Delta SkyMiles (Pre-WorldPerks Merger) - Wall Street analyst sees possibility of Delta Chapter 11 filing

Wall Street analyst sees possibility of Delta Chapter 11 filing (http://www.atwonline.com/indexfull.cfm?newsid=3797)

Dateline: Friday January 16, 2004

Delta Air Lines' new CEO Gerald Grinstein may be laying the groundwork for a possible Chapter 11 filing, Credit Suisse First Boston analyst James Higgins speculated in a report released Thursday, a day after Delta discussed its fourth-quarter and full-year 2003 financial results in a webcast (ATWOnline, Feb. 15).

While stressing that "this is purely our opinion," Higgins stated, "We believe [Grinstein] effectively warned yesterday of a potential bankruptcy if pilot costs cannot be reined in." During the webcast, Grinstein stressed the need for a new agreement with pilots while Executive VP and CFO Michele Burns said that if the pilot cost structure was equal to restructured peers or low-cost carriers, Delta would have achieved near-breakeven results in the December quarter. It reported a net loss of $327 million for the period, or $207 million excluding special items.
Higgins also suggested that Grinstein's announcement that the carrier has begun a "full strategic assessment" of its business plan could be interpreted as "due diligence that will enable [Delta] to claim, justifiably, that they did everything possible to avoid Chapter 11, if it comes to that."

Higgins likened the airline's situation to that which faced American Airlines "in late 2002," approximately 3.5 months before American came within hours of a Chapter 11 filing, "although [Delta's] liquidity position is stronger"--it ended the quarter with $2.7 billion in unrestricted cash. The analyst also questioned the carrier's plan to grow capacity 8%-10% this year given softening revenue trends and "more than usual incremental low-fare competition."--Perry Flint

------------------
I am not a sanctioned representative of Delta on these boards, just an interested participant. I'm only here trying to shed light on DL issues brought up on this board and to provide my opinion and/or to try to answer Qs. I do work for Delta, but I don't represent DL's final word when answering a question (in any capacity). Please e-mail Customer Care with your questions to get a corporately-supported reply.www.delta.com/email (http://www.delta.com/email)

It would be very sad, but not surprising, if Delta filed for Chapter 11 protection.

Its strategy under Leo Mullen was to cut costs, not to raise revenues. Even worse, it cut minor costs which resulted in major revenue losses.

It saved pennies by cutting back on SkyMiles and lost a number of large passengers.

It saved a few dollars by charging for drinks on international flights and risked turning off potential passengers whose fares would far outweigh the money collected for those drinks.

By increasing its reliance on RJ's, it not only lost passengers on those routes, but also on international flights. If someone is planning on going from Local Airport A to Regional Hub B to European Destination C, and does not want to make that first leg on an RJ, he is most likely going to book the entire intinerary on another airline.

By "putting the screws" to its employees, Delta did save some money -- and in the process created a situation where its peoples' morale is dismal. They are only human and this had to impact on how they deal with passengers.

With Mullen's departure, things seem to have improved a bit but it is a case of too little, too late. I am afraid that a great airline is going to go down the tubes while the man who sent it there is enjoying his "bankruptcy proof" retirement fund.

Not necessarily to defend Delta, but one could argue that the reduction in Skymiles benefits, charging for drinks (intl) and now meals (domestic), and using more RJ's, while in the long run maybe not a good move, were perhaps the only moves Delta could make now to reduce their costs. I'm assuming they were contractually bound to pay the pilots the rates they have been getting, and efforts to have them voluntarily reduce them haven't gone well.

I'm guessing the Chapter 11 filing is either a threat to get them reduce their wages. I don't know if they actually do file does that nullify the contract, and thus they are able to pay them almost anything they want.

Jeff

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Dovster:
It saved pennies by cutting back on SkyMiles and lost a number of large passengers.</font>

Just who you callin' large, Dovster? http://www.flyertalk.com/forum/smile.gif

Sounds like another round of retention bonuses for the executives is in order. http://www.flyertalk.com/forum/rolleyes.gif

Did Leo get an anal retentive bonus?

