they morage everything they have then pay it all back when the going gets good.

Of course this is great as long as the going get's good,as we've seen over the last couple of years the thinning of the herd may be starting.

Just as a point (and im saying this very quietly so my boss can't hear)TWA was a little different from Pan Am,Eastern etc

When they filed for BK part of the deal gave Carl Icahn a few hundred million in tickets,these he then sold(mostly through lowestfare.com?)at prices way below TWA's own prices,so they were pretty much hamstrung there,when they filed for BK again AA knew they could get rid of Mr Ichan and his tickets,though he did sue and lost.

Of course then we had 911 and all hell broke lose.

Just out of interest anyone on here fly TWA ?

Also a very good site for TWA fans http://www.nknet.com/twa/

[ChuckC]

Dave,
Very interesting. Had forgotten how Icahn played that card against TWA. Do you happen to have the link for the article still?

As for paying back the debts when things get good again, that strategy certainly worked in the 70s following the first oil crisis, and probably even after the recession right around Reagan's election. But like so many other parts of corporate America, airlines got tapped out by the excesses of the 90s.

Chuck-

[Scrooge]

here you go

http://www.businessweek.com/2001/01_04/b3716094.htm

It's not only excesses of the 90s,it's the fact that airlines like jetblue/airtran/southwest managed to offer a better product at a lot less money.Sure during the mid 90's when companys were willi9ng to pay whatever for air travel times were great,but once the crunch started paying $5k to fly cross country didn't seem like such a good deal.

Also you cannot get into this subject without bringing up unions and pensions.

Let face facts,Eastern would still be here if the International Association of Machinists hadn't gone up against Frank Lorenzo and his TXI group,im not saying the unions are wrong Frank Lorenzo wasn't known as the "most hated man in the USA" for nothing,but he knew that with the costs of running an airline going through the roof the only way to save Eastern was to take it non-union as he had done with CO.

Now the pensions are a whole new ballgame,to me it's amazing unethical
to offer a pension,sign contracts with unions for them,then not fund them,NWA and Delta are $12 billion in the hole for thier pension plans,how in the world could that happen,ok $10-20 million that could happen on a monthly swing,but to get in the billions!

ChuckC & Jetwet1, I'd be interested to know what your thoughts are on Chapter 11 itself.

It would seem, that it is an option which helps airlines defer having to directly face the flaws in their busines plans.

whilst airlines are in Chapter 11, it also maintains high capacity in the market, which does not assist other carriers. On the other hand, of course, it (can be) great news for the employees concerned, as it keeps them employed (at least in the short term).

We've had, in recent years, America West, US Airlines, Delta, United, North West go into Ch. 11 (and some of these not just the once). Without the Chapter 11 safety cusion, do you think that these airlines would have been forced to face their problems earlier, and draw up more robust business plans for different market conditions?

Another issue which has annoyed European airlines is that Ch. 11 airlines have often reduced transatlantic fares to below market levels as a quick way of immediatley increasing their cash flow position.

This artifically puts pressure on foriegn carriers, such as VS, and could be construed as governement support (remember we dont have a Ch.11 equivalent this side of the pond).

Not trying to start an a.net type discussion (perish the thought!) just interested in your views on if Ch. 11 has hindered or helped US airlies, and specifically Delta/NW as discussed on this thread.

Rich.

[ChuckC]

Richard,
Chapter 11 has frankly become a far neater and more predictable way of dealing with unexpected events in the airline business, forcing restructuring on many constituents at the same time who would otherwise be unlikely to agree on what medicine was needed. Think about what Dave's noted re: unions, and you can readily see how management ultimately holds all the cards these days. Even if the company goes bankrupt, and the company disavows the pension plans, most folks still get paid and the airline keeps flying while management gets breathing room to figure out a new business model. Dare I say that for some airlines Chapter 11 has become an actual part of their business model? UA has been there for 3 years now.

Is this the right way to run a business? I don't think so, but in today's very uncertain world, the irony is that the availability of Chapter 11 may have actually kept the airlines flying far longer than many would have managed without this relief. Do I think that competition alone would sort most of this problem out, particularly if companies knew that no government bailout or Chapter 11 was there as a sort of safety net?

I do.

Regards,
Chuck-

If there were no chap. 11, then think how many people would now be unemployed in the US!
There would be no major airlines left in the US except AA, so i think as unfair as it is, chap. 11 is a good idea.

Latest suggestion - DL and NW may merge. Oh boy!

The Northwest Delta?