WGW2707 From United States of America, joined Aug 2003, 1197 posts, RR: 33 Posted (10 years 5 months 6 days 3 hours ago) and read 9151 times:
I'm sure most of us here at a.net are aware of Delta's embarrassing catering dispute with Gate Gourmet, in which Gate Gourmet is said to have demanded that Delta wire them $25 million immediately or all catering service would cease. Delta apparently has disputed $6 million worth of bills from Gate Gourmet, claiming that the amount constitutes overbillings and wrong invoices.
So as a result of this dispute Delta has found many of its flights are not being catered. Passengers on long haul flights especially are infuriated by the unexpected absence of in-flight meal service, and understandably so. As a result, through no fault of its own Delta is alienating passengers at the moment it can least afford to.
The interesting factor in all of this is the Chairman & CEO of Gate Gourmet: David Siegel. As we all know, David Siegel was the blundering idiot who after rushing US Airways through their first bout of Chapter 11 totally failed to gain any substantial, long-term cost savings, and now US Airways is back in bankruptcy protection, its future cloudier than ever, while David Siegel jumped ship last spring on a convenient golden parachute-only a week after deliverying an emotional "US Airways: Transformation" address.
Consider also that last year, about a year ago at this time, Siegel referred to Delta, Northwest and Continental as "The Axis Of Evil" and called Delta's then-CEO Leo Mullins "Doctor Evil". Are we seeing a pattern of retribution on the part of Siegel? Is Siegel actively trying to crunch Delta, which of the Big 6 was the one that competed with US Airways the most? Could Siegel be attempting to enact revenge on Delta for the bad performance of US Airways that caused him embarrassment? It's an interesting question.
Another more disturbing possibility is that Siegel is a pathological airline-killer. Not content with virtually killing US Airways through severe mismanagement, sluggish response to changing market conditions, a rushed and poorly executed Chapter 11 reorganization and extreme agitation of militant labor unions, perhaps Siegel is looking for bigger prey, and is hoping to push Delta over the edge by effectively alienating Delta's customers, by causing them to have to endure long flights with no meal service.
Considering Siegel's past record, this whole scenario seems very unusual.
Sydscott From Australia, joined Oct 2003, 3249 posts, RR: 20
Reply 1, posted (10 years 5 months 6 days ago) and read 8984 times:
I think Delta should pay its bills, or at least some of it, and settle the rest in Court. If Gate Gourmet has been over-billing then let Delta prove it. Gate Gourment isn't a charity, its a business out to make a profit. If a Debtor doesn't pay its bills the standard response is not to sell them anymore until they do and, especially given the current Delta circumstances, no-one would want to extend them a large credit line. Simple. Pay your bill and get more catering service.
JAXpax From , joined Dec 1969, posts, RR:
Reply 2, posted (10 years 5 months 5 days 23 hours ago) and read 8927 times:
I don't believe it is any sort of retaliation.
I think it makes sense. If you depend on the airlines for your business, that puts you in a worsening situation. They already lost some money with the last US filing, and I certainly understand why Delta worries them. It's nothing other suppliers haven't done to various carriers in the past.
Bicoastal From , joined Dec 1969, posts, RR:
Reply 3, posted (10 years 5 months 5 days 23 hours ago) and read 8908 times:
To think that just one man is responsible for the downfall of an airline or airlines is ridiculous. A number of factors are contributing and have contributed to problems in the industry. Among them are: Fuel costs, new competition from low cost carriers, unions, management, consumers wanting only to pay the CHEAPEST ticket price possible, business travelers shopping for cheaper tickets, high costs, unwillingness to raise prices to cover costs.
I'm sure there are other factors. One man or woman does not make or break an airline.
