Possible Chapter 11 For Delta?

[skyflyr69]

Delta May Have to File for Bankruptcy

By HARRY R. WEBER
.c The Associated Press

ATLANTA (AP) - Delta Air Lines said Monday that it may have to file for bankruptcy if it doesn't get significant wage cuts from pilots, the first time the struggling carrier has publicly linked the two issues in a regulatory filing.

The Atlanta-based company has said repeatedly that it would fight to avoid bankruptcy and has been cautious in the words it uses when discussing the possibility. Asked about it at Delta's annual shareholder meeting last month, chief executive Gerald Grinstein said only that bankruptcy would be undesirable.

But in a quarterly report with the Securities and Exchange Commission on Monday, Delta said in part: ``If we cannot achieve a competitive cost structure, regain sustained profitability and access the capital markets on acceptable terms, we will need to pursue alternative courses of action ... including the possibility of seeking to restructure our costs under Chapter 11.''

Spokesman Anthony Black said that while it is the first time such language has been used in a public filing, Delta has not changed its position. He also noted that Delta is seeking to reduce cuts beyond pilot wage concessions, including through increased productivity and customer service improvements.

``It's an option,'' Black said of bankruptcy. ``It's not anything we see in the foreseeable future, but it's out there.''

Shares of Delta fell 35 cents, or 6.5 percent, to $5.03 in afternoon trading on the New York Stock Exchange.

Ray Neidl, an analyst with Blaylock & Partners in New York, said the language in the filing suggests Delta is guarding itself and making sure it warns people about the possibility of bankruptcy. He said the key to Delta's survival is clear.

``It's strictly dependent on the pilots,'' Neidl said. ``They can avoid bankruptcy if they get the cost cuts. If they don't, they'll have to go into bankruptcy.''

A spokeswoman for the pilots union could not immediately be reached for comment.

The company is seeking a 30 percent pay cut from pilots, who are offering only 9 percent and to forego a 4.5 percent raise they were to have received earlier this month. Talks have been on-again, off-again over the past year.

Delta, the nation's third-largest airline, has lost more than $3 billion and laid off 16,000 employees in the last three years. In the first quarter, it lost $387 million.

Maria Bartiromo had basically the same news on Delta. stock down .73 first time in 20 years below 5 bucks a share... This industry sure is something huh?

 

[firstamendment]

I'm sorry to see US Airways management tactics now being used at DAL. :down:

 

[luv2fly]

I'm sorry to see US Airways management tactics now being used at DAL. :down:

It's not just DAL and U. This is a cancer that is spreading through out the industry.

 

[WorldTraveler]

Its necessary because the other cancer that is endemic in this industry is labor thinking that one they should get a pay raise just because someone else got one compounded by a failure to recognize trouble and adjust to new realities. Sadly, bankruptcy is the only mechanism that airline management has had to get labor's attention after years when labor costs increased far faster than revenue increases (which are now monumental decreases in revenue).

Methinks Delta pilots will get smart soon enough to avoid a total wipeout in bankruptcy but their interests will best be served if they recognize that the company really does call the shots now.

 

[coolflyingfool]

Some of this I believe to be a contract concession ploy. It cannot be JUST the pilots that are having this effect on Delta. There has to be more than just the pilots pay as the issue for losing money. If the pilots and all employees had their pay reduced it would save the airline millions. My individual thoughts are the pilots at the top of the scale could shave a little, but I think all areas should be examined and don't blame the pilots for everything. Just my thoughts...........

 

[WorldTraveler]

Coolfool,
You are probably right but Delta's pilots are the only unionized employees so the company can and has changed benefits and work rules for non-contract employees. I was just on a Delta flight recently and the flight attendant talked about the major staffing and benefits changes they have incurred. Walking through Delta terminals, its obvious there are far fewer employees.

 

[desertfox]

The selection by DL of a CFO well versed in the bankrupcy rules -Michael Palumbo- was not by accident, in my opinion. He was very adept at TW and kept the doors open as long as possible.

 

[firstamendment]

Its necessary because the other cancer that is endemic in this industry is labor thinking that one they should get a pay raise just because someone else got one compounded by a failure to recognize trouble and adjust to new realities. Sadly, bankruptcy is the only mechanism that airline management has had to get labor's attention after years when labor costs increased far faster than revenue increases (which are now monumental decreases in revenue).

