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JammyBritton27
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Delta airlines Q2 2020 earnings thread

Tue Jul 14, 2020 11:37 am

Following a challenging flying season, Delta Air Lines on Tuesday kicked off the aviation earnings with mixed results. Second quarter revenues fell 88% year-over-year to $1.47 billion, while loss per share came in at a massive $4.43.

Delta Air Lines results breakdown:

https://news.alphastreet.com/delta-air- ... fographic/

Demand for air travel declined significantly in the June quarter as a result of COVID-19, with enplaned passengers down 93 percent year over year. As a result, Delta's adjusted operating revenue of $1.2 billion for the June quarter was down 91 percent versus the June 2019 quarter.

Passenger revenues declined 94 percent on 85 percent lower capacity. Non-ticket revenue declined 65 percent, as Cargo, MRO and Loyalty revenues declined at a lower rate than ticket revenue.

Official press release link:

https://ir.delta.com/news/news-details/ ... fault.aspx
Last edited by JammyBritton27 on Tue Jul 14, 2020 11:40 am, edited 1 time in total.
 
Ishrion
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 11:39 am

Delta also announced they’re retiring all 737-700s and some A320s/763s by the end of 2020.

https://news.delta.com/delta-air-lines- ... se-actions
 
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Polot
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 11:47 am

They lost $5.7 billion in the quarter. Let’s not try and sugar coat it/bury the information by only talking about revenue and lost per share, we all already know they and everyone else is going to lose billions.
 
Ciel
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 11:49 am

This may be strange to say this for a company, but i can't help to feel sad that such a great airline, with a long history, falls like this. My heart goes for all the people working in this industry.
 
picarus
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 11:56 am

What I find most striking is the acceleration of construction projects at LAX, LGA, and SLC. I incorrectly assumed those capital investments would be extended to preserve liquidity. Very smart move though as it takes advantage of uncrowded facilities and positions them for competitive advantage once the clouds part.
 
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Polot
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 12:03 pm

picarus wrote:
What I find most striking is the acceleration of construction projects at LAX, LGA, and SLC. I incorrectly assumed those capital investments would be extended to preserve liquidity. Very smart move though as it takes advantage of uncrowded facilities and positions them for competitive advantage once the clouds part.

The big things is they have already started (at least LGA and SLC, I don’t know about LAX), so it’s a matter of continuing planned pace, accelerating and saving money, or having half completed construction just sitting around (which depending on stage of construction may be impractical). It’s investments that have yet to break ground that would be deferred.
 
ethernal
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 12:20 pm

picarus wrote:
What I find most striking is the acceleration of construction projects at LAX, LGA, and SLC. I incorrectly assumed those capital investments would be extended to preserve liquidity. Very smart move though as it takes advantage of uncrowded facilities and positions them for competitive advantage once the clouds part.


I agree this is very surprising. If these are owned assets, presumably Delta expects to be able to mortgage them for liquidity in the future if needed - therefore negating the upfront cash burn - especially if they don't believe they'd be able to mortgage at decent terms half-built elements.
 
tphuang
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 12:26 pm

picarus wrote:
What I find most striking is the acceleration of construction projects at LAX, LGA, and SLC. I incorrectly assumed those capital investments would be extended to preserve liquidity. Very smart move though as it takes advantage of uncrowded facilities and positions them for competitive advantage once the clouds part.


That's what having a good balance sheet allows you to do. Good for Delta.
 
CRJ5000
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 12:31 pm

picarus wrote:
What I find most striking is the acceleration of construction projects at LAX, LGA, and SLC. I incorrectly assumed those capital investments would be extended to preserve liquidity. Very smart move though as it takes advantage of uncrowded facilities and positions them for competitive advantage once the clouds part.