(Or, as was more fitting, did he get a bonus to leave?)

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Dovster:
Did Leo get an anal retentive bonus?</font>

No, his bonus will be delayed to the point where it is in arrears.

the hint of the bankruptcy filing is basically a warning shot to the pilots / negotiating tactic

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by EchoVictor:
the hint of the bankruptcy filing is basically a warning shot to the pilots / negotiating tactic</font>

Exactly right!!!

Delta needs the leverage or the union will drag negotiations out forever. DL needs the threat of Chapter 11; it’s the only thing that trumps the strike card.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Dovster:
Did Leo get an anal retentive bonus?

(Or, as was more fitting, did he get a bonus to leave?)</font>

Did you say Leo got an enema??

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by BertBamboo:
Exactly right!!!

Delta needs the leverage or the union will drag negotiations out forever. DL needs the threat of Chapter 11; it’s the only thing that trumps the strike card.</font>

While DL may be a huge airline, the pilots still know the difference between a threat to file BR and the willingness of the management to go through with it. If it is only a threat, DL is done. DL needs to begin the filing process and let the pilots do all they can to stop BR from actually happening.

Edited as when I read what I typed with an Irish accent, it was not polite but not intended to be that way.

[This message has been edited by JRF (edited Jan 16, 2004).]

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by mikey1003:
Did you say Leo got an enema??</font>

It is very possible -- he certainly crapped on both Delta and its passengers.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by JRF:
While DL may be a huge airline, the pilots still know the difference between a threat to file BR and the willingness of the management to go through with it. If it is only a threat, DL is done. DL needs to begin the filing process and let the pilots do all they can to stop BR from actually happening.

Edited as when I read what I typed with an Irish accent, it was not polite but not intended to be that way.

[This message has been edited by JRF (edited Jan 16, 2004).]</font>

As an employee of DAL, I don't think it is a reach at all that we may end up in Chap. 11 to shed our huge debt load. We are falling behind the rest of the airlines in stock price and if we don't reverse course soon, BK is where we will be. You can not service 20b in debt with costs that are out of whack.

The pilot's pension fund is a very large debt burden on Delta's books. Under Chapter 11, the pension fund can be eliminated and the pilots would get zilch!

This is a huge hammer to hold over the head of Delta's ALPA pilots.

Just ask the US Air pilots.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Vikedog64:
As an employee of DAL, I don't think it is a reach at all that we may end up in Chap. 11 to shed our huge debt load. We are falling behind the rest of the airlines in stock price and if we don't reverse course soon, BK is where we will be. You can not service 20b in debt with costs that are out of whack. </font>

The stock price is not a direct factor, although it does play a role in some areas. Remember, a stock price is not always reflective of how well the company is doing.

However, I agree, it is not a far fetch that BR could be in hand... although I would like all those DL can do no wrong to chime in here and give us something to debate.

All I can say is "Its about time the Board of Directors woke up!!!!"

I guarantee you the Gerald regrets leaving Leo in his position during late 2002 and all of 2003.

Leo has destroyed Delta Airlines!!! For all those who think is the greatest. You are either too ignorant to see the forest for the trees or simply in love with his poison kool-aid.

The man has finally proved he cant run nothing but maybe Wachovia or Bank of America. Thats it!!!

The pilots had no reason whatsoever to take a pay cut thanks to his shenanigans. Unfortunately, he has taken his totally protected, fully funded pension and flies off into the sunset while Gerald and the employees are left to pick up the pieces.

The pilots now have no reason to delay. They must reduce their pay and NOW!!! The games are over!!!

As a Delta stockholder I am very displeased with the performance of the Board over the last 3 years and it seems they are finally wakening up. If not, they will probably see a lawsuit against them for failing to adhere to their corporate responsibilities. This would be on a personal level as well.

The debt to equity ratio is out of control and every other major has gotten their costs somewhat in check. Deltas is totaly out of whack. This accompanied with the growing threat of AirTran in the home base spells one thing "TROUBLE" and I mean big.