MEA-707 From Netherlands, joined Nov 1999, 4400 posts, RR: 34
Reply 4, posted (10 years 5 months 5 days 22 hours ago) and read 8783 times:
Can't Delta just buy their meals temporarily at other caterers, or even let their F/A's take or buy some sandwiches and drinks in the worst case as a stop gap measure? I remember to have read an australian airline where the F/A's baked cookies at home to help the airline out (Hazelton).
nobody has ever died from hard work, but why take the risk?
TOLtommy From United States of America, joined Dec 2003, 3320 posts, RR: 5
Reply 5, posted (10 years 5 months 5 days 22 hours ago) and read 8740 times:
I love it when someone who lists his age as 16-20 comes in here and spouts off like they understand how business (any business) operates. Observe and learn. Get a job in this industry and get some real world experience before posting your opinions.
If you go back in time, you'll find that many US employees thought David Siegel was going to be the person to turn US around. US had suffered through years of bad management before Siegel arrived at the company. You'll probably have to go back to around the time of your birth to find a CEO that US rank and file liked. David Siegel had earned his stripes as a leader in this industry. That's why US got him to come on board. Sadly his tenure at US is going to be what he is known for. No matter what, he's going to be the guy "who couldn't turn US around". Fact is, he was dealt a bad hand to start with. He got what he could to reduce costs, but it wasn't enough. He probably erred in choosing the path of least resistance during the first trip through CH11. The airline needed to find a new business model, and instead focused on lowering cost. They did enough to get out of CH11, but nothing more.
So now he's over at Gate Gourmet, and using the knowledge he gained at US to protect the interests of Gate Gourmet and it's shareholders. That's his job. You can be certain that Gate Gourmet had a team of lawyers look over the contracts w/ Delta. David Siegel alone didn't decide to impose these requirements on Delta. It was smart business to protect Gate Gourmet from becoming a creditor waiting years for pennies on the dollar. Delta's problems are not his fault.
762er From United States of America, joined Feb 2001, 542 posts, RR: 1
Reply 6, posted (10 years 5 months 5 days 22 hours ago) and read 8733 times:
I get a kick out of people who bash Dave Seigel. The only mistake he made in turning around US Airways (which proved to be fatal for him) was that he tried to be too nice to rank-and-file employees. I find it ironic that the people who hated him the most at the airline were those he tried to help out. If he had asked for about 10-15% more in wage concessions everyone would love him.
PROSA From United States of America, joined Oct 2001, 5644 posts, RR: 4
Reply 7, posted (10 years 5 months 5 days 21 hours ago) and read 8686 times:
It's been said, not entirely in jest, that if you want to know how a struggling business is really doing, ignore what management says and instead look at its major suppliers - if they're imposing restrictive credit policies, or worse yet demanding cash on delivery, you know that the business is in very rough shape no matter how management spins things.
"Let me think about it" = the coward's way of saying "no"
Usair734 From United States of America, joined Jan 2004, 57 posts, RR: 0
Reply 8, posted (10 years 5 months 5 days 19 hours ago) and read 8499 times:
I dont know the entire story, but I dont think David Siegel killed US Airways, nor do I believe US is dead yet. Seigel made the mistake of going back on his word after stating he was in it for the long run. Unfortunately that wasn't his only mistake. Nonetheless, US has management now which is at least commited to turning the company around. Whether or not it can actually be done is debatable, but i am certainly hoping they can pull through. Seigel did a good job in bankruptcy but couldnt stick it when the company came out.
N79969 From , joined Dec 1969, posts, RR:
Reply 10, posted (10 years 5 months 5 days 19 hours ago) and read 8456 times:
You need to get a grip on reality and perhaps read a little before making such absurd remarks. David Siegel attempted to fix the inherited mess left by years of bad USAirways management and labor union shortsightedness. From what I understand, he did exactly the opposite of what you claim: he achieved all the cost savings he was supposed to except labor costs. Since there are two parties or more to every contract, there was not much more he could do. Compared to his predecessors, his USAirways salary and benefits were pretty modest.
Rather than being a "pathological airline killer" he was a pretty good airline builder. Go look up the history Express Jet or ask someone that has worked there for a while about Siegel.
