Delta's Hiring Freeze and Q4 Loss

[meritflyer]

Taken from another forum:

From another forum:

Airline tightens belt to offset fuel prices

By RUSSELL GRANTHAM
The Atlanta Journal-Constitution

Published on: 12/04/07

Delta Air Lines plans some job cuts, a partial hiring freeze, fleet reductions and other steps to cut capacity in response to high fuel costs, the carrier's president said Tuesday.

Delta President Ed Bastian said the carrier has set a "$400 million productivity target" for next year to offset jet fuel costs that have soared in tandem with near-record crude oil prices, which reached almost $100 a barrel in recent weeks.

"We are pulling down domestic supply considerably," Bastian said during a Web cast of an investors conference.

In updated guidance to investors, Bastian said Delta now expects its operating profit margins in the final three months of the year to be flat or down 2 percent as a result of high fuel prices. The carrier had earlier projected operating margins of 3 percent to 5 percent in the fourth quarter.

The revised estimate means Delta will likely report a loss in the fourth quarter.

This year, airlines had been rebounding after years of losses as Delta and other carriers emerged from bankruptcy reorganizations with much leaner operations.

But Bastian said Delta is once again taking cost-cutting measures such as freezing new hires in "non-public-facing" job categories and targeting some unspecified positions for cuts. It is also parking aircraft and reducing its marketing budget in the face of a steep rise in fuel costs, its largest expense.

Delta now expects its average fuel price in the final three months of the year to be $2.60 per gallon, about 13 percent higher than previous projections. Jet fuel is Delta's largest expense.

Bastian said the carrier plans to freeze staff jobs that don't deal directly with customers. He said Delta has also "targeted some job cuts" but didn't offer specifics.

He said Delta has returned seven leased mainline jets and six smaller regional jets to reduce flying in the United States, and will cut 45 more jets next year.

"We'll take further steps to reduce supply" if fuel prices don't "stabilize," he said.

The carrier has more than 400 mainline jets in its fleet.

The reductions in Delta's domestic flying continue a strategy the airline has relied on during much of its turnaround efforts, as the growing competition from discount carriers has made many U.S. routes unprofitable for big network carriers.

Bastian said Delta will continue growing its more profitable overseas flying next year, where it is better able to pass higher fuel costs on to customers.

[Hootie]

Jeepers, that's unexpected.

[tprops4me]

Good luck everyone. I like how they say they are not saying which jobs will be cut, but at the same time say that they are parking aircraft. Duh!! I guess those displaced flight crews will just get to sit around the office and get payed. I wish they would quit screwing with pilots. I mean they are only the most vital factor in the whole operation. I'm going to bed. Too tired to think about this.

[aloft]

Does he really think he can raise prices by reducing supply? Or is he simply doing something for the sake of doing something as the new CEO, hoping for a spike in share price? Either way, what an idiot.

[wheelsup]

UAL said the same thing. I think they are some of the first of many.

[SkyCougar]

Originally Posted by aloft

Does he really think he can raise prices by reducing supply? Or is he simply doing something for the sake of doing something as the new CEO, hoping for a spike in share price? Either way, what an idiot.

I think they're just reducing domestic supply and putting their eggs in the international basket, because didn't they just order something like 18 - 777's?

[Ralgha]

Originally Posted by aloft

Does he really think he can raise prices by reducing supply? Or is he simply doing something for the sake of doing something as the new CEO, hoping for a spike in share price? Either way, what an idiot.

If you reduce the supply that is losing money, then yeah, it'll probably have a positive effect on the company as a whole.

[BobDDuck]

It's interesting. Out of the 6 big carriers, only US is making money domestically. The other 5 are making big bucks internationally and subsidizing their domestic operations with that income.

[Maximillian_Jenius]

all I read is more big planes for international, and more contract help for domestic!

Doh...

It's starting now, the majors will soon be international only, with contract domestic feed.

Just like in europe, lets say hello to the new slave class of airline pilots, if true!

[wheelsup]

Originally Posted by BobDDuck

It's interesting. Out of the 6 big carriers, only US is making money domestically. The other 5 are making big bucks internationally and subsidizing their domestic operations with that income.

That's pretty neat, I hope it continues, I've believed in DP from day 1 so hopefully he can keep this up! Airline management has a way of getting too cocky though, reference America West's 747's to Hawaii...

[B767Driver]

Originally Posted by Maximillian_Jenius

all I read is more big planes for international, and more contract help for domestic!

Doh...

It's starting now, the majors will soon be international only, with contract domestic feed.

Just like in europe, lets say hello to the new slave class of airline pilots, if true!

True.

Also, what do you do before a merger? Get ready!

[B767Driver]

Still hiring pilots and gate agents next year, from what I hear.

[777forever]

Originally Posted by Maximillian_Jenius

all I read is more big planes for international, and more contract help for domestic!

Doh...

It's starting now, the majors will soon be international only, with contract domestic feed.

