Delta Liquidation???
Sep 13th, 2005, 11:25 PM
#1
Original Poster
Join Date: Sep 2005
Posts: 32
Likes: 0
Received 0 Likes
on
0 Posts
Delta Liquidation???
I think Delta will end up like Braniff, Eastern, or Liquidated - LIQUIDATED.
They are worse off than most people admit or know - no cash flow, costs have already been cut to the max, pilots/mechanics maxed out on concessions, Cinncy has already seen a big hub cut, and now they have sold pretty much all of their connection assests (e.g. to SkyWest). And not enough in time.
In this day in age, Chapter 11 is a good thing for companies. But I think Delta is way in over their head. They're starting Chapter 11 with all of their options already maxed out, not entering with good options to EXIT Chapter 11. See United as an example of this - but not to say they have it great.
American really read the handwriting on the wall. They saw the curveball, and struck-out just to play another day.
So what happens AFTER Delta? Atlanta is a prime, prime hub. Forget Salt Lake City, and Cinncinati, they have less strategic value. Who gets Atlanta?
1) United - makes sense, but they don't really have the cash...not out of Chapter 11.
2) American - Dallas and Miami hubs make this pointless
3) Continental - maybe, if they have the money
4) Southwest - WOW, this would be great for them.
5) Air-Train - expands, for sure if they can
6) Jet Blue - would fit great
ATL could be the first low-cost hub. But what about all thos international flights.
Just some thoughts - anyone have any thoughts?
They are worse off than most people admit or know - no cash flow, costs have already been cut to the max, pilots/mechanics maxed out on concessions, Cinncy has already seen a big hub cut, and now they have sold pretty much all of their connection assests (e.g. to SkyWest). And not enough in time.
In this day in age, Chapter 11 is a good thing for companies. But I think Delta is way in over their head. They're starting Chapter 11 with all of their options already maxed out, not entering with good options to EXIT Chapter 11. See United as an example of this - but not to say they have it great.
American really read the handwriting on the wall. They saw the curveball, and struck-out just to play another day.
So what happens AFTER Delta? Atlanta is a prime, prime hub. Forget Salt Lake City, and Cinncinati, they have less strategic value. Who gets Atlanta?
1) United - makes sense, but they don't really have the cash...not out of Chapter 11.
2) American - Dallas and Miami hubs make this pointless
3) Continental - maybe, if they have the money
4) Southwest - WOW, this would be great for them.
5) Air-Train - expands, for sure if they can
6) Jet Blue - would fit great
ATL could be the first low-cost hub. But what about all thos international flights.
Just some thoughts - anyone have any thoughts?
Sep 14th, 2005, 03:24 AM
#2
Join Date: Jan 2003
Posts: 23,138
Likes: 0
Received 0 Likes
on
0 Posts
Maybe if I were an airline industry financial expert I would base my flying decisions on who I thought was going to liquidate. I have become resigned to booking flights based on cost and convenience and hoping the schedule does not change 6 times before I go, the plane takes-off and lands without major event, and the person sitting next to me weighs less than 300 pounds and does not have 2 "lap babies" with them.
I view my FF miles on various airlines not as "money in the bank" but something that I hope I can use some day, but not something I am counting on. I am booking leisure trips much closer to departure date than before, with the hope that my credit card will offer me some protection if an airline disappears.
I view my FF miles on various airlines not as "money in the bank" but something that I hope I can use some day, but not something I am counting on. I am booking leisure trips much closer to departure date than before, with the hope that my credit card will offer me some protection if an airline disappears.
Sep 14th, 2005, 04:18 AM
#3
Join Date: Feb 2004
Posts: 23,073
Likes: 0
Received 0 Likes
on
0 Posts
While I agree that DL may be liquidated eventually, I don't agree with a few points in the OP's post:
On one hand, the recent cut at CVG isn't that big of a cut. And DL still owns Comair.
On the other hand, I don't see ATL that valuable to other suitors. Atlanta, while a large city, isn't Chicago or New York. It doens't generate that much of original traffic. DL's hub there is important for two kinds of traffic - as a hub to its numerous European flights, and as a hub between the NE and Florida.
Now, for flights to Europe, many airlines already are expanding there. They don't necessarily need to buy DL's asset. More desirable to many airlines is UA's LHR operation.
For the NE-Florida market, there are tonnes of low-cost airlines flying non-stops. Jetblue, Spirit, AirTran, and don't forget Southwest. It's a highly competitive market.
Also, ATL isn't a fortress hub either, with AirTran also there, keeping fares down.