If Delta was disputing $ 6 million, they could have paid the $19 million that they did owe rather than stiffing Gate Gourmet for $25 million. No responsible CEO would continue delivering service to Delta if they held back that kind of money.
OttoPylit From , joined Dec 1969, posts, RR:
Reply 11, posted (10 years 5 months 5 days 19 hours ago) and read 8399 times:
Being that you are from Australia, you must not be totally aware of the whole story. Delta has been paying its bills and has not stopped. Gate Gourmet just decided that Delta may file for bankruptcy, and doesn't want to be burned by the loss in revenue during restructuring. Thats perfectly reasonable, and it would be fine to talk to Delta about your fears. However, GG just decided to tell Delta that from now on, they want their money upfront, or service will cease. Delta's reply was, "We always pay you at the end of the month, thats what our contract states, and we will not waver." So GG cut off food service completely. After 2 days, a judge ordered Gate Gourmet to continue catering Delta flights immediately. Delta and Gate Gourmet are now working on ways to ease GG's burden if it appears Delta must turn to BK. However, it was a very bad move on Gate Gourmet's part and I were Delta, I would be suing GG for all they are worth.
Delta could have easily turned to another caterer if there was another available. LSG Sky Chef's is too small to fulfill Delta's needs in ATL, and there is no one else. Delta was having to provile meal vouchers for passengers to grab something to bring on the plane as well as contracting with Chilk-Fil-A to place coolers of bags with chicken sandwiches and chips at the end of the jetways for international passengers.
WGW2707 From United States of America, joined Aug 2003, 1197 posts, RR: 33
Reply 12, posted (10 years 5 months 5 days 18 hours ago) and read 8338 times:
The problem here is that GateGourmet is trying to go around their existing contract with Delta, which is in my opinion despicable. It would be interesting to note if GateGourmet serves United and US Airways (and I am not sure whether they do or not) whether or not those two airlines are forced to prepay. The fact that you don't here about GateGourmet doing this to any other of the innumerable struggling airlines and the past record of David Siegel makes this whole situation extremely unusual, in my opinion.
I am familiar with Siegel's history prior to US Airways, he was a long-time executive at Continental. The fact that he later referred to Continental as part of an "axis of evil" is itself suspect-perhaps he had somewhat of a falling out with his former employer. While going from a management job Continental/Express Jet to CEO of US Airways is undeniably a step up, one wonders if there were not additional factors leading to his departure.
Flyguyclt From United States of America, joined Aug 2005, 537 posts, RR: 8
Reply 13, posted (10 years 5 months 5 days 18 hours ago) and read 8287 times:
While I don't always agree with the thread leader, I must say. I think he has hit the nail on the head with this one. I too agree, this is very bad business at its best. Delta was up to date on it's contract. That should have been the end of the story.
TOLtommy From United States of America, joined Dec 2003, 3320 posts, RR: 5
Reply 14, posted (10 years 5 months 5 days 17 hours ago) and read 8230 times:
"The problem here is that GateGourmet is trying to go around their existing contract with Delta, which is in my opinion despicable."
That's your opinion, and you certainly are entitled to post it. But as I said earlier, do you really think Gate Gourmet did this without having their lawyers review the contract, in order to see if they could actually do it? That why both sides have lawyers. Delta might be "up to date" on their contract, but the exposure for loss that it left GateGourmet, so they were correct to try protect themselves and their shareholders.
And again, do you really think that David Siegel was solely responsible for this decision? That's why large corporations have leadership teams.
