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United And Delta 2nd Quarter Earnings...  
User currently offlinelucky777 From United States of America, joined Oct 2008, 534 posts, RR: 0
Posted (2 years 8 months 2 weeks 1 day 11 hours ago) and read 7621 times:

Anybody care to theorize why United's second quarter earnings were nearly triple Delta's? I would have thought that Delta would have at least a temporary cost advantage with the NWA merger now finished and UAL still in the process of their merger with CAL. I know both airline's have sizable NRT operations and probably suffered due to the earthquake so would that not be considered a wash? If i'm not mistaken UAL's earnings were on the upper end of analyst's concensus and Delta's narrowly missed the concensus.

27 replies: All unread, showing first 25:
 
User currently offlineBurkhard From Germany, joined Nov 2006, 4360 posts, RR: 2
Reply 1, posted (2 years 8 months 2 weeks 1 day 9 hours ago) and read 7462 times:

Can it be that Delta now is in the real problems of the merger, while United still the real work hasn't started?

User currently offlineAlgoz66 From UK - England, joined Oct 2010, 77 posts, RR: 0
Reply 2, posted (2 years 8 months 2 weeks 1 day 9 hours ago) and read 7338 times:

Quoting Burkhard (Reply 1):
Can it be that Delta now is in the real problems of the merger, while United still the real work hasn't started?

I think you're right - UA and CO are effectively still operating as 2 separate airlines, so the combined results are distorted.


User currently offlinerdh3e From United States of America, joined Mar 2011, 1459 posts, RR: 2
Reply 3, posted (2 years 8 months 2 weeks 1 day 7 hours ago) and read 7136 times:

Quoting Algoz66 (Reply 2):
so the combined results are distorted.

Profit 1 + Profit 2 = Total Profit

There isn't really much to distort. There are still 2 sets of books under UAL.

[Edited 2011-08-08 06:41:26]

User currently offlinejustloveplanes From United States of America, joined Jul 2004, 1002 posts, RR: 1
Reply 4, posted (2 years 8 months 2 weeks 1 day 6 hours ago) and read 6979 times:

There are always accounting details that make it hard to exactly interpret what is happening without a deep dive.

A good overall measure is total revenue / divided by available seat miles. This normalizes the size of the two operations (though they are so close in size, total revenue is probably good enough).

Then the differnce is in what each airline calls it's "costs" for the quarter, and this is where accounting can make things murky.

A couple of factors might be if Delta bought more aircraft used and paid cash and were expensed heavily in the quarter. Delta does to tend to buy and hold it's AC.

Some of the difference might be just UA/CO being on a roll. The UA/CO numbers are good and seem to be an slight improvement on their recent history. UA was really starting to crank out the profits about 3 quarters before the merger.


User currently offlineAlgoz66 From UK - England, joined Oct 2010, 77 posts, RR: 0
Reply 5, posted (2 years 8 months 2 weeks 1 day 5 hours ago) and read 6787 times:

Quoting rdh3e (Reply 3):
Quoting rdh3e (Reply 3):

A rather flippant response. DL has single operating license and is reporting profits as such. Ua and Co still have different operating costs and expenses. That was the point I was trying to make.


User currently offlineDelimit From United States of America, joined Jan 2009, 1486 posts, RR: 2
Reply 6, posted (2 years 8 months 2 weeks 1 day 5 hours ago) and read 6696 times:

Quoting Algoz66 (Reply 5):
A rather flippant response. DL has single operating license and is reporting profits as such. Ua and Co still have different operating costs and expenses. That was the point I was trying to make.

If that were much of a factor it would be in Delta's favor. mergers generate costs while they are happening. UA/CO is in the midst of one. DL's is completed.


User currently offlineCODC10 From United States of America, joined Jul 2000, 2356 posts, RR: 6
Reply 7, posted (2 years 8 months 2 weeks 1 day 4 hours ago) and read 6601 times:

CO/UA have not yet realized all merger-related cost savings, so one would expect the numbers to be better at a fully-integrated carrier. UA has a larger China, India, and Latin America portfolio than DL, plus oil-related growth in Houston. All of these regions are outperforming the rest of the industry. On the other hand, DL has greater exposure to Europe and NRT, markets that have taken an especially hard hit lately. This certainly won't be the case forever, though.

User currently offlinegoblin211 From United States of America, joined Jun 2010, 1209 posts, RR: 0
Reply 8, posted (2 years 8 months 2 weeks 1 day 4 hours ago) and read 6446 times:

It's comparing apples and oranges. Delta is one airline making profit and UA and CO are separately making money and are then combined. The profit of two airlines combined will ALWAYS be greater than the profit of one airline.


