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How Can Delta Be Losing Money?  
User currently offlineNasmal From United States of America, joined Jun 2000, 219 posts, RR: 0
Posted (10 years 3 months 3 weeks 5 days 9 hours ago) and read 4203 times:

I have just flown delta across the country make stops at ATL, MIA, CVG, STL, DFW. I have to say it seems to amaze me how they can be losing money. Ever flight was full and very busy. The thing that amazed me the most is that Delta has tons of widebodies at ATL and I am sure those go out full too as did my ATL-MIA route was. How can they be losing money???? Bad managment? Too many widebodies hence having a lot of pilots being paid widebody salary????? SONG??????????Delta has to be the the number 1 american airline with most passenger service.

35 replies: All unread, showing first 25:
 
User currently offlineNorthwest 777 From United States of America, joined Sep 2000, 224 posts, RR: 0
Reply 1, posted (10 years 3 months 3 weeks 5 days 9 hours ago) and read 4175 times:

Just because a plane is full doesn't mean it is making money, unfortunately. Costs are very high for airlines and with really low fares in a lot of markets, it ends up costing more to transport the passenger then the fare itself. That's not to say they don't have higher yielding, profitable routes though.

User currently offlineAa757first From United States of America, joined Aug 2003, 3350 posts, RR: 8
Reply 2, posted (10 years 3 months 3 weeks 5 days 9 hours ago) and read 4163 times:

Because they are spending more money than they are making. Seriously, however, if it cost $93 to fly each passenger on every flight you were on, but each passenger only paid $87.

AAndrew


User currently offlineWGW2707 From United States of America, joined Aug 2003, 1197 posts, RR: 34
Reply 3, posted (10 years 3 months 3 weeks 5 days 9 hours ago) and read 4149 times:

One word: pilots.

Delta's pilots are by far the best-paid industry. A Delta pilot can expect to earn 100% more than his equally competent counterpart at American Airlines, itself not exactly having the lowest wages... With absurd payscales such as these, the question should be How Can Delta NOT Be Loosing Money?

I would actually doubt that even in a healthy economy with no simplified-structure LCCs and hostile pricewars to contend with Delta's current pilot wages would be unsustainable. I would guess that Delta's currrent wages could only really work in a command economy, like the former USSR...

-WGW2707


User currently offlineJetdeltamsy From United States of America, joined Nov 2000, 2987 posts, RR: 8
Reply 4, posted (10 years 3 months 3 weeks 5 days 9 hours ago) and read 4150 times:

it's simple. the seats are being sold below cost. a full plane equals less of a loss than an empty plane where seats cost twice as much.

it has been said the pilots earn too much.

i worry about my future (again).



Tired of airline bankruptcies....EA/PA/TW and finally DL.
User currently offlineYyz717 From Canada, joined Sep 2001, 16307 posts, RR: 56
Reply 5, posted (10 years 3 months 3 weeks 5 days 9 hours ago) and read 4149 times:

Basically it comes down to unit costs: overpaid & under-productive labour. The DL pilots for instance are the highest paid pilots in the US for every DL aircraft type by a premium of 10-20% over other US legacy carriers.

DL shareholders should be demanding that DL labour costs drop to the AirTran level.






Panam, TWA, Ansett, Eastern.......AC next? Might be good for Canada.
User currently offlineLono From United States of America, joined Apr 2004, 1335 posts, RR: 1
Reply 6, posted (10 years 3 months 3 weeks 5 days 9 hours ago) and read 4140 times:

Better question is.... How did they ever make any money!!!
Look at their history...
some examples....
Absorbing WA back in the 80's.... gaining many cities... only to give them up to Skywest
Absorbing (some say they killed PanAm).. and they did nothing with that investment...
Failed hubs in PDX, LAX, DFW, MCO, BOS, AB) (FRA / FRF / EDDF), Germany">FRA....
How could they not make money in the orient.... all the orient cities they used to fly to... and even the cities in Europe... all given up...
Spending millions on hubs and cities only to give it up later....



