Latest Airlines news and discussion.

Geko45 · Posted: Wed Sep 14, 2005 5:02 pm Post subject: Re: Delta

NEW YORK (CNN/Money) - Delta Air Lines filed for bankruptcy, making it one of two major carriers to seek protection from creditors Wednesday.

Delta (Research), the nation's third-biggest airline, has been hurt by the recent spike in jet fuel prices and growing competition from lower-cost, low-fare carriers -- and less than a half hour after its filing, Northwest Airlines also filed for protection from creditors.

Delta followed United Airlines (Research) and US Airways into bankruptcy. United, the No. 2 airline, has been in bankruptcy court for almost three years. US Airways (Research) has been in bankruptcy court twice since the Sept. 11 terrorist attacks that shook the airline industry.

Delta said in a statement announcing the bankruptcy filing that it expects to keep flying while it seeks to cut costs and reorganize, so the impact on flyers should be minimal. It is also expected to keep its frequent flyer program intact.

The Atlanta-based airline, which has not had a profitable quarter since 2000, filed under Chapter 11 of federal bankruptcy laws. In Chapter 11, a company is protected from creditors while it tries to reorganize.

Analysts said this year's spike in jet fuel prices forced Delta's bankruptcy filing.

"Hurricane Katrina was probably the last straw," Ray Neidl, analyst with Calyon Securities, said shortly before the widely expected bankruptcy filing. "Nobody could have predicted $60-, $70-a-barrel oil. Things just developed that were uncontrollable factors."

But Delta's problems predate not only the hurricane, but the Sept. 11, 2001 terrorist attacks. The company has lost some $6.1 billion since the start of 2001 from its airline operations, according to First Call, which tracks corporate earnings.

Some analysts said that Delta waited longer than some of its rivals to trim costs. It did not win cost concessions from its pilots union until last October, after paying them the highest wages in the industry under a contract reached months before the Sept. 11 attacks.

"They are another example of a company that started out in a relatively stronger financial position than their peers, and they felt they were in better position to survive a shakeout," said Philip Baggaley, Standard & Poor's senior airline credit analyst. "They didn't pursue cost-cutting as aggressively as they would have if they were heading toward bankruptcy early in the (industry's) downturn."

The airline has nearly 60,000 employees and flies about 340,000 people daily in its mainline operations, which includes Delta, the Delta Shuttle and Song, its attempt to compete in the growing low-fare market.

Another problem for Delta is that it has less international traffic than the nation's other big carriers. That means it faces competition on more routes from low-fare carriers such as AirTran, JetBlue and Southwest than some of its rivals.

Scramble to cut costs
Delta had been scrambling through the strong summer travel season to cut costs and raise cash.

Last week it completed the sale one of its feeder airlines, Atlantic Southeast Airlines, for $425 million. It also announced it was cutting flight capacity at its Cincinnati hub by 26 percent.

But these and other cost-cutting moves made over the last year could not stem losses, which are forecast by analysts to extend into 2007. The company has not reported a quarterly profit, excluding special items, since 2000.

Delta flirted with a bankruptcy filing in October 2004, before getting the Air Line Pilots Association to agree to cut wages by about a third – a move that saved about $1 billion a year. The airline also cut some 5,000 jobs in the year ending in June, aside from the sale of Atlantic Southeast.

Its second quarter payroll costs were 18 percent below a year earlier, as the company spent nearly $300 million less on salary and benefits.

But soaring fuel costs caused ongoing losses. The amount paid per gallon soared 50 percent in the second quarter from a year earlier, and has kept climbing.

The increased costs came as Delta and other carriers found it difficult to win higher fares from passengers, who have more options with the growth of low-fare rivals.

The average amount that Delta received from passengers came to 12.24 cents a mile in the second quarter, down 1 percent from a year earlier, even as the percent of empty seats on Delta jets fell.

The final cash crisis came when the bank that was processing the airline's Visa and MasterCard ticket purchases started holding back money as protection in case of a bankruptcy filing. The airline warned in August that such a move by the bank could cost $650 million by the end of October, straining its already thin cash reserves.

Geko45 · Posted: Wed Sep 14, 2005 5:02 pm Post subject: Re: Northwest

NEW YORK (CNN/Money) - Northwest Airlines filed for bankruptcy Wednesday, hit by a spike in jet fuel prices and an inability to win wage concessions from its unions, about a half hour after rival Delta also filed for Chaper 11 protection.

The twin filings mean four of the nation's major airlines are operating under protection from creditors.

Northwest had been flying for nearly a month with its unionized mechanics on strike and is expected to maintain its normal flight schedule in bankruptcy, limiting the impact on flyers.

Northwest follows No. 2 United Airlines (Research), US Airways (Research) and now Delta into bankruptcy. The shocks of the Sept. 11 terrorist attacks, and now Hurricane Katrina, which sent jet fuel prices soaring, were a double blow to the industry.

Northwest filed for protection under Chapter 11 of the bankruptcy code, under which a company is protected from creditors as it seeks to cut costs and reorganize.

Despite filing for bankruptcy, Northwest is generally seen as being in better financial shape than Delta. As late as Tuesday afternoon, some analysts had been saying it might avoid bankruptcy altogether.

The most recent financial report from Northwest showed it had $2.1 billion in cash on hand as of June 30. While that's down from $2.5 billion at the end of 2004, it's well above the $1.7 billion in cash and short-term investments its larger rival Delta showed on its balance sheet.

But Northwest has been playing hardball with its unions. It virtually pushed its union mechanics into a strike, making an offer calling for 25 percent pay cuts and slashing half of the union's jobs at the carrier. It had 1,200 replacement workers, as well as managers and outside contractors, ready to do the union's work as soon as the strike started.