From the airport with love
User currently offlineusdcaguy From United States of America, joined Jan 2004, 871 posts, RR: 2
Reply 9, posted (2 years 8 months 2 weeks 1 day 3 hours ago) and read 6207 times:

Quoting goblin211 (Reply 8):
It's comparing apples and oranges. Delta is one airline making profit and UA and CO are separately making money and are then combined. The profit of two airlines combined will ALWAYS be greater than the profit of one airline.

Really? Combine the results of AS and HA and compare that to DL's profit of $198MM. (-$50MM for HA plus $28.8MM for AS gives us about -$22MM). Even if HA had a profit of $9MM as it did a year earlier, you'd only have $37.8MM. You can't assume that two apples can be compared to one big orange. The same goes for UA/CO and DL. UA/CO are bigger, with totally different networks and different problems (or lack thereof). I believe it's best to look at % change in revenue between carriers vs. % change in total costs to determine how well each one did relative to the other.


User currently offlineLAXtoATL From United States of America, joined Oct 2009, 1590 posts, RR: 2
Reply 10, posted (2 years 8 months 2 weeks 1 day 3 hours ago) and read 6138 times:

Quoting goblin211 (Reply 8):
The profit of two airlines combined will ALWAYS be greater than the profit of one airline.

Say what? That is certainly not true.

Anyway, right now UA is performing better than Delta period. CODC10 gave a lot of reasons for why this is likely the case right now. UA will experience some merger related expenses once they get a SOC and sign new joint labor contracts, but they will also eventually see some synergy related cost reductions and revenue increases. It looks like the UA & CO merger is off to a good start with two solidly profitable carriers combining operations, when DL & NW combined both were reeling and recovering from bankruptcy. With Delta aggressively paying down debt, their results will continue to improve but will likely continue to trail UA.


User currently offlinelaxboeingman From United States of America, joined Mar 2008, 531 posts, RR: 0
Reply 11, posted (2 years 8 months 2 weeks 1 day 3 hours ago) and read 6138 times:

I know that DL made a profit, a good one for their condition. However, I am not sure of UA's figures, can someone share UA's profit if they know?

Also, I believe UA will be the bigger airline, and for now, because they are still two separate entities, loyal fliers are still flying on their respective airline, meaning they have not lost any pax due to the merger. I am not saying that pax would be lost, but it is just a thought.

Lastly, UA/CO has a very large route network, which serves a lot of people. They just keep their costs down, so they can make a profit.

Thank you very much for all answers/comments,

laxboeingman



The real American classics: LAX and Boeing.
User currently offlinegigneil From United States of America, joined Nov 2002, 16345 posts, RR: 86
Reply 12, posted (2 years 8 months 2 weeks 1 day 3 hours ago) and read 6059 times:

Quoting goblin211 (Reply 8):
The profit of two airlines combined will ALWAYS be greater than the profit of one airline.

That's one of the most incorrect statements ever. The profits of two airlines combined will ALWAYS be more than the profits of those same two airlines separate.

Always.

NS


User currently offlinetpaewr From United States of America, joined May 2001, 450 posts, RR: 0
Reply 13, posted (2 years 8 months 2 weeks 1 day 3 hours ago) and read 5859 times:

Quoting CODC10 (Reply 7):
UA has a larger China, India, and Latin America portfolio than DL, plus oil-related growth in Houston. All of these regions are outperforming the rest of the industry. On the other hand, DL has greater exposure to Europe and NRT, markets that have taken an especially hard hit lately. This certainly won't be the case forever, though.

exactly, my thoughts. in addition UAL said 2Q saw big upticks in premium traffic in these regions. Another factor favoring UA 3 cabin model and both UA and CO tendency to over-fly NRT from the PRC.

I don't think we can read much into this unless the pattern goes on for sometime. OTH UA/CO have the better network/hubs, so long term I suspect UA will lead, but not at this level.


User currently offlineeinsteinboricua From Puerto Rico, joined Apr 2010, 2677 posts, RR: 8
Reply 14, posted (2 years 8 months 2 weeks 1 day 2 hours ago) and read 5542 times:

Quoting gigneil (Reply 12):
That's one of the most incorrect statements ever. The profits of two airlines combined will ALWAYS be more than the profits of those same two airlines separate.

I think the point he's trying to make out is that when you have two separate BIG airlines (as are UA and CO) under one common holdings company (ie. United Continental Holdings), the profit both airlines bring (if any) will be added up and be shown as one. If both airlines bring big profits, then it is true that their profit will be greater than a single airline. It's wrong to say ALWAYS, since UA and CO might bring very small profits while DL bring big $$$, thus rendering the argument invalid. But that's not to say that the case will never happen.



"You haven't seen a tree until you've seen its shadow from the sky."
User currently offlineEricR From United States of America, joined Jul 2010, 1804 posts, RR: 1
Reply 15, posted (2 years 8 months 2 weeks 1 day 2 hours ago) and read 5419 times:

I took a look through each airline's 10-Q (unlike one individual on this forum who uses press releases and does not know how to interpret them accurately).

