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evank516
Posts: 2138
Joined: Wed Mar 01, 2017 12:15 am

Re: DAL Q2 2020 earnings thread

Wed Jul 15, 2020 2:50 am

jb1087xna wrote:
evank516 wrote:
The E70/75 presence in ATL is very small and I don't even think they have a crew base there. I think they only do HHH from ATL with that aircraft.


Is something changing in August? One of the four daily XNA-ATL frequencies will be flown by Republic with a E75 for the month of August. First time a DL E70/75 will have ever been on regularly scheduled service to XNA.


Up until they re-started Hilton Head, I hadn't seen E Jets in ATL for years.
 
deltairlines
Posts: 7084
Joined: Mon May 24, 1999 4:47 am

Re: DAL Q2 2020 earnings thread

Wed Jul 15, 2020 3:13 am

lightsaber wrote:
Delta's JV partnerships have future value in the pist Covid19 world. They invested and lost. What they must do next is become more adaptable when revenue is available. I'm thinking G4 (Allegiant) with 2x/week service with rapidly shifting routes.

I'm still trying to figure out how to simplify the fleet to cut costs. Unfortunately, there is no obvious sacrificial fleet left. I would question 717 longevity once the A220 is more of a known entity.

deltairlines wrote:
nwadeicer wrote:

You have no idea.. I'm like, how do you know this? We're 1100 miles away from ATL and this earnings stuff came out 2 hours ago.. I try to stay away from the rumor monger/mill, hard to sometimes physically.


One thing I've reminded a few friends of mine that still work at DL is don't forget about the profit sharing part of the formula. The past several years this number has been in the 13-16% range of your annual pay. Well, there will be no profit sharing on February 14, 2021, it's not likely there will be profit sharing on February 14, 2022, and maybe a small one on February 14, 2023. That should be taken into consideration in the paycuts - right now, the 25% cut is there, but then there's another ~15% that you would have likely gotten on February 14, 2021 had COVID not been a thing (since all indications are that this year was supposed to be a great financial year for the airlines).

That is a lifeline for Delta. Not having to pay in bad years is a way of cushioning the blow.

This is not a year to gloat.

Lightsaber


My point here is that having worked at Delta corporate for quite a number of years, I know that there are quite a few people there that have gotten accustomed to having that profit sharing check every February 14...some to the point that the budget it into the personal finances for the year ahead. My personal thought is that is dangerous in any situation, since as we know none of us can predict the future, and that you can't guarantee on January 1 of any year whether you'll be getting that check in 13 months.
 
n7371f
Posts: 1830
Joined: Fri Jul 04, 2008 3:54 pm

Re: DAL Q2 2020 earnings thread

Wed Jul 15, 2020 3:33 am

73G is an expensive airplane to fly on CASM. It's even worse when you're only seating 60% cap. And they have the 319 now from NWA that can run the routes of the 73G was ordered when DAL was a standalone carrier. Yes, tons of operational and maintenance commonality with the 738/739 fleet, but still an expense plane to run given the environment.

N649DL wrote:
PSU.DTW.SCE wrote:
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


I'm also very surprised by the retirement announcement of the 73G. I flew it last year for the first time on ATL-BTV. Easily the largest airplane at the airport that night on arrival.

I guess there are only 10 of them and probably doing it for fleet commonality reasons? Also can't the 717 operate what the 73G does now domestically? Older A320 and 763ER retirements I'm not surprised by, especially right now.

But hey, I'm glad the 757s are sticking around :-)
 
n7371f
Posts: 1830
Joined: Fri Jul 04, 2008 3:54 pm

Re: DAL Q2 2020 earnings thread

Wed Jul 15, 2020 3:33 am

What does this mean?

lightsaber wrote:
Delta's JV partnerships have future value in the pist Covid19 world. They invested and lost. What they must do next is become more adaptable when revenue is available. I'm thinking G4 (Allegiant) with 2x/week service with rapidly shifting routes.

I'm still trying to figure out how to simplify the fleet to cut costs. Unfortunately, there is no obvious sacrificial fleet left. I would question 717 longevity once the A220 is more of a known entity.

deltairlines wrote:
nwadeicer wrote:

You have no idea.. I'm like, how do you know this? We're 1100 miles away from ATL and this earnings stuff came out 2 hours ago.. I try to stay away from the rumor monger/mill, hard to sometimes physically.