Folks, it does not take a havard grad or a very intelligent person to tell that Delta is in dire straits. I could care less how much cash is one hand. They are burning through it like wildfire and their competitors are either making money or at least treading water. This is an awful position to be in even with a improving economy.

If the pilots do not take at least a 25% pay cut within the next 6 or so months, Delta will be filing for Chapter 11.

Gerald needs to get off his ... and get an agreement with the pilots that includes major profit sharing with the group in exchange for the pay cut. I truly believe they have a chance of making at least 75% off the cut back if they do what I would do.

Truly sad times and unfortunately all brought on by a Board of Directors being blindly led by a con artist that was an amatuer in the industry.

Oh how, Mr. Woolman must feel....

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by ChuckEss:
Under Chapter 11, the pension fund can be eliminated and the pilots would get zilch!</font>

I'm not familiar with labor laws (hence the posting), but in this case, would the pilots have no recourse? Wouldn't airlines be filing Chapter 11 left and right to get what they want whenever negotiations get tough?

Elektrik &lt;- a labor newbie (what happens when you're a student this long)

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by elektrik:
I'm not familiar with labor laws (hence the posting), but in this case, would the pilots have no recourse? Wouldn't airlines be filing Chapter 11 left and right to get what they want whenever negotiations get tough?

</font>

elekrik,

Don't know all of the gory legal details. But USAir did do away with the pilots pension plan with the court's permission. Here's a link with some info:

http://www.post-gazette.com/businessnews/20030131usairwaysbiz1p1.asp

Look at what United is trying to do the the pilot's retiree medical plan. . . . .

Anybody have an idea what happens to the outstanding FF mileage liability under a Chapter 11 filing? I haven't closely followed the proceedings of UA and US. I assume the liability remains intact under Chapter 11 and the only way miles are in danger are under Chapter 7 or one of the other exotic BK Chapters where they turn out the lights and everybody goes home.
Not that I expect that to happen anytime soon.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Cholula:
Anybody have an idea what happens to the outstanding FF mileage liability under a Chapter 11 filing? </font>

I don't think it matters. Delta, even without Chapter 11, can dilute the value of SkyMiles to make them virtually worthless for a six month period and then abolish them completely.

Delta may also limit the seats available for Award Travel to any or all destinations (including, but not limited to, allocating no Award seats on certain flights). Such changes to Delta’s frequent flyer program may include modifications that (i) govern mileage credits or other benefits earned on or after the date of change, (ii) change the value of already accumulated mileage credits or other benefits or (iii) govern mileage credits or other benefits earned on or after the date of change and change the value of already accumulated mileage credits. Delta reserves the right to terminate the Delta frequent flyer program with six months’ notice. Unless otherwise stated, the terms and conditions of the program’s current Membership Guide and Program Rules govern the program and any benefit associated with the program.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Dovster:
I don't think it matters. Delta, even without Chapter 11, can dilute the value of SkyMiles to make them virtually worthless for a six month period and then abolish them completely.

......Delta reserves the right to terminate the Delta frequent flyer program with six months’ notice........</font>

This is true and I suppose all the airlines have similar disclaimers in their rules. The chance of that ever happening is, IMO, probably non-existent. I don't care what kind of verbiage they have in the rules, if any airline ever tried that, their FF's would rip the place down brick by brick and lawsuits by the thousands would start flying.
Plus, with all the problems facing DL today, their SM's liability probably ranks fairly low. As you stated, they can and have cranked up the capacity controls on these and effectively make them worthless for those who don't have extreme flexibility in using them.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Cholula:
The chance of that ever happening is, IMO, probably non-existent.
</font>

I agree, but would go further. Even under Chapter 11 I doubt that any airline would refuse to honor FF miles. It would mean the end of any possibility of that airline ever having any frequent flyer travelling with it again.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Dovster:
I agree, but would go further. Even under Chapter 11 I doubt that any airline would refuse to honor FF miles. It would mean the end of any possibility of that airline ever having any frequent flyer travelling with it again.</font>

I thought that was just what Leo was trying to do? http://www.flyertalk.com/forum/wink.gif

Re the pilot's contract.... is there one among us that wasn't gratified that the airline and the DALPA reached the agreement in May 2001, thus preventing a pilot's strike? Sure seems like a long time ago, doesn't it?