PilotNtrng From United States of America, joined Dec 2003, 897 posts, RR: 3
Reply 15, posted (10 years 5 months 5 days 15 hours ago) and read 8007 times:
WGW. hey man im not being rude, but you need to get your facts straight. Seigel was trying to implent his low cost plan, but the friggin unions forced him out. And guess what's going on now with the new CEO ? He is doing the exact same things Seigel did and wanted to do. Everyone needs to cool their jets on US Air...lol
Ultrapig From United States of America, joined Dec 2003, 595 posts, RR: 0
Reply 18, posted (10 years 5 months 5 days 14 hours ago) and read 7921 times:
There is a concept of "Adequate Assurance of Future Performance". Under this doctrine in the uniform commercial code a seller of goods (good) may demand tighter credit terms if it feels insecure. Since Delta has threatened bankruptcy what was done may well have been proper. The problem with this thread is that we don't know all of the facts. Had the supplier come to me (and I have had similar clients in smaller cases) I would have told them to try and slowly reign in the line of credit shortening the supplier from let's say 30 to 10 days. Yes there is a problem with preferential threatened and a later lawsuit but that could have been settled. I probably would not have suggested a unilalateral shutdown
Frontiers4ever From United States of America, joined Dec 2003, 173 posts, RR: 0
Reply 19, posted (10 years 5 months 5 days 14 hours ago) and read 7866 times:
US Airways was already going to die without Siegel. Their Debt ratio was horrible. Any all airlines are struggling, maybe if only US was struggling Id agree with you but all legacy carriers are struggling. Its not Siegel fault to prior mismanagement.
Bostonguy From United States of America, joined Jul 2000, 514 posts, RR: 7
Reply 22, posted (10 years 5 months 5 days 14 hours ago) and read 7666 times:
My hunch is that Delta is using some technicality to avoid paying some bills to GateGourmet. Perhaps Delta is challenging some bills based on its own sloppy records. Thus, Delta could say it's been paying GateGourmet for what it has ordered and owes no money. GateGourmet could be confident it hasn't incorrectly billed Delta for services and thus is demanding payment for those services before delivering other orders.
We don't know yet exactly why GateGourmet withheld service to Delta. From Delta's statements on this, however, it seems there is room for some truth stretching. Given Delta's financial situation it would seem within the realm of possibility that they "got caught" using a creative way not to pay for something they ordered.
As for Siegel being an airline killer, well, that's a wild story if I ever heard one!
Sydscott From Australia, joined Oct 2003, 3249 posts, RR: 20
Reply 23, posted (10 years 5 months 5 days 12 hours ago) and read 7161 times:
I'm fully aware of the court case and Delta's situation. Airlines in Australia are rather boring at the moment as they are all profitable with no bankrupts in site. I was merely beginning the case againt what WGW said and I see from the thread that those with a bit more knowledge on the issue than I have have come in as well. A supplier tightening their credit line is a natural response to the threat, or perceived threat, of bankruptcy. The idea that a single person would take the decision or be out to get Delta is ridiculous. Nor can you blame Dave Siegel for killing US. Being appointed the CEO of US is a poisoned chalice and he did a good job of just keeping them in the air. The fact that he failed to achieve a turn around puts him in a league thats crowded with plenty of other Airline Executives.
"This ageism bullsh!t is really ugly and uncalled for"
Referring to someone as a teenage CEO only points out their lack of relevant experience when commenting on business issues. While its not a phrase I would use, its application to some of the younger members of the forum by those who have been working in the business world for a while is fair. Especially when you start a thread blaming 1 guy for trying to bankrupt an airline without a shred of evidence to back your claim.
Thrust From United States of America, joined Sep 2003, 2691 posts, RR: 9
Reply 24, posted (10 years 5 months 5 days 11 hours ago) and read 6941 times:
Seems to me David Siegel is Frank Lorenzo's successor....I vote we prevent him from working in the airline industry....he sounds like Carl Icahn too...he is depriving DL of their money for his own personal benefits.
Fly one thing; Fly it well
: Somehow I highly doubt David Siegel took DL's competition with US personally enough to make it his life goal to ruin the former...
: "Through no fault of its own? Delta wasn't paying the bills--I would say that this is EXCLUSIVELY Delta's fault." Does no one hear me, am I really THA