Wally Bird Ruled the Skys!
User currently offlineDalMD88 From United States of America, joined Jul 2000, 2574 posts, RR: 14
Reply 7, posted (10 years 3 months 3 weeks 5 days 9 hours ago) and read 4097 times:

Besides our low yield which has been destroyed by other airlines our debt is very high right now. We extened out all the credit we could get after 9/11 so we would have cash to weather the storm and to avoid Chapt 11 like UsAirways and UAL. The storm has out lasted our cash. The passengers are back, but they now all demand travel at sub Greyhound prices. Even if our pilots worked for free we would still not make money at these fares.

User currently offlineDeltaGuy From , joined Dec 1969, posts, RR:
Reply 8, posted (10 years 3 months 3 weeks 5 days 7 hours ago) and read 4030 times:

Well said DalMD88....I don't think enough people grasp your last point...but instead look to point fingers first.

Any word on when BK is *supposed* to hit?  Sad

DeltaGuy


User currently offlineRwylie77 From United Kingdom, joined May 2004, 367 posts, RR: 2
Reply 9, posted (10 years 3 months 3 weeks 5 days 6 hours ago) and read 3987 times:

Why don't Delta just fire all their pilots then who refuse to take a 50% paycut? There must be loads of unemployed pilots out there who would work for a reasonable salary?

If you look in Europe at EasyJet and Ryanair, they manage to carry passengers for free (Yes Free - they give the first ten or so tickets away for free on some flights, you just have to pay the tax) and still make a profit. Maybe some airlines such as Delta, US Airways and United should just close down and start again from scratch with a lower cost base. Bailing them out all of the time just doesn't seem to be working...ok there are factors such as high fuel prices to contend with which are not helping, but even before 9-11 a lot of the American airlines seemed to be struggling. Open up the skies to a free market and let market forces operate - it has worked in every other market on this planet.


User currently offlineBostonguy From United States of America, joined Jul 2000, 514 posts, RR: 8
Reply 10, posted (10 years 3 months 3 weeks 5 days 5 hours ago) and read 3948 times:

Besides our low yield which has been destroyed by other airlines...

Delta not adapting to a changed marketplace could be another reason. It's easy to blame "other airlines", but if these "other airlines" are making money (and that's the case in many instances) then something is terribly wrong at those airlines who didn't/couldn't act fast enough to adjust.

Even if our pilots worked for free we would still not make money at these fares.

Very sad.


User currently offlineMD-90 From United States of America, joined Jan 2000, 8508 posts, RR: 12
Reply 11, posted (10 years 3 months 3 weeks 5 days 5 hours ago) and read 3939 times:

Absorbing WA back in the 80's.... gaining many cities... only to give them up to Skywest

Surely they make money with the Salt Lake City hub, eh?

Absorbing (some say they killed PanAm).. and they did nothing with that investment...

Pan Am died on its own. Delta even loaned Pan Am what, $100 million that it never got back. And where do you think Delta's shuttle service across the Atlantic via 767 came from? The Pan Am route authorities. Although, in retrospect, R.E.G. Davies believes and Delta admits that they overpaid for Pan Am's Atlantic ops. The PAA name carried a lot of weight even into their dying days.

Failed hubs in PDX, LAX, DFW, MCO, BOS, AB) (AB) (FRA / FRF / EDDF), Germany">FRA / FRF / EDDF), Germany">AB) (FRA / FRF / EDDF), Germany">FRA....

Considering that the German routes that Pan Am flew were subsidized and that Delta couldn't make a profit on them (neither could PAA), why not shut them down and downsize Frankfurt? And if a hub isn't profitable, get rid of it. Delta pioneered hubbing (although I suspect it was sort of an accidental discovery), after all.

How could they not make money in the orient.... all the orient cities they used to fly to... and even the cities in Europe... all given up...

But did they turn a profit?





I do hope that Delta avoids bankruptancy, however.


User currently offlineDeltadude8 From United States of America, joined Feb 2000, 569 posts, RR: 4
Reply 12, posted (10 years 3 months 3 weeks 5 days 2 hours ago) and read 3815 times:

If you were paid millions of dollars to run an airline....and you wanted to make even more...where do you get that money without stealing?