Methinks Delta pilots will get smart soon enough to avoid a total wipeout in bankruptcy but their interests will best be served if they recognize that the company really does call the shots now.

World Traveler

What I am about to say is only one man's opinion. I feel you need to look at three things.
1. Since most people clump all the airlines together with their opinions, I feel I as an US Airways employee can say that some of us "labor" have given back to help the survival of our companies. Infact, out of the last 17 years with U, I have given back 15 of those years...no small sacrifice. We at U have done what we believed was the "right thing" and it still wasn't and will never be enough when the managements of the legacy (these changing terminologies crack me up) carriers demand the same pay and working conditions of Jetblue, who is only 4 years old with all new employees making new hire wages. Perhaps the DAL pilots are looking at this and seeing firsthand how the cutting and threatening tactica used at US Airways just doesn't work.

2. If DAL management has the money to purchase new uniforms to all their employees, then they must not be too bad off. If a company is really in bad shape, they cut anywhere and everywhere they can, especially considering these current uniforms are just a few years old. Also, they wouldn't continue a "LCC" that every analyst will say IS losing money hand over fist. Why should the pilots open up their contracts with this kind of waste going on? I mean, we're talking losing millions and having to find ways to avoid Chapter 11. The DAL management appears to speak out both sides of it's mouth.

3.Delta has spent millions of dollars to keep unions off the property. Only ALPA is on the property, so it's not as if you are talking of an 80% workforce unionized. DAL fought the AFA tooth and nail and of course paid out high wages to their f/a's to prove they didn't NEED a union. Delta f/a's are now and have been the highest paid in the country, so if DAL wants to complain about high wages, why are they not immediately cutting those wages. But I can see where they would be wary of alienating the rest of the employee groups.

BTW, I am not a pilot and am not for or against DAL or their decisions. These are simply observations of what I as an airline person see and compare where my company is concerned and would hope that the management of DAL is alittle better caliber then the bozos we have had to endure at U. I hope for nothing short of the best for Delta employees.

I just find it laughable that you haven't done your homework. I feel the Delta pilots want to make sure the exact insanities that happened at places like US don't happen at DAL. After what we have gone through at US Airways, I can't blame them.

Good luck to all of the Delta employees.

 

[WorldTraveler]

1stamendment,
I am acutely aware of the problems in the airline industry and find it appalling that you would assert that I haven't done my homework just because I don't happen to support your line. Shame on you.

First of all, I do have a great deal of pity for US employees (previously expressed on the US board). I geniunely believe US is an example of a company that has been mismanaged for years and the employees have sacrificed. Delta is not in that league and their employees across the board have been extraordinarily well treated for decades; that is part of the Delta legacy which is well known in business circles.

Delta pilots are due for a major correction in pay solely because they (or the union representing them) fail to recognize and act on the major changes that have taken place in the airline industry in the past 3 years - and it started BEFORE 9/11. The reality is that the airline industry is not the glamorous industry it once was, just like so many other industries. Quite frankly, I am tired of the American mindset (fostered by the government) that advocates hypercompetition to the point where the standard of living of the average American is falling. One need only look at the standard of living of Wal-Mart employees to get a picture of what is coming to the rest of the business world - and that includes the airline industry. While that is another message for another day, THAT IS the reality that the airline industry faces and there is absolutely no justification for any employee group at any company to make substantially more than what the same employee makes at PEER companies. Right now, Delta is defining its peer as other network carriers but in reality the peer group is fast becoming all LCCs.
While I don't think Delta was overly wise at announcing that they were funding a uniform replacement program right now, Delta is clearly managing the business to be a long term survivor; American and Continental and Northwest are doing the same thing investing in new airplanes and computer technology. When a company chooses to stop investing in the most basic aspects of the business, there won't be a future for long. I'm not knowledgeable enough about the uniforms to know whether that was a wise choice but I do know that business investment can't stop because one employee group decides they want to keep all of the money for themselves. And by the way, I recently rode up an elevator at a hotel in San Diego with a US crew and was appalled at the shape of their uniforms.
Finally, Delta has long been able to keep unions off the property because their employees have it better than other employees. Just because Delta has done a better job at treating its employees than most of its competitors doesn't mean they have failed; instead, they have succeeded because labor unions can best be viewed as a necessary evil when labor and management cannot work together. Ideally, every employee at every company should be treated in such a way that no way has to intervene for them.
I fully expect that the rest of the employees at Delta will face further cuts as the airline business continues to evolve but, as was previously mentioned, Delta's non-union employees have already contributed. Not sure where you work but statistics say that Delta's maintenance costs are by far the lowest in the industry among network carriers and comparable with many LCCs. Can you tell me why Delta's mechanics should take pay cuts when they already are some of the most productive in the industry and still are paid well above average? Kudos to them and I hope they end up doing all the maintenance work for all the other airlines that can't get their mechanics to recognize the reality facing them. High pay, high productivity, and high quality product is exactly what American workers need to produce instead of having work outsourced to Latin America as US is facing.