Everything is a gamble right now. Use the downtime and uncrowded airports to expedite construction projects, or conserve the cash? I'm a little surprised as well, but they have a pretty good balance sheet and have been somewhat conservative in other aspects during the pandemic. Might as well take advantage of the opportunity.
 
zuckie13
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 12:33 pm

Not to be dour but what part is mixed? This is just an overall bad looking financial report - as will be the reports of every other passenger airline in the US (and around the world really). Every airline will report:

1) Revenue is way down
2) We did everything we could do to raise cash
3) We did everything we could do to lower costs but are still hemorrhaging money.

plus, when you read between the lines furloughs and/or layoffs are coming.

Unless and until they can get passengers back to a level that will limit losses (and the US is not in a good place for that right now so don't hold your breath for Q3) there is going to be nothing "mixed" about results.
 
FluidFlow
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 12:43 pm

picarus wrote:
What I find most striking is the acceleration of construction projects at LAX, LGA, and SLC. I incorrectly assumed those capital investments would be extended to preserve liquidity. Very smart move though as it takes advantage of uncrowded facilities and positions them for competitive advantage once the clouds part.


Depending on the contracts, it might be cheaper to actually finish the projects and even speed them up. Sometimes it is hard to just stop building something especially when it is infrastructure and certain commitments have to be fulfilled. Chances are that they would have to revert certain work to make the area somewhat usable during the non-construction phase what actually means taking more money upfront (so right now) than paying on the bills.
Also while right now more can be built than under normal circumstances, speeding up the building process probably saves cash in the long run just due to lower leasing time of construction equipment (just as an example).
 
PSU.DTW.SCE
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 12:46 pm

On the fleet side:

MD88, MD90 already gone and B777 were already announced.

A portion of A320 and 763s was a no-brainer as those were really more or less pull-ahead retirements. It will be interesting to see which ones goes, and probably a function of what is going to be coming due for maintenance.

73G is interesting. They did a few specialized routes, but really the A319 could do most of what the 73G was doing. How much in the way of simplification related cost-saving does this enable?
Or with the 73Gs all in the 11-12 year range, were they approaching HMVs in the next 12-months? I would imagine these aircraft might find a buyer at some point, could be cost-avoidance and future way to raise some cash.

I'll be curious if anyone asks about the 717 lease situation, and new aircraft commitments/delivery schedule but I'm sure they will get a very non-descript and vague answer
 
LCDFlight
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 12:57 pm

The construction projects may be a bargaining chip. They can then request full government funding for that, and government funding "infrastructure" is a good talking point. Conveniently, it would be infrastructure owned by Delta.

Throwing a couple million at "acceleration" also allows them to not look like they are totally on their heels, which they pretty much totally are.
 
MIflyer12
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 1:12 pm

PSU.DTW.SCE wrote:
73G is interesting. They did a few specialized routes, but really the A319 could do most of what the 73G was doing. How much in the way of simplification related cost-saving does this enable?


Not just the A319s, but the A220-100s (and A220-300s yet come) can do the work of the 737-700s.

I don't see too much gain by simplification. It drops a sub-type from aircraft scheduling, and a low-count sub-type at that, but it doesn't simplify pilot scheduling, nor parts inventory very much. (How much, by value, does a -700 have in typical replacement parts unique from a -800 or -900ER, really?)

Pull ahead of some 767-300ER and A320 retirements was pretty predictable. Unless you've got 2006-era NW (We have no money, and we have no surplus of anything else to fly, so DC-9s and Saabs make do), retirement of old aircraft with higher operating costs as a frame approaches a heavy check is an easy choice. It's not like DL is going to need high utilization of 100% of frames any time soon.

The balance sheet got ugly quickly. They have a lot more cash (but they're still burning cash), yet the debt and lease finance obligations rose by $13.5 Billion from just six months earlier. That's more than 2x.
 
MIflyer12
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 1:18 pm

LCDFlight wrote:
The construction projects may be a bargaining chip. They can then request full government funding for that, and government funding "infrastructure" is a good talking point. Conveniently, it would be infrastructure owned by Delta.