One thing I've reminded a few friends of mine that still work at DL is don't forget about the profit sharing part of the formula. The past several years this number has been in the 13-16% range of your annual pay. Well, there will be no profit sharing on February 14, 2021, it's not likely there will be profit sharing on February 14, 2022, and maybe a small one on February 14, 2023. That should be taken into consideration in the paycuts - right now, the 25% cut is there, but then there's another ~15% that you would have likely gotten on February 14, 2021 had COVID not been a thing (since all indications are that this year was supposed to be a great financial year for the airlines).

That is a lifeline for Delta. Not having to pay in bad years is a way of cushioning the blow.

This is not a year to gloat.

Lightsaber
 
User avatar
Boeing757100
Posts: 264
Joined: Wed May 06, 2020 10:09 pm

Re: DAL Q2 2020 earnings thread

Wed Jul 15, 2020 3:40 am

Ishrion wrote:
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



What about older 752s? I know it wasn't in the report, but still... Delta will no longer be the largest 757 operator, that will likely go to Fedex sadly. :(
 
Waterbomber2
Posts: 1302
Joined: Mon Feb 04, 2019 3:44 am

Re: Delta airlines Q2 2020 earnings thread

Wed Jul 15, 2020 3:44 am

porkycheds wrote:
Waterbomber2 wrote:
What makes the OP call them mixed results?
They are pure horror.

2.5 more quarters like this and DL is bankrupt.


Just today Delta said that they have enough cash on hand for the next 19 months so I think that statement is factually incorrect. Delta ended the quarter with $15.7 Billion in cash, and that's before the $4.6 Billion in gov't loans they can still access.

"Delta slashed its daily cash burn to $27 million by the end of June from roughly $100 million a day at the end of March. The airline has said it wants to break even by the end of the year. It said it has 19 months of liquidity and had $15.7 billion at the end of the quarter."


There's more than one way to go bankrupt buddy.
One is when you run out of cash, the other is when your debts exceed your assets.

Their equity position is not strong enough to take a lot more of this.
 
alfa164
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Joined: Sat Oct 06, 2012 2:47 am

Re: DAL Q2 2020 earnings thread

Wed Jul 15, 2020 4:05 am

ethernal wrote:
I think critiquing the generous airline bailout is fair, but implying that this money is being funneled through to foreign airlines at this time is a silly claim.


Not only silly; let's call it what it is: an outright lie.


NWAESC wrote:
Oh, for sure. I can’t speak for everyone, but I’m operating on the assumption that I’ll be cut by Halloween. I just decided to enjoy the summer and ride the wave.


I will bet you a gin-and-tonic you will still have a job. Maybe 3 or 4 gin-and-tonics...

;)
I'm going to have a smokin' hot body again!
I have decided to be cremated....
 
porkycheds
Posts: 2
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Re: Delta airlines Q2 2020 earnings thread

Wed Jul 15, 2020 5:00 am

Waterbomber2 wrote:
porkycheds wrote:
Waterbomber2 wrote:
What makes the OP call them mixed results?
They are pure horror.

2.5 more quarters like this and DL is bankrupt.


Just today Delta said that they have enough cash on hand for the next 19 months so I think that statement is factually incorrect. Delta ended the quarter with $15.7 Billion in cash, and that's before the $4.6 Billion in gov't loans they can still access.

"Delta slashed its daily cash burn to $27 million by the end of June from roughly $100 million a day at the end of March. The airline has said it wants to break even by the end of the year. It said it has 19 months of liquidity and had $15.7 billion at the end of the quarter."


There's more than one way to go bankrupt buddy.
One is when you run out of cash, the other is when your debts exceed your assets.

Their equity position is not strong enough to take a lot more of this.