By making other employees in the company take pay cuts and stealing their money....

Word inside DL is that DL is in much better shape then the exec.s cook it to be....DL pilots have the support of over 80% of other employees NOT to take a paycut


User currently offlineFlyPNS1 From United States of America, joined Nov 1999, 6639 posts, RR: 24
Reply 13, posted (10 years 3 months 3 weeks 5 days 2 hours ago) and read 3778 times:

Word inside DL is that DL is in much better shape then the exec.s cook it to be....DL pilots have the support of over 80% of other employees NOT to take a paycut

If this is what the employees truly believe then DL is doomed.

I remember some UA employees who swore the company wasn't that bad off and that mighty UAL would never go Bankrupt........look at them now.




User currently offlineBucky707 From United States of America, joined Aug 2000, 1028 posts, RR: 3
Reply 14, posted (10 years 3 months 3 weeks 5 days 2 hours ago) and read 3780 times:

"Delta's pilots are by far the best-paid industry. A Delta pilot can expect to earn 100% more than his equally competent counterpart at American Airlines, itself not exactly having the lowest wages... With absurd payscales such as these, the question should be How Can Delta NOT Be Loosing Money?"


Are the Delta pilots overpaid relative to the rest of the industry? Sure, and it will change. But statements like this are just pure ignorance. First of all, the AA pilots make 36% less than the Delta pilots. Second, the statement the AA does not exactly have low wages is way off. AA is below all the other majors and below airlines like Frontier, Airtran, Southwest, etc. AA is very low paid right now. Third, the pilots are not the sole reason Delta is loosing money. Even if the Delta pilots were paid the same as the JetBlue pilots, Delta would have still lost money in the last quarter.

Delta has many problems to overcome. Pilot pay is one of them, and it will be addressed. But, it is not the only problem. Unless Delta management is willing to start to make real changes in the way the airline operates, Delta will never make it no matter how little you want to pay the pilots.


User currently offlineBoeingBus From United States of America, joined May 2004, 1597 posts, RR: 18
Reply 15, posted (10 years 3 months 3 weeks 5 days 2 hours ago) and read 3755 times:

There is a reason why United being declined the government loans - it's because they don't really need it...

I wouldn't be surprised that airlines in general are taking advantage of the current economic conditions and purposely make erroneous charges (like writing off old planes, asset values, etc...) for tax reason and to also get labor concessions from its unions.

Recently there was a Reuters or AP article on the fact that Legacy carriers are set to take off - profit wise.... It's all scam to defraud workers and to save money on taxes. Typical 'corporate capitalists' scamming the American public...



Airbus or Boeing - it's all good to me!
User currently offlineSlider From United States of America, joined Feb 2004, 6865 posts, RR: 34
Reply 16, posted (10 years 3 months 3 weeks 5 days 2 hours ago) and read 3719 times:

I can't speak for DL, but I know for CO, every $1 swing in the net crude price results in a $20M incremental cost hit!

In short, the price of fuel now, and where we budgeted for 2004 (which was already hedged a bit and budgeted higher to begin with) is about a $700 MILLION difference...

That's $700M that we might as well just set on fire. CO is about an $11B company, so it's clear to see that $700M is not just chump change.

Adding to this whole thing is something that I've only heard Gordon pound the table about: the fact that the Feds tax 25% of our ticket revenue. In other words, if a customer buys a $200 ticket, $50 of that goes to Washington off the top. INSANE!!!

It's a wonder ANYONE can make money when you add in the factor of labor and other capital costs aboev that. Scary.


User currently offlineAUAE From United States of America, joined Apr 2004, 296 posts, RR: 3
Reply 17, posted (10 years 3 months 3 weeks 5 days 2 hours ago) and read 3695 times:

What the hell are you smoking Deltadude8. Don't ever post figures like that... 80% of employees support not taking a paycut??? Show me the survey! I know I have not been asked through a survey and I damn sure know that 80% of my coworkers do not feel that way. Stealing...oh come on, not even worth addressing this one.