Most airlines are interested in expanding to Asia and S. America - routes that Southwest and Jetblue won't be flying for a while. DL lacks both.
Its fleet also has low value. They only have a few 777. Their 767s are getting old. Domestically, the 737-300s are old, though the MD-88/90 may fit AA, and 757s will fit many airlines. But still, not a "must buy" for anybody.
On one hand, the recent cut at CVG isn't that big of a cut. And DL still owns Comair.
On the other hand, I don't see ATL that valuable to other suitors. Atlanta, while a large city, isn't Chicago or New York. It doens't generate that much of original traffic. DL's hub there is important for two kinds of traffic - as a hub to its numerous European flights, and as a hub between the NE and Florida.
Now, for flights to Europe, many airlines already are expanding there. They don't necessarily need to buy DL's asset. More desirable to many airlines is UA's LHR operation.
For the NE-Florida market, there are tonnes of low-cost airlines flying non-stops. Jetblue, Spirit, AirTran, and don't forget Southwest. It's a highly competitive market.
Also, ATL isn't a fortress hub either, with AirTran also there, keeping fares down.
Most airlines are interested in expanding to Asia and S. America - routes that Southwest and Jetblue won't be flying for a while. DL lacks both.
Its fleet also has low value. They only have a few 777. Their 767s are getting old. Domestically, the 737-300s are old, though the MD-88/90 may fit AA, and 757s will fit many airlines. But still, not a "must buy" for anybody.
Sep 14th, 2005, 09:01 AM
#4
Join Date: Mar 2003
Posts: 387
Likes: 0
Received 0 Likes
on
0 Posts
Obviously, DL is hurting . . . as is NW, UA, US, and, to a lesser extent, CO & AA. But I think the predictions of DL’s demise are premature. DL still has some very valuable assets, including Comair and some lucrative European routes, and other airlines have been in bad shape, filed for bankruptcy, and come out of it better (like CO), at least for a while.
Also, if DL & NW file as expected, it may prompt the feds to do something to prevent their demise, such as abolish the rule banning foreign majority ownership in an airline.
Even Jet Blue is expected to post a loss for the fourth quarter. I suspect that if the economy does not improve and if fuel prices don’t decline, it will only be a matter of time before the remaining legacy carriers file, as well.
I personally would be sad if DL were to go away. I’ve generally had good experiences on them and have found their personnel to be FAR friendlier/professional than US or AA.
Also, if DL & NW file as expected, it may prompt the feds to do something to prevent their demise, such as abolish the rule banning foreign majority ownership in an airline.
Even Jet Blue is expected to post a loss for the fourth quarter. I suspect that if the economy does not improve and if fuel prices don’t decline, it will only be a matter of time before the remaining legacy carriers file, as well.
I personally would be sad if DL were to go away. I’ve generally had good experiences on them and have found their personnel to be FAR friendlier/professional than US or AA.
Sep 14th, 2005, 06:17 PM
#5
Original Poster
Join Date: Sep 2005
Posts: 32
Likes: 0
Received 0 Likes
on
0 Posts
RK:
While I agree that Delta still has some assets, I don't think these will be enough. Their restructuring efforts will just take too much for them to ever be the same again - or even exist.
So, let's put this in the context of the market, not just Delta itself.
It boils down to the law of a liberal and competitive economy, which partially dictate that:
1) HIGH COSTS - The industry is suffering on a mass scale - fuel costs, operating costs, low-cost carriers stilling market share (fliers). Those who have the cash flow to enter and exit bankruptcy will be the only ones who survive. It's who has the deeper pockets.
2) COMPETITION GLUT - There are too many competitors in the market (stalwarts, and low-costs), which has created some dis-equilibrium and helped disrupt any possibility for major profit.
Given that, I think Delta is the odd man out here. They are the least prepared to deal with the 2 above factors.
Of the stalwart airlines, AA and United are too strong to go away. They have STRONG hubs, good routes, started the restructuring process early on. US Airways/America West has bought itself some time with the merger. But, they'll never be the same. Count on them picking up the smaller, less profitable routes. Continental is doing ok, but they'll have to eventually get rid of their frills like everyone else. Northwest might survive, because of its strong INt'l routes/partnerships that make up for some domestic profit losses.
Which leaves us Jet Blue, SWA, and AirTran. These guys were made to endure a stagnant industry - they're gobbling up the scraps...and making it look good.
I'm anxious to hear everyone's continued opinion on this. We're talking about the #3 airline possibly going away! What happens next, how does it play out, and what are the implications?