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by milemaker:
All I can say is "Its about time the Board of Directors woke up!!!!"

I guarantee you the Gerald regrets leaving Leo in his position during late 2002 and all of 2003.

Leo has destroyed Delta Airlines!!! For all those who think is the greatest. You are either too ignorant to see the forest for the trees or simply in love with his poison kool-aid.

The man has finally proved he cant run nothing but maybe Wachovia or Bank of America. Thats it!!!

The pilots had no reason whatsoever to take a pay cut thanks to his shenanigans. Unfortunately, he has taken his totally protected, fully funded pension and flies off into the sunset while Gerald and the employees are left to pick up the pieces.

The pilots now have no reason to delay. They must reduce their pay and NOW!!! The games are over!!!

As a Delta stockholder I am very displeased with the performance of the Board over the last 3 years and it seems they are finally wakening up. If not, they will probably see a lawsuit against them for failing to adhere to their corporate responsibilities. This would be on a personal level as well.

The debt to equity ratio is out of control and every other major has gotten their costs somewhat in check. Deltas is totaly out of whack. This accompanied with the growing threat of AirTran in the home base spells one thing "TROUBLE" and I mean big.

Folks, it does not take a havard grad or a very intelligent person to tell that Delta is in dire straits. I could care less how much cash is one hand. They are burning through it like wildfire and their competitors are either making money or at least treading water. This is an awful position to be in even with a improving economy.

If the pilots do not take at least a 25% pay cut within the next 6 or so months, Delta will be filing for Chapter 11.

Gerald needs to get off his ... and get an agreement with the pilots that includes major profit sharing with the group in exchange for the pay cut. I truly believe they have a chance of making at least 75% off the cut back if they do what I would do.

Truly sad times and unfortunately all brought on by a Board of Directors being blindly led by a con artist that was an amatuer in the industry.

Oh how, Mr. Woolman must feel....</font>

Amen!!!

It is a ploy to get Pilots to lower wages AGAIN. When Leo the looser was thinking about filing ch 11 before he could not for the same reason Delta didn't qualify for government loans. They have planes that are paid off that they could get secured loans on.
The government is in tough problems since the agency that insures employee pension plans knows that companies have underfunded the plans. This means the US Taxpayer will bail out the programs just like we bailed out the banks in the late 1980s and banks are now profitable and have paid back ZERO to the taxpayer.

Delta has a tough sell to employees that see upper management being rewarded with bonus after bonus for managing a company into bankruptsy especially when they are being forced to take the cuts.

It is interesting that some European arelines have turned a profit and are using LARGE planes on short routes to cut down on Air Traffic Delays. We seem to be adding
planes by going regional jet crazy. I thought there was supposed to be a large group of Air Traffic Controllers coming up on retirement ?

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by billhar:
It is a ploy to get Pilots to lower wages AGAIN. When Leo the looser was thinking about filing ch 11 before he could not for the same reason Delta didn't qualify for government loans. They have planes that are paid off that they could get secured loans on.
The government is in tough problems since the agency that insures employee pension plans knows that companies have underfunded the plans. This means the US Taxpayer will bail out the programs just like we bailed out the banks in the late 1980s and banks are now profitable and have paid back ZERO to the taxpayer.

Delta has a tough sell to employees that see upper management being rewarded with bonus after bonus for managing a company into bankruptsy especially when they are being forced to take the cuts.