Good posts by everyone else though. When I jet around the system I can't help but to ask the same thing. It is all about costs and revenues. Costs are higher than the revenues right now, and we just can't raise the revenues. To do so would cause a decrease in pax, and it is all just a viscous cycle. Pilot costs are making the news because they are out of whack really bad. But so are other costs, the next worst is fuel (but not a whole lot you can do about that), then our debt load. The Wall Street Journal had a good article today on that. Even with pilot concessions, DL may need bankruptcy just to renogotiate all the debt arrangements. ??(just my personal opinion here!!) And lastly, lets not forget how big DL is. Big means big costs. You don't see Airtran rebuilding Boston terminals. When you fly more than 900 departures in your home city, you need a lot infrastructure to keep it going. All those things add up, and it is not so easy to just get that cost out. DL is not alone in all this either, AA, UA, CO, NW ect all have a hard road ahead.

Shawn



Air transport is just a glorified bus operation. -Michael O'Leary, Ryanair's chief executive
User currently offlineOrd From United States of America, joined Jul 1999, 1384 posts, RR: 1
Reply 18, posted (10 years 3 months 3 weeks 5 days 2 hours ago) and read 3691 times:

"Absorbing (some say they killed PanAm).. and they did nothing with that investment...and even the cities in Europe... all given up..."

Huh? Taking a look at Delta's schedule the Pan Am acquisition is very evident today. Certainly not "given up" as you say. Prior to getting Pan Am's European routes Delta flew to only a handful of European cities, and none from JFK. Now they fly to many times more cities, including 12 nonstop from JFK.

While there were many more routes they acquired to Europe, they were money losers. You don't keep money-losing routes.


User currently offlineN707PA From United States of America, joined Apr 2000, 279 posts, RR: 0
Reply 19, posted (10 years 3 months 3 weeks 5 days 1 hour ago) and read 3652 times:

While there were many more routes they acquired to Europe, they were money losers. You don't keep money-losing routes.

During Leadership 7.5, unprofitable routes were axed. DL used to fly routes such as DTW-LGW and LAX-HKG, but all were axed because they simply didn't make money. I suppose that ATL-STR must be a cash cow.....They've operated that route for years.


User currently offlineSDFOH From United States of America, joined Feb 2004, 74 posts, RR: 0
Reply 20, posted (10 years 3 months 3 weeks 4 days 20 hours ago) and read 3458 times:

One of the things to remember also about DL and ALL other legacy carriers is that even though things look good now, 2 months ago loads where pretty bad. When DL says it is losing money, they do not mean TODAY, they mean as a aggregate whole over the fiscal month/year.

Yes the summer is the money making season for all airlines, but DL was unable to hedge their fuel prices because they are already in debt up to their gills. On am flts from SDF to ATL a MD-88 mat be full with 142 pax, but if weather is even slightly bad then the a/c will leave with 8000 gallons of fuel on board. With no hedging on fuel then DL pays current market price. How many of you Americans out there are swearing every time you fill up your car at 2 bucks a gal (The rest of the world keep out of this  Big grin we know we are spoiled).

So if you just average out the loads over a one year time frame - probably the smallest reasonable amount of time due to seasonal travel differences. You will find that most carriers load factors are not that great especially now with artificially depressed ticket prices.


User currently offlineAlphascan From United States of America, joined Nov 2003, 937 posts, RR: 13
Reply 21, posted (10 years 3 months 3 weeks 4 days 20 hours ago) and read 3391 times:

Nasmal:

Maybe you should think about transferring to UND where they teach you some airline economics along with take-offs and landings. With the tuition you save, you can then pay for a First Class membership to a.net and read the Aviation News. There's an article in there just about every day which answers the question you pose in this thread.

I apologize for the sarcasm but you have a computer, USE IT!