I won't argue it's impossible for carriers to get more Federal grant money within a year (although I don't think it's probable), IMHO there's almost no chance for grants to be given for carrier-owned infrastructure. That's just crazy. The Payroll Support Program kept workers out of unemployment and allowed carriers to both maintain the network and plan for systemwide reductions. Reasons just to give DL a new concourse at LAX are pretty weak. (Don't even talk about construction worker counts - the number employed full-time-equivalent per $ million of total construction cost looks pitiful.)
 
micstatic
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 1:37 pm

so I wonder if in a post covid world if the A220 is used at Key west?
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codc10
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 1:57 pm

micstatic wrote:
so I wonder if in a post covid world if the A220 is used at Key west?


I don't doubt it, but at the very least EYW can go to an all-DCI station and the E70/75 can replace the 73G frequencies.
 
United1
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 2:26 pm

Looks like they wrote down the value or their investments in LATAM, Virgin and Aeromexico. Not surprising and it will be interesting to see what, if anything, they manage to recover from those companies. DL also canceled the A350 purchase commitments they bought off of LATAM.

While DL did a decent job of narrowing their cash burn this quarter they still have a ways to go and unfortunately DL performed slightly worse than expected missing both its revenue and EPS estimates.

Lets see how everyone else does...this is a very bumpy flight :)
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deltairlines
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 2:27 pm

micstatic wrote:
so I wonder if in a post covid world if the A220 is used at Key west?


Delta's also occasionally thrown the A319 into EYW.

I'd expect the future of EYW to be a mix of A319/E175/A220.

The only other station in the network that really needed the 737-700 was TGU. Who knows if that comes back anytime soon.
 
maverick4002
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 2:34 pm

What is loyalty revenue?
 
Wacker1000
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 2:35 pm

zuckie13 wrote:
Not to be dour but what part is mixed?


They still aren't AA. ;)
 
dmstorm22
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 2:39 pm

maverick4002 wrote:
What is loyalty revenue?


I imagine revenues tied to SkyMiles program - so sale of miles, sale of co-branded credit cards, deals with SkyMiles partners, etc.
 
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Polot
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 2:42 pm

maverick4002 wrote:
What is loyalty revenue?

Revenue from SkyMiles, eg fees from purchasing tickets with miles, revenue from any partnerships SkyMiles may participate in, etc.
 
NYCAAer
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 2:46 pm

What I found truly amazing is that 15,000 employees agreed to take an early retirement. The number doesn’t include the pilots, that’s still being determined. At AA in flight service, when early retirement was offered early on during COVID-19, only 875 or so flight attendants took it, despite many more than that are way beyond retirement age, in their 70s and 80s.

Kudos to the Delta employees who are leaving, 15,000 is an incredible number, it sounds like Delta might be able to avoid furloughs altogether.
 
B757Forever
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 2:52 pm

NYCAAer wrote:
What I found truly amazing is that 15,000 employees agreed to take an early retirement. The number doesn’t include the pilots, that’s still being determined. At AA in flight service, when early retirement was offered early on during COVID-19, only 875 or so flight attendants took it, despite many more than that are way beyond retirement age, in their 70s and 80s.

Kudos to the Delta employees who are leaving, 15,000 is an incredible number, it sounds like Delta might be able to avoid furloughs altogether.



The number is actually 17,435 that was announced today. That does not include pilots. The DL early retirement package was very attractive and super generous. If only I was a few years older...
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tphuang
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 2:55 pm

If early retirement package is really generous, how much saving are they getting vs furlough?
 
PSU.DTW.SCE
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 2:55 pm

That's an insane number of people. Wow, I'm sure there are a lot of good people in that bunch and a lot of institutional knowledge.
 
joeblow10
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 3:02 pm

As crazy as it sounds I still don’t see 17.5K off the payroll as enough if we’re talking “avoiding furloughs” all-together. Granted, not including pilots, but per the sounds of it on APC, doesn’t seem like more than 1500 or so will take it?

Realistically you’re looking at a 20% reduction in force including pilots - I’m sure many are some of the more expensive folks on payroll, but still, with revenues down 90% and only destined to get that low again after Labor Day, seems like there still could be the need to reduce headcount further.
 