I don't think either one of us is in a position to know what Delta can or can't "take a lot more of, " but when the CEO of said airline comes out and publicly states that they've got the resources necessary to get thru the next 19 months I'll err on the side of caution and hazard a guess that your earlier comment about Delta going bankrupt if they have a couple more quarters like this one as incorrect to put it mildly, buddy
 
Ciel
Posts: 19
Joined: Thu Jan 18, 2018 5:00 pm

Re: DAL Q2 2020 earnings thread

Wed Jul 15, 2020 7:08 am

hondah35 wrote:
Well, if it makes you feel any better, you can smile as you work to pay your taxes which will go in part to the $2B they lost during their foreign airline investing adventures

There needs to be a law preventing any airline receiving bailout funds if it has wasted money investing in overseas airlines


I am not american.

For sure, the strategy of investing in foreign airlines backfired, but I don't think DL was "wasting" money. These investments were strategic, and I believe they would have paid off in the long run, if such a pandemic hadn't occurred.

While we are at it, what I find more shocking than foreign investments, are the companies that do not block the middle seats for social distancing. Efficient or not, any measures that are aiming at ensuring the safety of people should be recognized and encouraged.
 
TYWoolman
Posts: 609
Joined: Sat Jun 24, 2017 8:24 pm

Re: DAL Q2 2020 earnings thread

Wed Jul 15, 2020 9:49 am

gaystudpilot wrote:
TYWoolman wrote:
2-3 years recovery time...then facing a huge debt load. Seems the industry will be changing real fast in the coming years with new hungry startups filling the capacity voids of legacy pull-backs and the legacies thinking of how to bring value to their shareholders in this new reality. Seems like the legacies are not only streamlining themselves for survival but maybe to be in the inevitable position of being able to make a case for "strategic alternatives."


The industry will be lucky to have 75% recovery to pre-2020 levels by 2024.

Agree, we will hear, “under strategic review”, in reference to an airline on this list:

-AA
-DL
-UA

-AS
-B6
-HA
-WN
-F9
-G4
-NK


Yes, some times get this strange feeling will be among the top three, especially if this crisis drags on.
 
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klm617
Posts: 5025
Joined: Sat Jul 04, 2015 8:57 pm

Re: Delta airlines Q2 2020 earnings thread

Wed Jul 15, 2020 11:09 am

NWAESC wrote:
If that was directed at me, thank you for the kind words- I really appreciate it!


They were. People like you are a great asset to this forum. You always share your option seeing the issue from all sides not just a biased perspective that suits your narrative or agenda. And that is much appreciated. None of us knows all the right answers but if we are open to learning we are all richer for that experience and you never talk at us you talk too us to help us better understand the situation without an attitude.
the truth does matter, guys. too bad it's often quite subjective. the truth is beyond the mere facts and figures. it's beyond good and bad, right and wrong...
 
TWFlyGuy
Posts: 426
Joined: Mon Apr 17, 2017 5:10 pm

Re: DAL Q2 2020 earnings thread

Wed Jul 15, 2020 1:26 pm

Prost wrote:
F9Animal wrote:
Maybe airlines should consider having a rainy day fund for things like this? Or some type of insurance for downfalls? I do think this downturn will see the survivors having action plans in the future for a similar situation.


The problem then becomes the airline has all this money just sitting around, and Wall Street will either want to see it used for growth or returned to shareholders. And if it isn’t, some corporate raider will come in and load the carrier up with debt and take the cash, ala Al Checci and Gary Wilson with NWA.


That's correct unless it were regulated to exist. For example, after the 2008 financial crisis, banks had their capital requirements raised and have to pass stress tests. I don't think that would be a bad thing for airlines to be subjected to. It's put the banks in a much more stable position to weather storms. Not that they won't lay off in 2021 (most have said they won't in 2020, but that was early on so things likely have changed). If a capital requirement was regulated to exist you wouldn't have the raider situation.
 
jagraham
Posts: 1104
Joined: Sun Jul 17, 2016 11:10 pm

Re: DAL Q2 2020 earnings thread

Wed Jul 15, 2020 3:40 pm

lightsaber wrote:
I'm confused at the aircraft decisions. Ok, getting rid of old aircraft needing maintenance makes sense, but doesn't save money like removing a type. I was expecting to see at least removing an engine type.

Sadly, Delta needs to cut costs more.

United1 wrote:
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 :)

While not a surprise, getting that almost $2 billion off the plate cleans up the the balance sheet.