It is interesting that some European arelines have turned a profit and are using LARGE planes on short routes to cut down on Air Traffic Delays. We seem to be adding
planes by going regional jet crazy. I thought there was supposed to be a large group of Air Traffic Controllers coming up on retirement ?</font>

Alot of what you say is true, but DAL has almost 21B in debt and revenue is not keeping up. Reducing pilot pay is only one part of our profit improvement plan, albeit a big part. What good is it going to do DAL if we start adding more widebody flights at pay scales that are head and shoulders above any other major? There is not a he** of a lot of wiggle roomfor us anymore. We have 2.7 b of unrestricted cash. That is nothing for a company our size. Within 6 months without a pilot agreement, I predict we will file Chap. 11. The 9% pay reduction ALPA offered is nothing more than a joke. It doesn't even cover the raises they got the last 2 years. I too was disgusted by the mgnt bonuses and such, but to to continue to point fingers at each other will do no good. It is time for ALL employees and all management levels to do what we must to ensure a solid future for this company. Thanks for letting me vent..

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Vikedog64:
Alot of what you say is true, but DAL has almost 21B in debt and revenue is not keeping up. Reducing pilot pay is only one part of our profit improvement plan, albeit a big part. What good is it going to do DAL if we start adding more widebody flights at pay scales that are head and shoulders above any other major? There is not a he** of a lot of wiggle roomfor us anymore. We have 2.7 b of unrestricted cash. That is nothing for a company our size. Within 6 months without a pilot agreement, I predict we will file Chap. 11. The 9% pay reduction ALPA offered is nothing more than a joke. It doesn't even cover the raises they got the last 2 years. I too was disgusted by the mgnt bonuses and such, but to to continue to point fingers at each other will do no good. It is time for ALL employees and all management levels to do what we must to ensure a solid future for this company. Thanks for letting me vent..</font>


Vikedog, what do you do at Delta?

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Traveller:

Vikedog, what do you do at Delta?</font>

Flight attendent for 19 years including 2 with Western Airlines.

As a past DL flyer and hopefully never again, I will be actually happy to see Delta in chapter 7 instead of 11.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by mlibers:
As a past DL flyer and hopefully never again, I will be actually happy to see Delta in chapter 7 instead of 11.</font>

I assume that you say this because of the FF changes. Don't be surprised if the changes are reversed with the new leadership. I have no facts on the matter, just an opinion. I wonder why you would wish for any company to file Chap 7? Are you that important to not give a crap about all of the people it would affect?

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Vikedog64:
Flight attendent for 19 years including 2 with Western Airlines. </font>

It must be very hard to do your jobs these days, but you all come thru with flying colors! Thanks for all you do to make flying enjoyable for me!!

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Traveller:
It must be very hard to do your jobs these days, but you all come thru with flying colors! Thanks for all you do to make flying enjoyable for me!!</font>

Thanks for the kind words. The job is different than it used to be. Many of our days are 10-14 hrs long but we don't serve as much food as we did. Doesn't everyone in every business work long days? The only stressful aspect ,in my opinion is the terrorist threats. Real or not, it is always there. I do have a business that I have owned for 9 years so I do appreciate Delta much more than I used to.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Vikedog64:
I assume that you say this because of the FF changes. Don't be surprised if the changes are reversed with the new leadership. I have no facts on the matter, just an opinion. I wonder why you would wish for any company to file Chap 7? Are you that important to not give a crap about all of the people it would affect? </font>

Yes, you hit the nail on the head, skymiles or DL miles should change as management too.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by mlibers:
As a past DL flyer and hopefully never again, I will be actually happy to see Delta in chapter 7 instead of 11.</font>

Not me.

I am no longer paying $$$ to fly Delta and I hope their management is fired with a vengance.

However, their employees have always been and still are top-notch. I don't want to see them on the street because of their idiot bosses.

Additionally, the loss of any airline will likely result in higher prices due to less competition.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by mlibers:
As a past DL flyer and hopefully never again, I will be actually happy to see Delta in chapter 7 instead of 11.</font>

That's wonderful.....