While I agree that Delta still has some assets, I don't think these will be enough. Their restructuring efforts will just take too much for them to ever be the same again - or even exist.
So, let's put this in the context of the market, not just Delta itself.
It boils down to the law of a liberal and competitive economy, which partially dictate that:
1) HIGH COSTS - The industry is suffering on a mass scale - fuel costs, operating costs, low-cost carriers stilling market share (fliers). Those who have the cash flow to enter and exit bankruptcy will be the only ones who survive. It's who has the deeper pockets.
2) COMPETITION GLUT - There are too many competitors in the market (stalwarts, and low-costs), which has created some dis-equilibrium and helped disrupt any possibility for major profit.
Given that, I think Delta is the odd man out here. They are the least prepared to deal with the 2 above factors.
Of the stalwart airlines, AA and United are too strong to go away. They have STRONG hubs, good routes, started the restructuring process early on. US Airways/America West has bought itself some time with the merger. But, they'll never be the same. Count on them picking up the smaller, less profitable routes. Continental is doing ok, but they'll have to eventually get rid of their frills like everyone else. Northwest might survive, because of its strong INt'l routes/partnerships that make up for some domestic profit losses.
Which leaves us Jet Blue, SWA, and AirTran. These guys were made to endure a stagnant industry - they're gobbling up the scraps...and making it look good.
I'm anxious to hear everyone's continued opinion on this. We're talking about the #3 airline possibly going away! What happens next, how does it play out, and what are the implications?
Sep 15th, 2005, 04:28 PM
#6
Join Date: Feb 2003
Posts: 8,586
Likes: 0
Received 0 Likes
on
0 Posts
wilsm - why do you consider United strong? Haven't they been in ch. 11 for forever? The several times I've flown them in the past few years I've been impressed with service (of course, I usually fly USair so I don't have high expectations), but it can't be a good thing it's taken them so long to exit bankruptcy.
All the airlines seem to have a staying power that the industry insiders never imagined. I can't tell you how many times I read a quote about USAirways that said something along the lines of "Stick a fork in them, they're done", but they are still here.
Has Delta restructured their salary levels like USair did? That could allow for a ton of cost savings, but also would result in a lot of unhappy employees.
Not good times in the airline industry nowadays.
All the airlines seem to have a staying power that the industry insiders never imagined. I can't tell you how many times I read a quote about USAirways that said something along the lines of "Stick a fork in them, they're done", but they are still here.
Has Delta restructured their salary levels like USair did? That could allow for a ton of cost savings, but also would result in a lot of unhappy employees.
Not good times in the airline industry nowadays.
Sep 15th, 2005, 08:35 PM
#7
Original Poster
Join Date: Sep 2005
Posts: 32
Likes: 0
Received 0 Likes
on
0 Posts
Karens:
I consider United strong because of the hubs, the routes, and the cash that they still have.
United has milked bankruptcy for all that it's worth - remember, bankruptcy is a good thing for most companies that have some semblance of assets. Case in point, United was able to dump its entire pension issues off to the federal govt.
I consider United strong because of the hubs, the routes, and the cash that they still have.
United has milked bankruptcy for all that it's worth - remember, bankruptcy is a good thing for most companies that have some semblance of assets. Case in point, United was able to dump its entire pension issues off to the federal govt.
Sep 15th, 2005, 11:30 PM
#8
Join Date: Apr 2005
Posts: 1,145
Likes: 0
Received 0 Likes
on
0 Posts
As an interested observer (not an expert, employee or investor), can anyone tell me why Delta's stock price rose Thursday while NWA's fell? I'd love to hear the opinions - it seems Wall Street like Delta's prospects better than NWAs.
Sep 16th, 2005, 03:57 AM
#9
Join Date: Feb 2004
Posts: 23,073
Likes: 0
Received 0 Likes
on
0 Posts
About the stock prices:
DL stocks have been in the dump for many weeks. Everybody knows they'll file for Chapter 11. Now that has happened, some investors with some extra cash are basically gambling that they may get something out of it.
NW's case is different. Even up till Wednesday afternoon, there are still a lot of analysts - and I assume real investors too - that think NWA was just playing a game of chicken with their various union groups, as well as debtors; and is just using the threat of Ch11 to negotiate. It's the minority view, but some do believe that. Well, they bet wrong, and many of them sell to recover whatever they can at this time.
DL stocks have been in the dump for many weeks. Everybody knows they'll file for Chapter 11. Now that has happened, some investors with some extra cash are basically gambling that they may get something out of it.