Reduced obligated purchases is, sadly, a good thing now.


The other side of the old plane / varied engine type issue is that DL could park those planes for just the storage costs. For example, how many more planes can AA get rid of?

Also, other posters have noted that DL is WFU their youngest 767s. I am in the 'sale' camp (DL is actually selling 767s that have value as opposed to scrapping 767s that have HMVs soon). Cash flow is not just about minimizing maintenance expense . .

Lightsaber
 
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lightsaber
Moderator
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Re: Delta airlines Q2 2020 earnings thread

Wed Jul 15, 2020 4:31 pm

Please post respectfully. Posts celebrating or mocking airline losses will be considered flamebait and deleted. This is a fact based forum, please post accordingly.

Layoffs and furloughs are coming to the industry and no one deserves to be mocked for (hopefully a concern instead of a fact) losing a job beyond their control.

Please take a minute to think about posting during these trying times about what thoughts might be going through the mind of employees of airlines you might not be a fan of.

Lightsaber
Moderator
Airliners.net
Flu+Covid19 is bad. Consider a flu vaccine, if not for yourself, to protect someone you care about.
 
ShinyAndChrome
Posts: 280
Joined: Fri Aug 28, 2015 1:53 am

Re: DAL Q2 2020 earnings thread

Wed Jul 15, 2020 5:55 pm

TWFlyGuy wrote:
Prost wrote:
F9Animal wrote:
Maybe airlines should consider having a rainy day fund for things like this? Or some type of insurance for downfalls? I do think this downturn will see the survivors having action plans in the future for a similar situation.


The problem then becomes the airline has all this money just sitting around, and Wall Street will either want to see it used for growth or returned to shareholders. And if it isn’t, some corporate raider will come in and load the carrier up with debt and take the cash, ala Al Checci and Gary Wilson with NWA.


That's correct unless it were regulated to exist. For example, after the 2008 financial crisis, banks had their capital requirements raised and have to pass stress tests. I don't think that would be a bad thing for airlines to be subjected to. It's put the banks in a much more stable position to weather storms. Not that they won't lay off in 2021 (most have said they won't in 2020, but that was early on so things likely have changed). If a capital requirement was regulated to exist you wouldn't have the raider situation.


I'm not opposed to mandating something like that, but I'd rather it was applied more broadly than just the airlines. Unlike the banks in the last recession, airlines didn't put themselves in this position any more than any other large, heavily capitalized industry. Singling them out as such will make the sector even more uniquely unappealing as an investment than it already is (remember that banks enjoy much greater profitability as an industry).
 
Waterbomber2
Posts: 1302
Joined: Mon Feb 04, 2019 3:44 am

Re: Delta airlines Q2 2020 earnings thread

Wed Jul 15, 2020 6:24 pm

porkycheds wrote:
Waterbomber2 wrote:
porkycheds wrote:

Just today Delta said that they have enough cash on hand for the next 19 months so I think that statement is factually incorrect. Delta ended the quarter with $15.7 Billion in cash, and that's before the $4.6 Billion in gov't loans they can still access.

"Delta slashed its daily cash burn to $27 million by the end of June from roughly $100 million a day at the end of March. The airline has said it wants to break even by the end of the year. It said it has 19 months of liquidity and had $15.7 billion at the end of the quarter."


There's more than one way to go bankrupt buddy.
One is when you run out of cash, the other is when your debts exceed your assets.

Their equity position is not strong enough to take a lot more of this.


I don't think either one of us is in a position to know what Delta can or can't "take a lot more of, " but when the CEO of said airline comes out and publicly states that they've got the resources necessary to get thru the next 19 months I'll err on the side of caution and hazard a guess that your earlier comment about Delta going bankrupt if they have a couple more quarters like this one as incorrect to put it mildly, buddy


Actually we all can.

Take the balance sheet of DL and look at their equity position.
It was about 15 billion USD up to the previous quarter.
Substract 6 billions in losses and their equity goes down to 9 Billions.
So actually it's 1.5 more quarters like this and their equity will turn negative.

The saving grace are the grants that they received. Those should add a quarter.
Hence 2.5 quarters like Q2 and they could be bankrupt.