NYCAAer
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 3:08 pm

B757Forever wrote:
NYCAAer wrote:
What I found truly amazing is that 15,000 employees agreed to take an early retirement. The number doesn’t include the pilots, that’s still being determined. At AA in flight service, when early retirement was offered early on during COVID-19, only 875 or so flight attendants took it, despite many more than that are way beyond retirement age, in their 70s and 80s.

Kudos to the Delta employees who are leaving, 15,000 is an incredible number, it sounds like Delta might be able to avoid furloughs altogether.



The number is actually 17,435 that was announced today. That does not include pilots. The DL early retirement package was very attractive and super generous. If only I was a few years older...


Very impressive! With around 91,000 people in the company pre COVID-19, and then the pilots being added to that number, I think Delta will have the right number of employees and it looks better for the ones who need to stay.
 
Alias1024
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 3:13 pm

NYCAAer wrote:
Kudos to the Delta employees who are leaving, 15,000 is an incredible number, it sounds like Delta might be able to avoid furloughs altogether.


The picture is still very uncertain on whether pilot furloughs will be avoided. Over 2,500 WARN act letters were sent out at the beginning of the month. It will depend on the take rate of the pilot-only early retirement package currently in the sign up period, and any other agreements that can be reached between the Delta and ALPA.

Does the company have an appetite for a voluntary paid leave at reduced rate package like Southwest and Alaska have offered? Or is this a non-starter due to the optics of one of only two unionized groups at the airline getting paid leaves when nobody else does?

Are pilots willing to consider further reduction in monthly guaranteed hours after seeing their schedules and pay reduced to contractual minimums already, in order to spread the work around?
It is a mistake to think you can solve any major problems with just potatoes.
 
TonyClifton
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 3:32 pm

Alias1024 wrote:
NYCAAer wrote:
Kudos to the Delta employees who are leaving, 15,000 is an incredible number, it sounds like Delta might be able to avoid furloughs altogether.


The picture is still very uncertain on whether pilot furloughs will be avoided. Over 2,500 WARN act letters were sent out at the beginning of the month. It will depend on the take rate of the pilot-only early retirement package currently in the sign up period, and any other agreements that can be reached between the Delta and ALPA.

Does the company have an appetite for a voluntary paid leave at reduced rate package like Southwest and Alaska have offered? Or is this a non-starter due to the optics of one of only two unionized groups at the airline getting paid leaves when nobody else does?

Are pilots willing to consider further reduction in monthly guaranteed hours after seeing their schedules and pay reduced to contractual minimums already, in order to spread the work around?

I think the future for negotiations around the industry hinges on the JetBlue deal. Others will be waiting to see what adjustments were made to secure no furloughs.
 
gwrudolph
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 3:32 pm

joeblow10 wrote:
As crazy as it sounds I still don’t see 17.5K off the payroll as enough if we’re talking “avoiding furloughs” all-together. Granted, not including pilots, but per the sounds of it on APC, doesn’t seem like more than 1500 or so will take it?

Realistically you’re looking at a 20% reduction in force including pilots - I’m sure many are some of the more expensive folks on payroll, but still, with revenues down 90% and only destined to get that low again after Labor Day, seems like there still could be the need to reduce headcount further.


Unfortunately, I think you are right. I’m not sure how you can only reduce 20% labor cost when you are facing a 90% revenue reduction. Even 20% on 50% revenue reduction, which seems optimistic in the near term, doesn’t seem to compute
 
ethernal
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 3:37 pm

gwrudolph wrote:
joeblow10 wrote:
As crazy as it sounds I still don’t see 17.5K off the payroll as enough if we’re talking “avoiding furloughs” all-together. Granted, not including pilots, but per the sounds of it on APC, doesn’t seem like more than 1500 or so will take it?

Realistically you’re looking at a 20% reduction in force including pilots - I’m sure many are some of the more expensive folks on payroll, but still, with revenues down 90% and only destined to get that low again after Labor Day, seems like there still could be the need to reduce headcount further.