NW's case is different. Even up till Wednesday afternoon, there are still a lot of analysts - and I assume real investors too - that think NWA was just playing a game of chicken with their various union groups, as well as debtors; and is just using the threat of Ch11 to negotiate. It's the minority view, but some do believe that. Well, they bet wrong, and many of them sell to recover whatever they can at this time.
Sep 16th, 2005, 05:17 AM
#10
Join Date: Mar 2003
Posts: 2,032
Likes: 0
Received 0 Likes
on
0 Posts
In addition to rkk's reasons, one analyst yesterday said that the upsurge was mostly from small investors and noninvestors who saw the 60 cent price and, not knowing the stock is essentially worthless now, went out to buy it looking for a good upside. People looking at the pretty airplanes I would think.
Sep 16th, 2005, 08:15 AM
#12
Join Date: Jan 2003
Posts: 12,885
Likes: 0
Received 0 Likes
on
0 Posts
The rumors of AA buying NWA are coming back. Few years back AA did offer to buy NWA but NWA wanted twice as much as the offer made by AA. AA walked away.
AA is not exactly swimming in cash itself these days but the prospect of getting 30 slots to China and rights to base out of Japan may make it worthwhile for AA to take a long hard look at some kind of a deal.
AA is slowly but surely banking on international traffic and giving up on the domestic front to LCCs.
The idea of AA either buying NWA outright or picking bits and pieces is not as far fatched as it looks.
AA is not exactly swimming in cash itself these days but the prospect of getting 30 slots to China and rights to base out of Japan may make it worthwhile for AA to take a long hard look at some kind of a deal.
AA is slowly but surely banking on international traffic and giving up on the domestic front to LCCs.
The idea of AA either buying NWA outright or picking bits and pieces is not as far fatched as it looks.
Sep 16th, 2005, 08:59 AM
#13
Original Poster
Join Date: Sep 2005
Posts: 32
Likes: 0
Received 0 Likes
on
0 Posts
I definitely agree that American is the best positioned in the market. It also makes sense for them to go after NWA - from an Asia perspective, it's very profitable.
However, what about Minneapolis, Detroit, and Memphis? I don't see Detroit and Memphis being that valuable enough to absorb. American already has the Midwest covered with Chicago and St. Louis.
Enter SWA - I bet they work out a deal with American to expand to these 3 markets, which they currently are not in. AA and SWA would share Minneapolis (AA for Int'l), SWA for most domestic.)Or Air-Tran/Jet Blue could jump on this.
SWA could be the big domestic winner here though. NWA's hubs would be great for their current strategy.
What about Delta though? Any thoughts on who would go after their assets?
Keep it going - this is a cool, interesting topic!
However, what about Minneapolis, Detroit, and Memphis? I don't see Detroit and Memphis being that valuable enough to absorb. American already has the Midwest covered with Chicago and St. Louis.
Enter SWA - I bet they work out a deal with American to expand to these 3 markets, which they currently are not in. AA and SWA would share Minneapolis (AA for Int'l), SWA for most domestic.)Or Air-Tran/Jet Blue could jump on this.
SWA could be the big domestic winner here though. NWA's hubs would be great for their current strategy.
What about Delta though? Any thoughts on who would go after their assets?
Keep it going - this is a cool, interesting topic!
Sep 16th, 2005, 09:35 AM
#14
Join Date: Jan 2003
Posts: 12,885
Likes: 0
Received 0 Likes
on
0 Posts
I agree with you. AA would not be interested in any of the 3 hubs. NWA's fleet is not exactly AA's style either, but the Asian market and especially the 5th freedom rights out of Japan is very tempting to AA, <b>IF</b> it could be acquired at a reasonable cost.
Also, NWA's European destinations are not too shabby.
Unfortunately I don't think NWA will offer bits and pieces and if it does, it will definitelay NOT be the Asian market, so unless AA is willing to buy the whole lot (could be expensive) and try to sell off bits and pieces, this will not go anywhere. (lots of speculation going on around here
)
Also, NWA's European destinations are not too shabby.
Unfortunately I don't think NWA will offer bits and pieces and if it does, it will definitelay NOT be the Asian market, so unless AA is willing to buy the whole lot (could be expensive) and try to sell off bits and pieces, this will not go anywhere. (lots of speculation going on around here
)
Sep 21st, 2005, 05:56 AM
#15
Join Date: Feb 2004
Posts: 1,834
Likes: 0
Received 0 Likes
on
0 Posts
I think Delta will ultimately liquidate. They should have filed for bankruptcy last year. Wilsm79 is correct- no cash flow, costs cut to the max (and what's left to cut isn't enough to get them out of the hole), and pilots/mechanics maxed out on concessions.