Ed said that they have an estimated 19 months of liquidity (cash + short-term investments), that doesn't mean that their balance sheet won't turn negative before they run out of cash. So they could have cash to keep running a going concern but be in chapter 11.

They did take a hit on their investments, so it may not be as short as 2.5 quarters.
But calling a 6 billion loss a mixed result is a bit too ridiculous.
 
tphuang
Posts: 5212
Joined: Tue Mar 14, 2017 2:04 pm

Re: Delta airlines Q2 2020 earnings thread

Wed Jul 15, 2020 6:42 pm

Waterbomber2 wrote:
porkycheds wrote:
Waterbomber2 wrote:

There's more than one way to go bankrupt buddy.
One is when you run out of cash, the other is when your debts exceed your assets.

Their equity position is not strong enough to take a lot more of this.


I don't think either one of us is in a position to know what Delta can or can't "take a lot more of, " but when the CEO of said airline comes out and publicly states that they've got the resources necessary to get thru the next 19 months I'll err on the side of caution and hazard a guess that your earlier comment about Delta going bankrupt if they have a couple more quarters like this one as incorrect to put it mildly, buddy


Actually we all can.

Take the balance sheet of DL and look at their equity position.
It was about 15 billion USD up to the previous quarter.
Substract 6 billions in losses and their equity goes down to 9 Billions.
So actually it's 1.5 more quarters like this and their equity will turn negative.

The saving grace are the grants that they received. Those should add a quarter.
Hence 2.5 quarters like Q2 and they could be bankrupt.

Ed said that they have an estimated 19 months of liquidity (cash + short-term investments), that doesn't mean that their balance sheet won't turn negative before they run out of cash. So they could have cash to keep running a going concern but be in chapter 11.

They did take a hit on their investments, so it may not be as short as 2.5 quarters.
But calling a 6 billion loss a mixed result is a bit too ridiculous.


They don't lose morecash from impairment charges.
 
TWFlyGuy
Posts: 426
Joined: Mon Apr 17, 2017 5:10 pm

Re: DAL Q2 2020 earnings thread

Wed Jul 15, 2020 9:30 pm

ShinyAndChrome wrote:
TWFlyGuy wrote:
Prost wrote:

The problem then becomes the airline has all this money just sitting around, and Wall Street will either want to see it used for growth or returned to shareholders. And if it isn’t, some corporate raider will come in and load the carrier up with debt and take the cash, ala Al Checci and Gary Wilson with NWA.


That's correct unless it were regulated to exist. For example, after the 2008 financial crisis, banks had their capital requirements raised and have to pass stress tests. I don't think that would be a bad thing for airlines to be subjected to. It's put the banks in a much more stable position to weather storms. Not that they won't lay off in 2021 (most have said they won't in 2020, but that was early on so things likely have changed). If a capital requirement was regulated to exist you wouldn't have the raider situation.


I'm not opposed to mandating something like that, but I'd rather it was applied more broadly than just the airlines. Unlike the banks in the last recession, airlines didn't put themselves in this position any more than any other large, heavily capitalized industry. Singling them out as such will make the sector even more uniquely unappealing as an investment than it already is (remember that banks enjoy much greater profitability as an industry).


Certainly agree. It should be broader. I think these two are somewhat unique in that they have been the biggest corporate bailout recipients on an industry wide basis but I could see other industries needing. Oil & Gas these days may be next for example.
 
smartplane
Posts: 1508
Joined: Fri Aug 03, 2018 9:23 pm

Re: DAL Q2 2020 earnings thread

Wed Jul 15, 2020 10:06 pm

Josh32121 wrote:
In olden days, it might have represented some up-front cash collection, but today, nearly every booking is paid by credit card, and I recently learned that credit card processing intermediaries withhold a huge chunk of cash from airlines (varies according to specific contract terms, I assume) until the revenue is earned in case they must pay refunds for airlines that stop operating in the interim. Therefore, airlines don't receive much cash benefit from bookings until the passengers fly.

The card companies are in a world of financial pain too. In most jurisdictions, whether they get repaid by their customer or not, ultimately they have to make the refund to the customer. However, there is a process where this can be dragged out, while waiting for the airline to approve the refund (in other words, the claim is justified). The card company also has to refund part of their revenue (commission), so understandable why both card companies and airlines are 'stretching' the refund process.