"To he who only has a hammer in his toolbelt, every problem looks like a nail."
User currently offlineScottb From United States of America, joined Jul 2000, 6793 posts, RR: 32
Reply 22, posted (10 years 3 months 3 weeks 4 days 19 hours ago) and read 3315 times:

"Even if our pilots worked for free we would still not make money at these fares."

Well, this may well be true, but if Delta had jetBlue's average labor costs per employee, they WOULD have made an operating profit in the first quarter. Look at it this way: JetBlue spent $77.6 million on labor costs in the first quarter with an average of roughly 5000 full-time equivalent employees (FTE's) -- that works out to $15,500 per employee in the quarter. Delta spent $1.609 billion on labor in the same quarter with roughly 69,900 FTE's -- or $23,000 per employee in the quarter. The differential in labor cost is $7,500 per employee. When you multiply that by 69,900 employees, it works out to over $524 million. Delta's operating loss was $388 million in the quarter. If the employees "worked for free", Delta would have made a billion in the quarter, but no one expects them to work for free.

The problem isn't just with the pilots -- the cuts likely will have to hit all work groups at Delta -- but it's tough to justify (and not fair) to the non-unionized employees why they're taking a pay cut if the pilots are still getting pay increases. Reductions in pilot salaries will also dramatically decrease Delta's expense for contributions to its pilots' pension fund. They've already taken action on the pension cost side for other employee groups by converting their plans into cash balance plans.


User currently offlineStarlionblue From Greenland, joined Feb 2004, 17068 posts, RR: 66
Reply 23, posted (10 years 3 months 3 weeks 4 days 19 hours ago) and read 3303 times:

Why don't Delta just fire all their pilots then who refuse to take a 50% paycut? There must be loads of unemployed pilots out there who would work for a reasonable salary?

1. Contracts. You can't just fire them. This is normally a good thing.
2. Institutional knowledge. DL pilots all know how to work with each other, and know DL procedures. Training lots of new pilots costs money, which DL does not have.
3. Morale. Shot down.
4. Loyalty. Gone. Loyal employees are one of the best assets a company has.

These factors far outweigh the benefits of just "firing them all", even if DL could.



"There are no stupid questions, but there are a lot of inquisitive idiots."
User currently offlineRobsawatsky From Canada, joined Dec 2003, 597 posts, RR: 0
Reply 24, posted (10 years 3 months 3 weeks 4 days 19 hours ago) and read 3297 times:

Reminds me of the twist on the old business saying:

"We're losing money on each item, but we're making it up in volume."



25 Mandala499 : Even if they make a profit, they could still be loosing money! As in, debt repayment! I say the "whole" industry needs some major restructuring to pre
26 Nasmal : Alphascan: Ive lived in Florida all my life, and I dont think I would be able to spend two weeks of winter in UND. I enjoy being two miles within the
27 StarAC17 : Why don't Delta just fire all their pilots then who refuse to take a 50% paycut? There must be loads of unemployed pilots out there who would work for
28 Md80fanatic : I'm not trying to be a smartazz but....why do the people that decide fares elect to sell below their cost? What freakin' sense does that make? Everyon
29 WGW2707 : DeltaMD88 and DeltaGuy's comments reveal the thought process being used by Delta pilots right now admirably: "Tickets are being sold below cost, peopl
30 OttoPylit : WGW2707, Well said. While anyone can agree that the pilots are NOT the only reason the airline is losing money, it is by far the biggest factor. Once
31 M404 : Another single word - YIELD If you can't get out more than you put in. You have no yield.
32 Kieso : Delta just wants the pilots to make what the should! I'm sure they have lots of money we don't know about. The pilots make way to much!
33 InnocuousFox : To sum up, as a stand-alone statistic, load factors don't mean crap. I could fill 100% of the seats every time if I gave them away for free.
34 Dalmd88 : So JetBlue's Average earnings per FTE are $15,500. No wonder they are making money. That comes out to an AVERAGE wage of $7.45/ hr. We all know the pi
35 Post contains images Sq452 : Because they are charging me $270 to go from BOS-DAY through Cincinnati, and $1,200 if i were to just end in Cincinnati!!!! Just kidding, I know thats
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