Just like in europe, lets say hello to the new slave class of airline pilots, if true!

International routes are way more profitable as the Legacies don't have to deal with Jetblue, Virgin America, Skybus etc. Its getting bad out there because of the LCCs. Too much competition causing all the airlines to fly for ridiculously low yields. I forecast lots of consolidation in the future. I think Delta will merge with Northwest. I think Q400s and ATR-600s are coming to the US regional market. Kiss 50 seat RJs goodbye. I also think at least one of these LCCs are going to implode, which might not be such a bad thing

[meritflyer]

Originally Posted by 777forever

I think Q400s and ATR-600s are coming to the US regional market. Kiss 50 seat RJs goodbye.

You're just biased.

[CFIse]

Originally Posted by BobDDuck

It's interesting. Out of the 6 big carriers, only US is making money domestically. The other 5 are making big bucks internationally and subsidizing their domestic operations with that income.

Well yeh, sort of. The legacies don't actually fly international from Des Moines for example, yet I'm sure there are some passengers from Des Moines who want to fly internationally. So those passengers fly domestic to get to a location where they can fly internationally. So while the legacies may well skew the numbers so that they can say that they make money internationally while losing money domestically, without the domestic network they wouldn't have the passengers to fly internationally, so international wouldn't be so profitable - or frankly even exist.

[CFIse]

Originally Posted by Maximillian_Jenius

all I read is more big planes for international, and more contract help for domestic!

Doh...

It's starting now, the majors will soon be international only, with contract domestic feed.

Just like in europe, lets say hello to the new slave class of airline pilots, if true!

True that!

If domestic is not profitable then it has to be lower cost, and fuel ain't going down anytime soon, so labor here we come. Which means either mainline pilots gotta give it up again for the good of the company or they're going to hit the streets while the regionals fight over the work, all the while driving their pilots further into poverty.

Someone, somewhere, someday, is going to say "screw ALPA, let's take the fight on" and drive a bus right through scope limitations and outsource 737-size flying - and then we'll see if ALPA has the balls to fight it - RLA or no RLA, government order to fly or be jailed be damned!

That will be a sad day for pilots - but I see it coming.

[Cptnchia]

You guys need to calm down. First, Bastain is the CFO not CEO, second, these cuts were previously announced, nothing new. The freezes and cuts are from non-contact employees, ie back office. Thirdly, the cuts in domestic flying are from transferring 10 more mainline aircraft to international, which will require more pilots, and parking 35 RJs, which bites for the regional guys.

All the carriers will be facing this, I think though that this next round of concessions will be played out at the regional level. There are so many players there, that the whipsaw will be humongous.

[B767Driver]

Originally Posted by CFIse

. Which means either mainline pilots gotta give it up again for the good of the company or they're going to hit the streets while the regionals fight over the work, all the while driving their pilots further into poverty.

.

I'm at my minimums, compensationwise, for flying a jumbo jet. Any more cuts and you commuter guys can have my seat. Sadly, I'm sure there would be thousands of takers.

[Hootie]

Originally Posted by Cptnchia

I think though that this next round of concessions will be played out at the regional level.

There is no where else to go but up, so since there are no concessions to give, I doubt that can happen.

[PGT]

Originally Posted by CFIse

Well yeh, sort of. The legacies don't actually fly international from Des Moines for example, yet I'm sure there are some passengers from Des Moines who want to fly internationally. So those passengers fly domestic to get to a location where they can fly internationally. So while the legacies may well skew the numbers so that they can say that they make money internationally while losing money domestically, without the domestic network they wouldn't have the passengers to fly internationally, so international wouldn't be so profitable - or frankly even exist.

What's wrong with Des Moines?

True when you think about it. To fly internationally I often have to fly DSM-MSP, ORD, DTW. Same with the tons of other smaller airports that RJ's fly into.

[kellwolf]

Originally Posted by PGT

What's wrong with Des Moines?

Where do I start?

[Cptnchia]

Originally Posted by Hootie

There is no where else to go but up, so since there are no concessions to give, I doubt that can happen.

Wanna bet? All it will take is for a Mesa type operator to undercut another regional and then the pressure is on for paycuts. There will always be someone willing to undercut your pay.

[greaper007]

Originally Posted by Cptnchia

Wanna bet? All it will take is for a Mesa type operator to undercut another regional and then the pressure is on for paycuts. There will always be someone willing to undercut your pay.

I agree. You could even cut first year pay further (gulfstream with RJs or 737s). It could even cost you several thousand dollars for a type rating. They've been doing it in Europe for years. I think the only solution is for us all to get together and meditate and pray for the absolute financial destruction of every low paying jet operator in existence.

[Alchemy]

Originally Posted by Hootie

There is no where else to go but up, so since there are no concessions to give, I doubt that can happen.

Ask Comair, Air Wisconsin and ACA about that.

[Hootie]

If you guys say so, but the way I see it the bottom feeder regionals already can't hire enough 250 hour wonders for 20k a year.