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by mlibers:
As a past DL flyer and hopefully never again, I will be actually happy to see Delta in chapter 7 instead of 11.</font>

As much as I think DL management sucks, this is ridiculous. Too many good people work for DL.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by mlibers:
As a past DL flyer and hopefully never again, I will be actually happy to see Delta in chapter 7 instead of 11.</font>

Nonsense! There are plenty of companies out there (travel related and otherwise) that I won't support for a variety of real or perceived offenses, but I don't wish Chapter 7 on any them! DL has thousands of great employees, many of whom have bent over backwards to help me through the years, all of whom would become jobless if DL folded.

IMHO, I don't forsee a Chapter 7 in DL's future, but I can't rule out a reorganization filing if they can't reign in their costs any other way.

[This message has been edited by DLfan (edited Jan 18, 2004).]

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by mlibers:
As a past DL flyer and hopefully never again, I will be actually happy to see Delta in chapter 7 instead of 11.</font>

I just decided on a whim for this to be the sixth post (fifth in a consecutive row) to quote the above quote.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Vikedog64:
Alot of what you say is true, but DAL has almost 21B in debt and revenue is not keeping up. Reducing pilot pay is only one part of our profit improvement plan, albeit a big part. What good is it going to do DAL if we start adding more widebody flights at pay scales that are head and shoulders above any other major? There is not a he** of a lot of wiggle roomfor us anymore. We have 2.7 b of unrestricted cash. That is nothing for a company our size. Within 6 months without a pilot agreement, I predict we will file Chap. 11. The 9% pay reduction ALPA offered is nothing more than a joke. It doesn't even cover the raises they got the last 2 years. .</font>

I'm certain that only a credible brush with Ch 11 will exact a workable deal from DALPA; I am not certain that such a brush is feasible soon.

The problems at DL are most insidious-- performance is bad, but not likely bad enough to drive the company to the brink anytime soon. True, large accounting losses are not infinitely sustainable. And, while $2.7bn in cash indeed is not such a large amount, the fine print in the 8-K filing reveals that it is not dwindling very quickly:

LIQUIDITY AND FINANCING TRANSACTIONS

At Dec. 31, 2003, Delta had $2.9 billion in cash, of which $2.7 billion was unrestricted. For the December 2003 quarter, Delta had positive cash flow from operations of $82 million and non-fleet capital expenditures of $125 million, resulting in a cash burn for the quarter. [of $43m]

With cash flow from operations being positive, even in a weakish quarter, DL is not deteriorating quickly enough for Ch 11 to loom. Their cash flow position should improve as Spring and Summer arrive.

Could that change? yes. The fundamental weakness of DL's uncompetitive contract with DALPA is enhanced vulnerability to competitors who at some point may think they can bleed it dry-- and if their relative cost position is low enough, they will be able to at the appropriate pricing points.

Unfortunately, for the moment that kind of damage is prospective only, and likely not enough to make for a credible Ch11 filing, nor enough to get any realistic outcome from DALPA. They remain having almost no incentive to do anything but prolooooong their status quo and drain as much of DAL's $2.9bn in cash from the bank into their coffers as possible.

[This message has been edited by martin33 (edited Jan 18, 2004).]

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by martin33:
I'm certain that only a credible brush with Ch 11 will exact a workable deal from DALPA; I am not certain that such a brush is feasible soon.

The problems at DL are most insidious-- performance is bad, but not likely bad enough to drive the company to the brink anytime soon. True, large accounting losses are not infinitely sustainable. And, while $2.7bn in cash indeed is not such a large amount, the fine print in the 8-K filing reveals that it is not dwindling very quickly:

LIQUIDITY AND FINANCING TRANSACTIONS

At Dec. 31, 2003, Delta had $2.9 billion in cash, of which $2.7 billion was unrestricted. For the December 2003 quarter, Delta had positive cash flow from operations of $82 million and non-fleet capital expenditures of $125 million, resulting in a cash burn for the quarter. [of $43m]

With cash flow from operations being positive, even in a weakish quarter, DL is not deteriorating quickly enough for Ch 11 to loom. Their cash flow position should improve as Spring and Summer arrive.