Unfortunately, I think you are right. I’m not sure how you can only reduce 20% labor cost when you are facing a 90% revenue reduction. Even 20% on 50% revenue reduction, which seems optimistic in the near term, doesn’t seem to compute


There are other mechanisms like reduced hours within contractual guardrails for many roles that can be used to further reduce payroll costs. But yes, if revenue remains down >50-60% through the winter I don't see how furloughs are avoided.
 
NYCAAer
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 3:37 pm

gwrudolph wrote:
joeblow10 wrote:
As crazy as it sounds I still don’t see 17.5K off the payroll as enough if we’re talking “avoiding furloughs” all-together. Granted, not including pilots, but per the sounds of it on APC, doesn’t seem like more than 1500 or so will take it?

Realistically you’re looking at a 20% reduction in force including pilots - I’m sure many are some of the more expensive folks on payroll, but still, with revenues down 90% and only destined to get that low again after Labor Day, seems like there still could be the need to reduce headcount further.


Unfortunately, I think you are right. I’m not sure how you can only reduce 20% labor cost when you are facing a 90% revenue reduction. Even 20% on 50% revenue reduction, which seems optimistic in the near term, doesn’t seem to compute


I would think that the retirements are the highest paid employees in the company due to their seniority. For example, a senior purser at Delta flying international exclusively is probably earning three times as much as a newly hired flight attendant. So that could reduce labor costs.
 
jagraham
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 3:42 pm

Delta tries harder to get a win-win situation regarding its employees. Furloughs would be cheaper, but would leave bad tastes in everyone's mouths. In addition, Delta apparently expects the COVID effects to go on for a while; so shrinking the airline rather than having 17000+ employees waiting to be called back works better.
 
N312RC
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 3:42 pm

One thing people seem to forget about on these boards is that you can’t simply say demand is down this percent, therefore we must cut this percent of staffing. It’s a delicate balance in an extremely difficult time. Cut too much and you give up market share if things unexpectedly come back. Not to mention the training and re-onboarding/hiring costs. Cut too little and you end up bleeding even more money.

Either way, Uncle Ed believes that furloughs will be minor (at least right now). The company seems to be willing to run a little fat on staffing (ie not optimally relating to productivity) so they can say look how we protected all these jobs, you don’t need unions (and point at UA, who are presently drinking straight from the bottle in their front yard watching the house burn).
 
gwrudolph
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 3:46 pm

NYCAAer wrote:
gwrudolph wrote:
joeblow10 wrote:
As crazy as it sounds I still don’t see 17.5K off the payroll as enough if we’re talking “avoiding furloughs” all-together. Granted, not including pilots, but per the sounds of it on APC, doesn’t seem like more than 1500 or so will take it?

Realistically you’re looking at a 20% reduction in force including pilots - I’m sure many are some of the more expensive folks on payroll, but still, with revenues down 90% and only destined to get that low again after Labor Day, seems like there still could be the need to reduce headcount further.


Unfortunately, I think you are right. I’m not sure how you can only reduce 20% labor cost when you are facing a 90% revenue reduction. Even 20% on 50% revenue reduction, which seems optimistic in the near term, doesn’t seem to compute


I would think that the retirements are the highest paid employees in the company due to their seniority. For example, a senior purser at Delta flying international exclusively is probably earning three times as much as a newly hired flight attendant. So that could reduce labor costs.


Fair point! I’m still going to speculate here a bit and say I still think it will, unfortunately, take a bit more than 20% if revenues continue to be so diminished.
 
kiowa
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 3:52 pm

NYCAAer wrote:
gwrudolph wrote:
joeblow10 wrote:
As crazy as it sounds I still don’t see 17.5K off the payroll as enough if we’re talking “avoiding furloughs” all-together. Granted, not including pilots, but per the sounds of it on APC, doesn’t seem like more than 1500 or so will take it?

