"The Middle Seat" column at the WSJ (sorry its a pay site) comments about Delta's still high costs, especially in light of AA and UA concessions:
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Delta is going to have a hard time competing with American, head-to-head, when it has to pay its pilots as much as 73% more. That will be the difference in hourly rates, starting Thursday, between a 12-year Boeing 777 captain at Delta and a 12-year Boeing 777 captain at American. Delta pilots get a 4.5% raise this week; American pilots take a 23% pay cut.
Consider an eight-hour U.S.-Europe flight. Just the in-flight hourly rate difference between a 777 captain and first officer at the two airlines would mean Delta would have to sell three or four more tickets for each flight at today's prices. In the airline world, where profit may come from only the last couple of passengers on a trip, that's a lot.
Delta spent a whopping 52% of its revenue on wages and benefits in the first quarter. That doesn't leave much for paying for jet fuel, airplanes, airport facilities and the like. "If we are unsuccessful in achieving a cost structure that is competitive, there is no airline that would succeed under that circumstance," Mr. Mullin said.
[This message has been edited by Craig6z (edited 04-30-2003).]
Spiff
Apr 30, 03, 6:29 am
Surely all the savings from the gutting of the SkyPiles program will make up for it?
Once the "expense" of having all these freeloading Medallions has been removed, it should be smooth financial savings for Delta - just the high rollers and the Priceline crowd to worry about...
clrankin
Apr 30, 03, 9:19 am
<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Delta is going to have a hard time competing with American, head-to-head, when it has to pay its pilots as much as 73% more... Delta pilots get a 4.5% raise this week; American pilots take a 23% pay cut.</font>
Sounds like Delta needs to spend some $$ to hire better negotiators the next time around. Heck, they probably could have saved themselves a bundle if they had just tried to pay the union bosses off! http://www.flyertalk.com/forum/smile.gif (please note the sarcasm here-- I'm not serious when I talk about bribing people.)
It will be interesting to see how well DL fares (ahem, yes, pun intended... http://www.flyertalk.com/forum/smile.gif ) a few months from now if AA and others have substantially lower payroll costs. Payroll is obviously only one part of running an airline, but I'd imagine that such large differences in labor costs could make the difference between staying afloat and going under-- especially these days when domestic and international travel is still far less than it used to be.
JS
Apr 30, 03, 10:52 am
Well, since the Delta pilots screwed over me and many others Christmas of 2000, hindsight says that Delta should have told the pilots to get lost.
I mean, is it really that much worse to take another flight since all the Delta flights are cancelled due to a pilot strike, than being cancelled by Delta and re-booked, only to have to wait in a very, very long line at LGA?
Shoulda let the pilots walk out and go hungry for a while, and then when they come to their senses and return to work at reasonable wages, Delta would not be in this position today.
[This message has been edited by JS (edited 04-30-2003).]
vetteset
Apr 30, 03, 3:08 pm
DL is in the best shape of all the majors. AA lost 2 planes on 9/11 and one shortly after. DL obviously has the money to shell out for pensions, bonuses and pay raises for top management. They also got 423 million from the goverment. I am not sticking up for the pilots, but they have worked constantly with management with various issues. Military flights, SONG, RJ's and codeshare. Alot of what the company is doing is against the contract, but the pilots have given their OK. There are also 1400 pilots without jobs. I don't think anyone here should be thinking that they have NOT given at all.
Morrissey
Apr 30, 03, 4:43 pm
Delta Proposes 22% Wage Cut on Pilots, No Planned Raises
<font face="Verdana, Arial, Helvetica, sans-serif" size="2">ATLANTA -- Delta Air Lines Inc., seeking to remain competitive with other airlines that have slashed labor costs, proposed a 22% reduction in pilot's hourly wage rates and for them to not get raises due next month and May 2004.
The proposal contains two phases.
In the second phase, Delta has essentially asked its pilots to open up the contract to address scope, work rules and benefits and re-address pay rates, according to the Air Line Pilots Association (News - Websites), which represents more than 9,000 Delta pilots. Delta has proposed the second-phase negotiations take place in the fall of 2004 or sooner depending on the airline's financial condition.</font>
I'm sure this proposal will be well-met. http://www.flyertalk.com/forum/rolleyes.gif
Hike fares to stay competitive, add fees to stay competitive, overpay CEO to stay competitive, why not competitively slash pilot salaries too? http://www.flyertalk.com/forum/biggrin.gif
<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Morrissey:
Delta Proposes 22% Wage Cut on Pilots, No Planned Raises
<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Atlanta-based Delta proposed this week to cut its pilots' pay by 22 percent, which would still leave their industry-leading pay rates higher than those of their peers at other airlines.
If the proposal were accepted by the pilots' union, Delta pilots would still be paid roughly 12.5 percent more than pilots at United Airlines, which has filed for bankruptcy and enacted pay cuts across the board. Delta pilots would pocket as much as 22 percent more than American pilots in their first year under American's new contracts, JPMorgan analyst Jamie Baker said.
"Delta should be asking for more, in our view," Baker said in a research note. "While recognizing Delta lacks the threat of imminent bankruptcy, we're unimpressed with the magnitude of management's proposal." He expected Delta's pilots to resist somewhat but react favorably overall.</font>