When refunds consistently exceed inflows from customers, the customer must obtain a bank guarantee and / or credit line to cover the refunds, and the value is many times the actual or average outflow. Not many financiers (none?) willing to underwrite refunds in the present environment.

In normal circumstances, the card companies simply debits the refunds from funds 'passing through', but it doesn't work when the funds flow is negative.
 
hondah35
Posts: 72
Joined: Wed May 16, 2007 1:55 pm

Re: DAL Q2 2020 earnings thread

Wed Jul 15, 2020 10:41 pm

austinrc wrote:
dcaproducer wrote:
Almost all of my federal and corporate customers have banned their staff from flying/traveling. Travel quarantines, which are necessary, will make things even more difficult.


And a lot of that traffic may never come back. People are realizing that all their business trips were often unnecessary.



And a lot of that traffic may never come back. People are admitting that all their business trips were often unnecessary.

FIFY
 
gaystudpilot
Posts: 266
Joined: Sat Dec 08, 2007 10:55 pm

Re: DAL Q2 2020 earnings thread

Thu Jul 16, 2020 7:53 am

TYWoolman wrote:
gaystudpilot wrote:
TYWoolman wrote:
2-3 years recovery time...then facing a huge debt load. Seems the industry will be changing real fast in the coming years with new hungry startups filling the capacity voids of legacy pull-backs and the legacies thinking of how to bring value to their shareholders in this new reality. Seems like the legacies are not only streamlining themselves for survival but maybe to be in the inevitable position of being able to make a case for "strategic alternatives."


The industry will be lucky to have 75% recovery to pre-2020 levels by 2024.

Agree, we will hear, “under strategic review”, in reference to an airline on this list:

-AA
-DL
-UA

-AS
-B6
-HA
-WN
-F9
-G4
-NK


Yes, some times get this strange feeling will be among the top three, especially if this crisis drags on.


I have a similar sense. If something happens, I don’t think it will be a 1:1 combination, i.e., the parts will be greater than the sum.
 
Josh32121
Posts: 287
Joined: Wed Apr 30, 2008 1:02 am

Re: DAL Q2 2020 earnings thread

Thu Jul 16, 2020 9:31 pm

gwrudolph wrote:
Josh32121 wrote:
alfa164 wrote:

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.




I am thinking - and hoping - you are in a good position. You are definitely appreciated here, and I am sure Delta feels the same.


Revenue is not earned until the flight is flown. Bookings only represent unearned deferred revenue until that point. In olden days, it might have represented some up-front cash collection, but today, nearly every booking is paid by credit card, and I recently learned that credit card processing intermediaries withhold a huge chunk of cash from airlines (varies according to specific contract terms, I assume) until the revenue is earned in case they must pay refunds for airlines that stop operating in the interim. Therefore, airlines don't receive much cash benefit from bookings until the passengers fly.

There's a lot of talk in the thread above about reduction in labor costs vs. reduction in revenue, and although labor is a large and not insignificant cost of operating an airline, it's hardly the only cost. Retiring fleet types, deferring maintenance, flying fewer flights to decrease variable costs like fuel, etc. also contribute significantly to cost reduction.

There's certainly nothing normal or even predictable about the current situation, and no one knows when the old "normal" will--if ever--resume. A lot of highly profitable business travel was predicated on the idea that face-to-face meetings were essential to conduct such business. That assumption is highly questionable now. I'm sure some dealings must still take place in person, and certain on-site tasks must still take place. But there's a case to be made that a chunk of business travel will be replaced by virtual encounters and never return.