Could that change? yes. The fundamental weakness of DL's uncompetitive contract with DALPA is enhanced vulnerability to competitors who at some point may think they can bleed it dry-- and if their relative cost position is low enough, they will be able to at the appropriate pricing points.

Unfortunately, for the moment that kind of damage is prospective only, and likely not enough to make for a credible Ch11 filing, nor enough to get any realistic outcome from DALPA. They remain having almost no incentive to do anything but prolooooong their status quo and drain as much of DAL's $2.9bn in cash from the bank into their coffers as possible.

[This message has been edited by martin33 (edited Jan 18, 2004).]</font>

Thanks for the imput! I too read the same numbers that you did. The real problem are the big debt payments due the next two years..

It is funny-my company has had a contract with DL for years. Before the SM changes our travelers used to screem if they had to ride another airline other than DL.

Now they are having trouble meeting the volume attached to the contract as the business travelers are demanding other carriers as they have cut new deals.

My guess is that we are not a lone ranger in that regard.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by mlibers:
As a past DL flyer and hopefully never again, I will be actually happy to see Delta in chapter 7 instead of 11.</font>

Moreover, we'd miss that much-anticipated Crow Banquet that the SkyPiles management will be likely attending... http://www.flyertalk.com/forum/biggrin.gif

Anytime there is less competition is just bad news for the consumer. Don't you think all the other major airlines would be licking their chops thinking, "Delta is no longer here and since the consumer has one less option we can provide less for a higher cost" Especially in many of Delta's smaller markets..

Delta's not going out of business anytime soon. I think cooler heads would prevail before that happened.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Spiff:
Moreover, we'd miss that much-anticipated Crow Banquet that the SkyPiles management will be likely attending... http://www.flyertalk.com/forum/biggrin.gif</font>

Considering Delta's revenue trends, I don't anticipate a crow banquet for the SkyMiles folks anytime soon.

Since UA has continued operations during very difficult times, I am confident in DL continuing for a long long time. I ought to shed some of those miles, though.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by N866DA:
Considering Delta's revenue trends, I don't anticipate a crow banquet for the SkyMiles folks anytime soon.</font>

Did I miss something, is DL heading towards being profitable? All is well, the light is on at the end of the tunnel? The pilots are going to work for free, all the FF are going to give back their miles, Boeing will start making 757s again for song.... ?

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by mlibers:
As a past DL flyer and hopefully never again, I will be actually happy to see Delta in chapter 7 instead of 11.</font>

It’s been at least nine hours since someone last used the above quote for a statement so thought I’d give it a little bump.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by JRF:
Did I miss something, is DL heading towards being profitable? All is well, the light is on at the end of the tunnel? The pilots are going to work for free, all the FF are going to give back their miles, Boeing will start making 757s again for song.... ?

</font>

Given your well documented opinions, I think it's safe to say I (and most analysts) am probably more optimistic about Delta's future than you are.

That aside, Delta's current and forseeable troubles are as a result of costs, not depressed revenues or SkyMiles.

So any blame of SkyMiles--excuse me, SkyPiles--for the current situation is misguided. That is the issue I was addressing in my post above.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by JPoor007:
Delta's not going out of business anytime soon. I think cooler heads would prevail before that happened. </font>

When I was growing up in New York, we had the Times, Post, Daily News, Herald Tribune, World Telegraph and Brooklyn Eagle.

The last three disappeared because the Printers Union refused to cut back on their demands, forcing the newspapers out of work (and their printers out of jobs.)

Cool heads do not always prevail.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Dovster:
When I was growing up in New York, we had the Times, Post, Daily News, Herald Tribune, World Telegraph and Brooklyn Eagle.

The last three disappeared because the Printers Union refused to cut back on their demands, forcing the newspapers out of work (and their printers out of jobs.)

Cool heads do not always prevail.

</font>

Same with Eastern Airlines!

Surprised no one here remembers mlibers as a troll last year BERATING us all for criticising the SkyMiles changes...