The bankruptcy filing gives Northwest a chance to force unions representing pilots, flight attendants and other ground workers to accept deep pay cuts. Northwest said earlier this year it needed an additional $1.1 billion in labor cost savings to avoid bankruptcy. It recently warned that the spike in fuel prices meant $1.1 billion wasn't enough to avoid bankruptcy.

The filing also gives Northwest a chance to dump some of its pension obligations on the federal agency that guarantees private pension plans. Its most recent filing showed Northwest faced a $3.8 billion shortfall in its pension plans, and it had been pushing for new laws to give it more time to cover the gap.

Experts said one other factor may have pushed Northwest: a change in bankruptcy laws due to take effect Oct. 17. Under the new law, Northwest management would have only 18 months to work out a reorganization plan without competing plans from creditors. United has gone for nearly three years without facing such a challenge in its bankruptcy proceedings under existing law.

But experts also agreed that the soaring price of jet fuel was a major factor. Northwest said in its bankruptcy announcement that it now expects that its fuel bill for 2005 will be approximately $3.3 billion. This compares with $2.2 billion for 2004 and $1.6 billion for 2003.

"Those three factors, pension, labor and fuel prices, likely were the major considerations," Philip Baggaley, Standard & Poor's senior airline credit analyst, said in comments before the Northwest filing.

Northwest also faced growing competition from low-fare, lower-cost carriers, which has hurt major hub-and-spoke carriers such as American Airlines, the No. 1 airline, and the other airlines in bankruptcy.

The stiff competition has helped keep airfares lower than necessary to cover current fuel costs. Northwest's average fare per mile flow slipped 1.7 percent in the first half of the year, even as fuel costs soared.

But Northwest, with a greater percentage of its traffic coming from overseas routes, was somewhat less affected than some of its peers by the growth of the low-fare carriers, which operate almost exclusively domestic routes.

Desire · Tar Sands Joined: Jun 20, 2004 Posts: 72

Delta Air Lines and Northwest just went belly-up.

Desire · Tar Sands Joined: Jun 20, 2004 Posts: 72

Can this thread be made sticky? Feel free to delete the thread I started on the latest airline bankruptcies.

AirlinePilot

Actually I think we are still pretty far from Belly up. Chapter 11 is increasingly being used as a "tool" in US corporations to move along the process of evolving a company that can't seem to manage itself in a changing evironment. Its a bad trend and one that likley won't continue in the same vein due to the fairly large bankruptcy law change coming on October 17th. I think there will be a slightly artificial rush to go into bankruptcy in order to take advantage of the "old" rules.

Operations as normal for now here at Delta, i go out on a regular trip tommorow!

I'm also looking into a second carreer as this is likely a dead end in the long term.

At least its not boring.

mermaid · Tar Sands Joined: Sep 12, 2005 Posts: 77 Location: belgium

there are so many people who have to sleep at night and that they can't due to the major noise of some heavy motors of those carrierflights, i think they won't regret....

And for the pensions, i feel sorry for all retirees, but i think when the whole economy will be worse and worse, no-one will be able to save a pension and if saved,the pensioncompanies won't pay due to bankruptcy.
The airliners are in deep trouble, but flying around is a welfare thing, before flying things and life weren't impossible....

Leanan · News Editor Joined: May 20, 2004 Posts: 4582

Andy Serwer did a story on these bankruptcies on CNN this morning. He said the airlines will continue - for now - and the customers will likely be fine. It's the airline employees and the shareholders who will be screwed.

He put the blame squarely on de-regulation. This was surprising to me, because Serwer, editor of Fortune magazine as well as CNN money correspondent, is usually your typical free market capitalist rightwinger. Not the type who usually calls for more government regulation.

But he is this case. He says the government has to do something. He doesn't think the airlines can survive in a free market situation.

some_guy282 · Intermediate Crude Joined: Jul 18, 2004 Posts: 691

Misery loves company. Delta and Northwest are considering a merger.
_________________
In individuals, insanity is rare; but in groups, parties, nations, and epochs it is the rule. – Nietzsche

Time makes more converts than reason. – Thomas Paine

History is a set of lies agreed upon. – Napoleon Bonaparte

Eli

This is why the Airlines still have a long way to fall.

The legacy carriers like North West and Delta are huge companys with huge losses and huge debt loads. They are not only losing billions they are borrowing billions as well.

The key to the airlines right now is that they are being kept afloat by banks like Ge for example. They have loaned them tons of money that they get from the fed and just keep loaning money and keep them operating rather than realize the loss. We don't just have an airline problem we have a banking problem as well.

Not until some of these guys stop operating will there be any hope for the rest of the airline industry but the big banks are loathe to let it happen lest the banks commit the mortal sin of actually admitting they lost money and see their own stock fall.

frankthetank

from marketwatch.com

BabyPeanut

lawnchair · Intermediate Crude Joined: Oct 20, 2004 Posts: 793

It will be interesting to see if Rita sends Houston-based Continental Airlines into Chapter 11 bankruptcy with her sister airlines Delta and Northwest (the three have acted almost as one domestically for several years). Houston IAH airport, their hub, is almost certainly not going to be seriously damaged by Rita, but it is going to be shut down for several days (starting tomorrow at Noon, though some flights are already scratching IAH/HOU, maybe fearing a lack of JetA to get out of the area). And, they will be in the midst of the economic and social chaos if Rita does bear down on Metro Houston.

BabyPeanut

BabyPeanut