Labor isn’t the only cost, but logically those Other non-labor costs must also go down proportionately to achieve an overall cost reduction percentage. If you are facing a 90 percent revenue reduction, all costs would need to come down significantly, not just labor. For example, if labor came down 20 percent and it represented 70% of your overall costs, if all other costs were not reduced as well, the reduction to overall costs would only be 14%


Yes, that's exactly my point. There seemed to be some assumption that reducing labor costs by 20% was the only reduction in costs the airlines would see. Not flying flights reduces fuel, landing fees, outsourced ground labor, and other variable costs besides direct employee costs. Plus the retired fleet types will end depreciation expense (a non-cash expense) for those aircraft as well as acruals for maintenance on those aircraft. I'm sure there are others I don't know about or can't think of. Any other incremental cost reductions attributable to flying fewer planes and having fewer butts in seats besides direct labor cost reductions will contribute to overall cost reduction.
ATLien
 
Josh32121
Posts: 287
Joined: Wed Apr 30, 2008 1:02 am

Re: DAL Q2 2020 earnings thread

Thu Jul 16, 2020 9:36 pm

smartplane wrote:
Josh32121 wrote:
In olden days, it might have represented some up-front cash collection, but today, nearly every booking is paid by credit card, and I recently learned that credit card processing intermediaries withhold a huge chunk of cash from airlines (varies according to specific contract terms, I assume) until the revenue is earned in case they must pay refunds for airlines that stop operating in the interim. Therefore, airlines don't receive much cash benefit from bookings until the passengers fly.

The card companies are in a world of financial pain too. In most jurisdictions, whether they get repaid by their customer or not, ultimately they have to make the refund to the customer. However, there is a process where this can be dragged out, while waiting for the airline to approve the refund (in other words, the claim is justified). The card company also has to refund part of their revenue (commission), so understandable why both card companies and airlines are 'stretching' the refund process.

When refunds consistently exceed inflows from customers, the customer must obtain a bank guarantee and / or credit line to cover the refunds, and the value is many times the actual or average outflow. Not many financiers (none?) willing to underwrite refunds in the present environment.

In normal circumstances, the card companies simply debits the refunds from funds 'passing through', but it doesn't work when the funds flow is negative.


I'm not talking about lending losses from cardholders not paying their bills. I'm saying that booking using credit cards do not mean the airline has received all that cash. Unlike most other merchants, card issuers withhold settlement of cash to the airlines for credit card transactions until the flights are flown to protect the card issuer in case the airline goes under and they have to pay out refunds to their cardholders for chargebacks. Bookings do not equal cash to airlines nor do they equal revenue recognized by airlines.
ATLien
 
MIflyer12
Posts: 8068
Joined: Mon Feb 18, 2013 11:58 pm

Re: DAL Q2 2020 earnings thread

Thu Jul 16, 2020 9:54 pm

Josh32121 wrote:
I'm not talking about lending losses from cardholders not paying their bills. I'm saying that booking using credit cards do not mean the airline has received all that cash. Unlike most other merchants, card issuers withhold settlement of cash to the airlines for credit card transactions until the flights are flown to protect the card issuer in case the airline goes under and they have to pay out refunds to their cardholders for chargebacks. Bookings do not equal cash to airlines nor do they equal revenue recognized by airlines.


How broadly does that occur with the Big 4 carriers? What percentage? Yes, credit card holdback reserves were a problem for Frontier before it made a trip into Ch 11 in 2008. The processor was right to be wary.

https://www.reuters.com/article/airline ... 6220081006
 
Josh32121
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Re: DAL Q2 2020 earnings thread

Fri Jul 17, 2020 7:45 pm

MIflyer12 wrote:
Josh32121 wrote:
I'm not talking about lending losses from cardholders not paying their bills. I'm saying that booking using credit cards do not mean the airline has received all that cash. Unlike most other merchants, card issuers withhold settlement of cash to the airlines for credit card transactions until the flights are flown to protect the card issuer in case the airline goes under and they have to pay out refunds to their cardholders for chargebacks. Bookings do not equal cash to airlines nor do they equal revenue recognized by airlines.


How broadly does that occur with the Big 4 carriers? What percentage? Yes, credit card holdback reserves were a problem for Frontier before it made a trip into Ch 11 in 2008. The processor was right to be wary.

https://www.reuters.com/article/airline ... 6220081006


I'm not an insider, so I don't have specific numbers, and I acknowledge it may vary quite a bit depending on the specific airline and its agreements with credit card processors. I just remember the issue coming to light when the coronavirus pandemic began and highlighting the fact that airlines don't necessarily receive cash from credit card bookings right away.