Realistically you’re looking at a 20% reduction in force including pilots - I’m sure many are some of the more expensive folks on payroll, but still, with revenues down 90% and only destined to get that low again after Labor Day, seems like there still could be the need to reduce headcount further.


Unfortunately, I think you are right. I’m not sure how you can only reduce 20% labor cost when you are facing a 90% revenue reduction. Even 20% on 50% revenue reduction, which seems optimistic in the near term, doesn’t seem to compute


I would think that the retirements are the highest paid employees in the company due to their seniority. For example, a senior purser at Delta flying international exclusively is probably earning three times as much as a newly hired flight attendant. So that could reduce labor costs.


If you buy off the top of the pilot's seniority list, pilots will just fill in the seats from more junior pilots. If a Delta 777 captain makes $350/flight hour, it does not matter how senior or junior they are. The company still pays for the pilot to fly that seat with the negotiated rate. How does that save $? Unless the workforce takes less pay for a specific job, Delta will not be saving money by buying off employees. The Delta pilots and ALPA will be very slow to negotiate lower wages. The non-union employees may be in for some scary times much sooner. Good luck to them all.
 
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NWAESC
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 3:52 pm

joeblow10 wrote:
As crazy as it sounds I still don’t see 17.5K off the payroll as enough if we’re talking “avoiding furloughs” all-together. Granted, not including pilots, but per the sounds of it on APC, doesn’t seem like more than 1500 or so will take it?

Realistically you’re looking at a 20% reduction in force including pilots - I’m sure many are some of the more expensive folks on payroll, but still, with revenues down 90% and only destined to get that low again after Labor Day, seems like there still could be the need to reduce headcount further.


Maybe. But roughly 20% of the company are hitting the exits, and many of those staying are still under a 25% pay cut. On top of that, there are still some levers left before we have to go to invol. furloughs.
"Nothing ever happens here, " I said. "I just wait."
 
MIflyer12
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 3:59 pm

kiowa wrote:
If you buy off the top of the pilot's seniority list, pilots will just fill in the seats from more junior pilots. If a Delta 777 captain makes $350/flight hour, it does not matter how senior or junior they are. The company still pays for the pilot to fly that seat with the negotiated rate. How does that save $? Unless the workforce takes less pay for a specific job, Delta will not be saving money by buying off employees. The Delta pilots and ALPA will be very slow to negotiate lower wages. The non-union employees may be in for some scary times much sooner. Good luck to them all.


You're ignoring the fact that not everyone is at top of scale. At some point you're replacing a 12-yr 738 captain with a 6-yr captain, and there is a (small) savings. You're ignoring the fact that there will be fewer pilots.
 
Alias1024
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Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 4:02 pm

kiowa wrote:
NYCAAer wrote:
gwrudolph wrote:

Unfortunately, I think you are right. I’m not sure how you can only reduce 20% labor cost when you are facing a 90% revenue reduction. Even 20% on 50% revenue reduction, which seems optimistic in the near term, doesn’t seem to compute


I would think that the retirements are the highest paid employees in the company due to their seniority. For example, a senior purser at Delta flying international exclusively is probably earning three times as much as a newly hired flight attendant. So that could reduce labor costs.


If you buy off the top of the pilot's seniority list, pilots will just fill in the seats from more junior pilots. If a Delta 777 captain makes $350/flight hour, it does not matter how senior or junior they are. The company still pays for the pilot to fly that seat with the negotiated rate. How does that save $? Unless the workforce takes less pay for a specific job, Delta will not be saving money by buying off employees. The Delta pilots and ALPA will be very slow to negotiate lower wages. The non-union employees may be in for some scary times much sooner. Good luck to them all.


With international being slower to recover there is less need to replace those wide body pilots. Instead of immediately training a replacement for say an A330 captain that retires, they just reduce the number of A330 captains, which they were going to do anyway. They pay the early retiree a reduced rate and avoid the training cascade that would occur if that pilot is instead displaced.
It is a mistake to think you can solve any major problems with just potatoes.
 