The was no large one time charge that swayed either carriers financials. For example, UA had a $146 million one time integration charge, however, this was mostly offset by a $107 million benefit to revenue related to frequent flyer mile revenue.

There are two interesting items to note:
1.) The average price paid per gallon of fuel (the number 1 expense for airlines). The average price per gallon that UA paid in the most recent quarter was $2.88, however DL paid $3.23 on average per gallon of fuel.

2.) UA had a much better margin on their contract carrier arrangements (a.k.a regional flying). This figure represents the revenue UA generates from regional flying less the costs UA pays to the regional airline flying the route on their behalf. Some accounting changes DL made partially explain why DL's margin on regional flying was worse. However, UA's margin here appears really high, but I was unable to locate any notes that reference this. This is pure speculation on my part, but maybe UA negotiated a better overall arrangement with their regionals.

Below is an excerpt from DL's 10-Q regarding their contract carrier arrangement:
Contract carrier arrangements - Contract carrier arrangements expense increased as a result of the change in reporting due to the transactions involving Compass and Mesaba. Upon the closing of these transactions, we entered into new or amended long-term capacity purchase agreements with Compass, Mesaba, and Pinnacle

Below are a couple links to each airlines most recently issued 10-Q:
http://ir.united.com/phoenix.zhtml?c...ExOTMxMjUtMTEtMTk2NDU5L3htbA%3d%3d

http://phx.corporate-ir.net/phoenix....E0NDUzMDUtMTEtMDAyMTkwL3htbA%3d%3d


User currently offlineNutsaboutplanes From United States of America, joined Jul 2010, 486 posts, RR: 8
Reply 16, posted (2 years 8 months 2 weeks 1 day ago) and read 4839 times:

I am missing some of the logic in this thread. To me, DL would certainly have the advantage as they have realized the synergies that they were looking for that were the resoning behind the merger in the first place. They have cut overlap, increased pricing power in markets where they gained market-share, consolidated corporate and administrative functions and consolidated facilities.

With all of these changes, Delta should have the cost advantage.....not UA. If anything, this should be a very strong indicator that UA will do extremely well once it accomplishes all of the merger tasks that DL has completed after the NW merger.....there is still a lot of re-alignment to do at UA/CO.



American Airlines, US Airways, Alaska Airlines, Northwest Airlines, America West Airlines, USAFR
User currently offlinegigneil From United States of America, joined Nov 2002, 16345 posts, RR: 86
Reply 17, posted (2 years 8 months 2 weeks 1 day ago) and read 4775 times:

I approve the previous message.

NS


User currently offlineTOMMY767 From United States of America, joined Aug 2003, 6584 posts, RR: 11
Reply 18, posted (2 years 8 months 2 weeks 1 day ago) and read 4747 times:

Quoting Nutsaboutplanes (Reply 16):
With all of these changes, Delta should have the cost advantage.....not UA. If anything, this should be a very strong indicator that UA will do extremely well once it accomplishes all of the merger tasks that DL has completed after the NW merger.....there is still a lot of re-alignment to do at UA/CO.

For one between UA/CO they don't have as much of a gas guzzling fleet as DL. Fuel savings have to be huge. The oldest planes in the combined fleet are a handful of UA 757s from 1989-1990. DL has DC-9s, M88s, A320s, and 757s that are all getting up there.



"Folks that's the news and I'm outta here!" -- Dennis Miller
User currently offlinemm320cap From United States of America, joined Jul 2004, 227 posts, RR: 3
Reply 19, posted (2 years 8 months 2 weeks 1 day ago) and read 4747 times:

Quoting einsteinboricua (Reply 14):
I think the point he's trying to make out is that when you have two separate BIG airlines (as are UA and CO) under one common holdings company (ie. United Continental Holdings), the profit both airlines bring (if any) will be added up and be shown as one. If both airlines bring big profits, then it is true that their profit will be greater than a single airline. It's wrong to say ALWAYS, since UA and CO might bring very small profits while DL bring big $$$, thus rendering the argument invalid. But that's not to say that the case will never happen.

There is a BIG misconception going on in this thread. A comparison of DAL's and UA/CO's profits IS appropriate, as they are close to the same size. To suggest that UA/CO's profits are inflated because they are 2 carriers, is completely misguided. Sure, if you were comparing UA/CO's profit to, let's say a USAirways, you could make that claim, as USAirways was decently close in size to CO. To add in United's profit's would mean that you then are comparing apples/oranges. But to compare DAL's profit to stand along CO would make no sense at all, due to the huge size difference. The comparison ONLY works when you look at combined UA/CO.