This is a young man with his own problems. Delta is probably well rid of him. Although I rarely fly Delta anymore, my best wishes go with the employees.

If AA is the model, there is a lot of choppy water ahead before the threat of BK makes the pilots rational. Good luck!

------------------
"It was the epoch of belief, it was the epoch of incredulity..."

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by N866DA:
Considering Delta's revenue trends, I don't anticipate a crow banquet for the SkyMiles folks anytime soon.</font>

I don't think these changes can be ruled out as to the reason people aren't giving Delta the revenue it needs to stay alive.

Delta posted the worst results of the majors. I have a feeling at the Freddies, DL and CO are going to get hammered on their programs.

Time will tell. http://www.flyertalk.com/forum/smile.gif

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Spiff:
I don't think these changes can be ruled out as to the reason people aren't giving Delta the revenue it needs to stay alive.

Delta posted the worst results of the majors. I have a feeling at the Freddies, DL and CO are going to get hammered on their programs.

Time will tell. http://www.flyertalk.com/forum/smile.gif</font>

Spiff.... Time will indeed tell, but Delta's customers are giving Delta better RASM and yields than AMR or UAL are getting from their customers.

All I'm saying is that Delta's problems are in other areas (costs) and that the argument so many people have made that SkyMiles is somehow responsible for revenue loss or lagging revenue simply is not supported by the numbers.

Just presenting a differing view.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by N866DA:
Spiff.... Time will indeed tell, but Delta's customers are giving Delta better RASM and yields than AMR or UAL are getting from their customers.

All I'm saying is that Delta's problems are in other areas (costs) and that the argument so many people have made that SkyMiles is somehow responsible for revenue loss or lagging revenue simply is not supported by the numbers.
</font>

While there certainly wasn't a SM-induced collapse in DL revenue, the relative trends in their favor did indeed reverse as the Day of Change drew near...

Although the DL passenger RASM is still a bit higher in absolute terms than AA (9 versus 8.7 cents), fourth quarter numbers show AA having a 6.1% increase in passenger RASM over the year earlier, versus a 4.6% increase for DL. Yield per passenger mile was also up slightly more at AA (3.5%) than at DL (2.5%) in Q42003. And, counting up all the dollars from all passengers, Total passenger revenue: up 4.6% at AMR (incl Eagle, or 3.9% AA mainline) versus up 2.6% at DL.

At the least, those numbers do not support the DL mgmt "official line", pre-Leodeparture, that the new SM was bringing high-$$ customers in in droves...

Given all that cash on hand, why would the pilots cut a deal? If you are them, why would you not just maintain your pay and drain that cash into your own pockets, and only when it is gone, cut a deal. I don't see how it makes sense for them to cut a deal while there is cash on hand to siphon.

Given this, I don't see why the Board doesn't vote for a one time major dividend payout to shareholders to drain that cash into the more deserving pockets, and then walk up to the pilots' union and ask them if they'd like to still have an airline to fly with and seniority to maintain.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Owen:

Given this, I don't see why the Board doesn't vote for a one time major dividend payout to shareholders to drain that cash into the more deserving pockets, and then walk up to the pilots' union</font>

that's an intriguing idea. the roadblocks would be, potentially: dividend-restricting covenants on existing debt, and/or maintaining future credibility with the credit markets. The latter might be a non-issue if the alternative is simply a DALPA-siphoning instead..

When looking at RASMs (or any other ratio for that matter) and comparing them you have to actually break out the numerator and denominator so that you can actually determine what (in each carrier's case) is driving the RASM change.

Is it that Revenue is improving or that ASMs are declining? Or some combination of both?

Also, you can't just say costs are the problem without considering why costs are a problem. It is not just the pilots wages, it is the fact that the major carrier's have next to no pricing power at present.

The SkyMiles changes (the repricing of SMUs in particular) was Delta's backhanded attempt at pricing power with its best customers. Indisputably, the attempt failed as they will now derive absolute zero revenue from domestic upgrades.