WaywardMemphian
Posts: 1497
Joined: Sat Dec 13, 2014 9:05 pm

Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 4:02 pm

NYCAAer wrote:
What I found truly amazing is that 15,000 employees agreed to take an early retirement. The number doesn’t include the pilots, that’s still being determined. At AA in flight service, when early retirement was offered early on during COVID-19, only 875 or so flight attendants took it, despite many more than that are way beyond retirement age, in their 70s and 80s.

Kudos to the Delta employees who are leaving, 15,000 is an incredible number, it sounds like Delta might be able to avoid furloughs altogether.


The last go around at FedEx in Memphis was wildly popular. In fact many got upset over getting denied for it. My Mom almost didn't get it over her 'value' to the company. She fought like a mother to be be approved. We have taken that nest egg for her during this pandemic and doubled it with smart buys on the market bottom and have transitioned it back to more stable plays. I imagine longtime employees at these airlines see it the same way.
Last edited by WaywardMemphian on Tue Jul 14, 2020 4:05 pm, edited 1 time in total.
 
TonyClifton
Posts: 216
Joined: Thu May 14, 2020 3:19 pm

Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 4:04 pm

kiowa wrote:
NYCAAer wrote:
gwrudolph wrote:

Unfortunately, I think you are right. I’m not sure how you can only reduce 20% labor cost when you are facing a 90% revenue reduction. Even 20% on 50% revenue reduction, which seems optimistic in the near term, doesn’t seem to compute


I would think that the retirements are the highest paid employees in the company due to their seniority. For example, a senior purser at Delta flying international exclusively is probably earning three times as much as a newly hired flight attendant. So that could reduce labor costs.


If you buy off the top of the pilot's seniority list, pilots will just fill in the seats from more junior pilots. If a Delta 777 captain makes $350/flight hour, it does not matter how senior or junior they are. The company still pays for the pilot to fly that seat with the negotiated rate. How does that save $? Unless the workforce takes less pay for a specific job, Delta will not be saving money by buying off employees. The Delta pilots and ALPA will be very slow to negotiate lower wages. The non-union employees may be in for some scary times much sooner. Good luck to them all.

Also direct cost savings from retraining. Right now every single 777 pilot needs to train in a new jet. If they displaced someone on say the A350, they create a huge waterfall of displacements. If that 777 Captain decides to take an early out instead, you save an entire chain. Individually it isn’t much, but ramp it over a few hundred pilots taking it, and it isn’t insignificant.
 
MIflyer12
Posts: 8014
Joined: Mon Feb 18, 2013 11:58 pm

Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 4:04 pm

NWAESC wrote:
On top of that, there are still some levers left before we have to go to invol. furloughs.


There are, but they may not be up to the scale of the problem.

DL likes to blather about 45K people (of 91,000 full-time-equivalent employees) taking a voluntary leave. However, wages and salaries were down only 24% y-o-y on an ASM 85% capacity reduction with a 94% passenger op revenue reduction.
 
baje427
Posts: 795
Joined: Mon Aug 01, 2011 12:42 am

Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 4:10 pm

Its going to be a while before DL returns to profitability. With looming shutdowns across the US harder times are ahead. All the best to the employees.
 
panamair
Posts: 4324
Joined: Fri Oct 12, 2001 2:24 am

Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 4:12 pm

Some notes from the earnings call and Q&A:

- expect Q3 2020 revenues to be 20-25% of Q3 2019; compared to Q2 2020 at around 10% of Q2 2019
- June average daily cash burn rate of $27m; July is around the same number and expect this to continue into August at this $20-30m level despite adding more flights in Aug.
- Domestic business burning around $17m (of the $27m) a day; international burning $10m a day despite small operation due to ticket refunds
- business travel not returned in any meaningful way; talking to corporate buyers all the time and taking them on 'tours' to explain what Delta has been doing to make the flying experience safer. Individual business travellers are starting to travel more now (based on SkyMiles data)
- will probably extend middle seat blocking and capacity caps beyond Sep 30
- NPS (net promoter scores) never been higher
- Net sales trended positive from May going into June (steady increase in sales plus decrease in refunds) and continuing into July; demand has 'stalled', not necessarily dropped.
- Ended Q2 with $15.7bn of liquidity; was able to access $15bn of additional liquidity this year without issuing equity
- Able to issue debt at blended interest rate of about 5.5%; maturities for the next 18 months have been taken care of/accounted for/extended
- Adjusted Net debt at end of Q2 was $13.9bn, up only about $3.5bn from the pre-Covid start of 2020
- 40,000+ Delta employees on various short-term voluntary leave programs; thousands more signed up into the fall
- As of last night over 17,000+ non-pilot employees signed up for the early-out package, mostly at the higher-paid senior levels
- Talking to Airbus to manage the next 18-24 months, not ready to report anything yet, no cash capex on new aircraft through end of 2020
- Not spending any more money on refurbishing 767-300ER fleet

-
 
gmcc
Posts: 343
Joined: Tue Apr 25, 2006 3:54 am

Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 4:23 pm

Polot wrote:
picarus wrote:
What I find most striking is the acceleration of construction projects at LAX, LGA, and SLC. I incorrectly assumed those capital investments would be extended to preserve liquidity. Very smart move though as it takes advantage of uncrowded facilities and positions them for competitive advantage once the clouds part.

The big things is they have already started (at least LGA and SLC, I don’t know about LAX), so it’s a matter of continuing planned pace, accelerating and saving money, or having half completed construction just sitting around (which depending on stage of construction may be impractical). It’s investments that have yet to break ground that would be deferred.


LAX is well under way with a lot of the long lead time stuff already ordered, structure steel on the new 2/3 head house already up and last time I checked the LAMP webcams the T3 connector is gone as well. All of this is fairly low risk for them as LAWA will reimburse they for most if not all of the non DL specific stuff.
 
User avatar
NWAESC
Posts: 1573
Joined: Thu Aug 30, 2007 1:02 pm

Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 4:24 pm

MIflyer12 wrote:
NWAESC wrote:
On top of that, there are still some levers left before we have to go to invol. furloughs.


There are, but they may not be up to the scale of the problem.

DL likes to blather about 45K people (of 91,000 full-time-equivalent employees) taking a voluntary leave. However, wages and salaries were down only 24% y-o-y on an ASM 85% capacity reduction with a 94% passenger op revenue reduction.


Don't get me wrong; I'm pretty clear-eyed about the gravity of it all. I just think that there are more moves that can/will be made to mitigate layoffs. I think some of those will be anecdotal, and some could be substantial.
"Nothing ever happens here, " I said. "I just wait."
 
alfa164
Posts: 3599
Joined: Sat Oct 06, 2012 2:47 am

Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 4:33 pm

gwrudolph wrote:
Unfortunately, I think you are right. I’m not sure how you can only reduce 20% labor cost when you are facing a 90% revenue reduction. Even 20% on 50% revenue reduction, which seems optimistic in the near term, doesn’t seem to compute


Does "revenue" equate to sales-minus-refunds? If so, the disproportionate amount of refunds during this quarter may obscure what was actually better than a "90% revenue reduction". Going forward, there should be much less refunds processed, and the overall net number may actually be much better.


NWAESC wrote:
Don't get me wrong; I'm pretty clear-eyed about the gravity of it all. I just think that there are more moves that can/will be made to mitigate layoffs. I think some of those will be anecdotal, and some could be substantial.


I am thinking - and hoping - you are in a good position. You are definitely appreciated here, and I am sure Delta feels the same.
I'm going to have a smokin' hot body again!
I have decided to be cremated....
 
User avatar
NWAESC
Posts: 1573
Joined: Thu Aug 30, 2007 1:02 pm

Re: DAL Q2 2020 earnings thread

Tue Jul 14, 2020 4:38 pm

Thank you for the kind words!
"Nothing ever happens here, " I said. "I just wait."

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