User currently offlineDelta2ual From United States of America, joined Dec 2007, 606 posts, RR: 1
Reply 20, posted (2 years 8 months 2 weeks 22 hours ago) and read 4254 times:

I, for one am very happy to see the huge profits at UAL. Most of our employees have been working under concessionary contracts. It's about time they share the wealth.


From the world's largest airline-to the world's largest airline. Delta2ual
User currently offlinegigneil From United States of America, joined Nov 2002, 16345 posts, RR: 86
Reply 21, posted (2 years 8 months 2 weeks 22 hours ago) and read 4227 times:

They do. Over $90m in profit sharing year to date. Enjoy it.

NS


User currently offlineDelta2ual From United States of America, joined Dec 2007, 606 posts, RR: 1
Reply 22, posted (2 years 8 months 2 weeks 10 hours ago) and read 2547 times:

Quoting EricR (Reply 15):
2.) UA had a much better margin on their contract carrier arrangements (a.k.a regional flying). This figure represents the revenue UA generates from regional flying less the costs UA pays to the regional airline flying the route on their behalf. Some accounting changes DL made partially explain why DL's margin on regional flying was worse. However, UA's margin here appears really high, but I was unable to locate any notes that reference this. This is pure speculation on my part, but maybe UA negotiated a better overall arrangement with their regionals.

I think that is an understatement! I couldn't believe it when I saw it, but UAL made $827 MILLION in profit for 2010 off their Express flying program (DL made a paltry $100K, AMR lost $144 Million).

http://www.centreforaviation.com/new...st-divestiture-for-american-eagle/

Quoting gigneil (Reply 21):
They do. Over $90m in profit sharing year to date. Enjoy it.

NS

Actually, I'm on furlough, so I don't currently enjoy anything from UAL. But, contracts will need to be improved (or at least blend the best of both with CO) for a smooth merger to occur. There were alot of unhappy people in my department who, while realistic things will never go back, do expect improvements in a contract negotiated under BK.



From the world's largest airline-to the world's largest airline. Delta2ual
User currently offlinedeltal1011man From United States of America, joined Sep 2005, 9081 posts, RR: 12
Reply 23, posted (2 years 8 months 2 weeks 10 hours ago) and read 2531 times:

Quoting CODC10 (Reply 7):
Latin America portfolio

How is that?

(disclamer IMHO UA has a far better network than Delta, who has alot of work to do on the western side of the world(mainly India and Asia, bust also the west coast) but Europe and Latin America are two of Delta's stronger points)

Quoting EricR (Reply 15):
1.) The average price paid per gallon of fuel (the number 1 expense for airlines). The average price per gallon that UA paid in the most recent quarter was $2.88, however DL paid $3.23 on average per gallon of fuel.

he is the real reason. Delta is getting its ass kicked on fuel right now.


But i would like to see the break down of operating cost on the new NG fleet UA has. My thinking is while DL does have a much larger fuel bill the over all cost per plane may not be as out of wack as one would think.

Quoting Delta2ual (Reply 22):
I think that is an understatement! I couldn't believe it when I saw it, but UAL made $827 MILLION in profit for 2010 off their Express flying program (DL made a paltry $100K, AMR lost $144 Million).

hmmm I wouldn't mind knowing why the gap is so large. Is it the way Delta has its RJ contracts set up or?



yep.
User currently offlinelightsaber From United States of America, joined Jan 2005, 12420 posts, RR: 100
Reply 24, posted (2 years 8 months 2 weeks 4 hours ago) and read 2347 times:
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Quoting deltal1011man (Reply 23):
he is the real reason. Delta is getting its ass kicked on fuel right now.

Not as badly as AA.  

I would suspect that is the root of the problem: a slow fleet replacement strategy works until fuel prices spike.

Quoting EricR (Reply 15):
1.) The average price paid per gallon of fuel (the number 1 expense for airlines). The average price per gallon that UA paid in the most recent quarter was $2.88, however DL paid $3.23 on average per gallon of fuel.

Interesting difference in hedges!

Quoting EricR (Reply 15):
This is pure speculation on my part, but maybe UA negotiated a better overall arrangement with their regionals.

UA renegotiated their contracts not too long ago when RJs were being parked. But much will come down to the fuel as the parent airline buys the fuel for the regional. In some ways, the two topics will be related. RJs consume quite a bit of fuel per passenger...

Lightsaber



I've posted how many times?!?
25 LipeGIG : As said, this means nothing. Profits are not based on being one or two, profits are based, in general terms, on revenue (which includes tickets sold,
26 panamair : Actually I don't believe that is correct. Based on the P/L statements I'm looking at for Q2 2011: Consolidated (including Regionals): UA: $3.09 DL: $
27 EricR : Actually both of our numbers for DL are accurate. The number you referenced includes the mark to market adjustments for fuel hedges, but it is a non-
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