 

[mga707]

Could someone with the power to do so PLEASE correct the topic header?
It's total gibberish as written ("Chp For 11 For Delta"?!) and it just bugs me. Thanks!

 

[North by Northwest]

Its necessary because the other cancer that is endemic in this industry is labor thinking that one they should get a pay raise just because someone else got one compounded by a failure to recognize trouble and adjust to new realities. Sadly, bankruptcy is the only mechanism that airline management has had to get labor's attention after years when labor costs increased far faster than revenue increases (which are now monumental decreases in revenue).

Methinks Delta pilots will get smart soon enough to avoid a total wipeout in bankruptcy but their interests will best be served if they recognize that the company really does call the shots now.

WorldTraveller "Its necessary because the other cancer that is endemic in this industry is labor thinking that one they should get a pay raise just because someone else got one compounded by a failure to recognize trouble and adjust to new realities." You mean just like corp. America? Gosh, why should we get a raise just because our management gets one every year...in the millions. It just isn't the American way. We should continue paying our leaders multi millions of dollars so they can downsize the companies they run. Labor is and always has been the problem, if only we could get rid of them and keep our money and bonuses. Welcome to the new America of the 21st Century. :down:

 

[luv2fly]

Coolfool,
You are probably right but Delta's pilots are the only unionized employees so the company can and has changed benefits and work rules for non-contract employees. I was just on a Delta flight recently and the flight attendant talked about the major staffing and benefits changes they have incurred. Walking through Delta terminals, its obvious there are far fewer employees.

"Coolfool,
You are probably right but Delta's pilots are the only unionized employees so the company can and has changed benefits and work rules for non-contract employees."

Delta has changed benefits and work rules for non contract employees. Some of those changes have been passed on to the pilot group as well. Most notably, the PPO healthcare costs.

"I was just on a Delta flight recently and the flight attendant talked about the major staffing and benefits changes they have incurred."

Delta pilots have already suffered over a 25% reduction in staffing, and under Jerry's proposal, an additional 15% would be furloughed in addition to the 30% pay cut. No other employee group has suffered a direct pay cut. In addition, many of the other employee groups remain at the top of their peer group. Since you mentioned flight attendants, here are some facts for you.
A Delta FA makes:

14.3 % more than an American FA
21% more than a United FA
23% more than a US airways FA

A flight attendant that flew 75 hours or less under the old work rules has had no change in compensation under the new work rules. In fact, the worst case scenario had a flight attendant who used to fly 90 hours a month now having to fly 93.5 hours to earn the same pay.
Although a pilot pay reduction would have the most dramatic effect on Delta's financial performance, pilot pay alone will not stave off BK. Pilot pay will come down, and so will others, but IMO, Delta has other more serious problems to contend with financially. It's just easy for them to place the blame on the employees.

 

[flyhigh]

luv-

what is your basis for saying that an additional 15% would be let go under Jerry's plan?

 

[BillLumbergh]

Could someone with the power to do so PLEASE correct the topic header?
It's total gibberish as written ("Chp For 11 For Delta"?!) and it just bugs me. Thanks!

Done.

 

[luv2fly]

luv-

what is your basis for saying that an additional 15% would be let go under Jerry's plan?

flyhigh,

The productivity improvements the company is asking for would result in 1200 to 1500 less pilot positions. Initially it was stated that these productivity improvements could be handled through attrition, but at one of Jerry's roadshows he stated that they would most likely just result in future furloughs.