Delta could survive bankruptcy but major changes would have to be made to its operations. For example, my friend who is a 19 year Delta veteran flight attendant makes top dollar for a flight attendant and receives full health and flight benefits for her family. Her goal had been to fly through next year (when she would have 20 years of seniority) so that her family would receive lifetime flying benefits even if she retired. While having children a few years back, she took up to a year in leave where she continued to receive full benefits. Currently, she flies 5 days per month, and that's considered full time. My business wouldn't survive if my employees only worked 5 days per month, or if I had to pay their benefits while they took off a year.
Delta's planes, even though they are older by US standards, can be sold on the international market in a day. As an Atlantan, I think the Atlanta market would eventually benefit from the demise of Delta. Even with Airtran, ATL is a fortress hub. None of the other discount carriers or even national carriers have a significant presence here. I don't think one airline will take over the hub but instead, Airtran will expand and several other carriers will move in or increase their presence. Many predicted the death of ATL as a major airport when Eastern went under (Concourse C was deserted for a while) but those gates are all full now. The Southeast US continues to grow, and Atlanta is in the center of that population and economic expansion.
Use your Delta FF points sooner rather than later.
Delta could survive bankruptcy but major changes would have to be made to its operations. For example, my friend who is a 19 year Delta veteran flight attendant makes top dollar for a flight attendant and receives full health and flight benefits for her family. Her goal had been to fly through next year (when she would have 20 years of seniority) so that her family would receive lifetime flying benefits even if she retired. While having children a few years back, she took up to a year in leave where she continued to receive full benefits. Currently, she flies 5 days per month, and that's considered full time. My business wouldn't survive if my employees only worked 5 days per month, or if I had to pay their benefits while they took off a year.
Delta's planes, even though they are older by US standards, can be sold on the international market in a day. As an Atlantan, I think the Atlanta market would eventually benefit from the demise of Delta. Even with Airtran, ATL is a fortress hub. None of the other discount carriers or even national carriers have a significant presence here. I don't think one airline will take over the hub but instead, Airtran will expand and several other carriers will move in or increase their presence. Many predicted the death of ATL as a major airport when Eastern went under (Concourse C was deserted for a while) but those gates are all full now. The Southeast US continues to grow, and Atlanta is in the center of that population and economic expansion.
Use your Delta FF points sooner rather than later.
Sep 22nd, 2005, 07:47 AM
#17
Join Date: Jan 2003
Posts: 5,525
Likes: 0
Received 0 Likes
on
0 Posts
Padams-you know not what you write. Your Delta flight attendant neighbor is probably NOT flying full time with only 5 days a month. She is probably on what is called "auxiliary" and considered part time which requires one to chose to fly either the first two weeks or the second two weeks of the month(perfect for moms!).Or she could be flying full time with high time turnarounds(worth about 8-9 flight hours per trip) and is flying low time hours for a regular full timer.Most full time flight attendants these days fly at least 13-19 days a month with high hour trips.(The 19 year seniority that your neighbor has is not that senior anymore with the airlines as they have not hired as they did in the past.) Delta flight attendants are NOT the highest paid in the industry as they have not had a pay raise in over 7 years and took a 10% pay cut last year along with losing one of their weeks of paid vacation.The work conditions have drastically changed through the years and what you reported is not what it is. It sounds like your neighbor took one of the personal leaves offered after 9/11 as many were offered due to empty aircraft,etc. at the time.As for free healthcare- Delta has United Healthcare as their provider and as many would tell you-there are high copays and premimums to be had.I think that most airline employees will tell you that the past 10 years have seen great changes to the jobs and benefits which have caused great hardships to many.
Sep 22nd, 2005, 09:37 AM
#18
Join Date: Jul 2003
Posts: 184
Likes: 0
Received 0 Likes
on
0 Posts
Regarding airline crew schedules I never realized why the actual day count seems lower until my friend, also a f/a although not for Delta, explained it. Often their days are 13-15 hours long, half of which are actually pay hours, and in those supposed 5 days per month are 120 hours at work! Yes, the average person does 40 hour weeks, but they are home at night to attend to life's business. When crew are away, they're away! I imagine they feel that they should be compensated for their time, just like everyone else. That said, I think that those five days seems a bit low, my friend works 15 and she gets apparently one of the highest time trip that there is at her airline. Apparently Delta is betting on their international routes to make money, that seems reasonable but how long can the legacies hide from low cost carriers on that? I am betting Jet Blue starts international in the next five years. Then where will everybody hide?