This article is from April but explains the issue:
https://www.forbes.com/sites/marisagarc ... 466ddb75fa

Admittedly, Delta is in a relatively strong financial position (emphasis on "relatively" as the entire industry is in a dire spot right now), so it may not be subject to these holdbacks after all. I'm an accountant by trade, and I just wanted to distinguish between bookings and cash collection and revenue recognition--each of which may happen at different points in time and affect the financial statements in different ways. My original point was that new bookings don't necessarily equal cash collected and definitely not revenue recognized.

I think this holdback thing may become a bigger issue as airline financials deteriorate.
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WBM
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Re: Delta airlines Q2 2020 earnings thread

Sat Jul 18, 2020 4:58 am

Waterbomber2 wrote:

Actually we all can.

Take the balance sheet of DL and look at their equity position.
It was about 15 billion USD up to the previous quarter.
Substract 6 billions in losses and their equity goes down to 9 Billions.
So actually it's 1.5 more quarters like this and their equity will turn negative.

The saving grace are the grants that they received. Those should add a quarter.
Hence 2.5 quarters like Q2 and they could be bankrupt.

Ed said that they have an estimated 19 months of liquidity (cash + short-term investments), that doesn't mean that their balance sheet won't turn negative before they run out of cash. So they could have cash to keep running a going concern but be in chapter 11.

They did take a hit on their investments, so it may not be as short as 2.5 quarters.
But calling a 6 billion loss a mixed result is a bit too ridiculous.

When equity tips negative it does not mean that a company is bankrupt, or that it must enter into bankruptcy. It would not be a good thing for Delta to lose their equity, but it would not necessarily mean they were bankrupt either. They could go bankrupt with positive equity. It is also quite possible to have a thriving business with negative equity. Just last week I worked on the financials for such a company. If you have cash to keep running, there is no need to go into bankruptcy. The more important thing in regards to the 19 months of liquidity is that Delta does not expect the next 19 months to be as bad as the last four months were in regards to net profit. They have been busy adjusting their business to current conditions so that even if business remains down, they won't have as big of losses going forward.
 
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lightsaber
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Re: Delta airlines Q2 2020 earnings thread

Sat Jul 18, 2020 5:20 pm

WBM wrote:
Waterbomber2 wrote:

Actually we all can.

Take the balance sheet of DL and look at their equity position.
It was about 15 billion USD up to the previous quarter.
Substract 6 billions in losses and their equity goes down to 9 Billions.
So actually it's 1.5 more quarters like this and their equity will turn negative.

The saving grace are the grants that they received. Those should add a quarter.
Hence 2.5 quarters like Q2 and they could be bankrupt.

Ed said that they have an estimated 19 months of liquidity (cash + short-term investments), that doesn't mean that their balance sheet won't turn negative before they run out of cash. So they could have cash to keep running a going concern but be in chapter 11.

They did take a hit on their investments, so it may not be as short as 2.5 quarters.
But calling a 6 billion loss a mixed result is a bit too ridiculous.

When equity tips negative it does not mean that a company is bankrupt, or that it must enter into bankruptcy. It would not be a good thing for Delta to lose their equity, but it would not necessarily mean they were bankrupt either. They could go bankrupt with positive equity. It is also quite possible to have a thriving business with negative equity. Just last week I worked on the financials for such a company. If you have cash to keep running, there is no need to go into bankruptcy. The more important thing in regards to the 19 months of liquidity is that Delta does not expect the next 19 months to be as bad as the last four months were in regards to net profit. They have been busy adjusting their business to current conditions so that even if business remains down, they won't have as big of losses going forward.

Considering the last 3 months already scrapped several fleets and took the hit on the JV equity, I do not see how money could be lost as fast.

There is also the matter of October layoffs. :cry2:

I think Delta will be viable a long time. Long before Delta isn't viable, several competitors will fold. Although I fully expect some ULCC to thrive.

Lightsaber
Flu+Covid19 is bad. Consider a flu vaccine, if not for yourself, to protect someone you care about.
 
TropicalSky
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Re: Delta airlines Q2 2020 earnings thread

Sat Jul 18, 2020 7:05 pm

So all told DAL is retiring 70 aircrafts so far?
 
smartplane
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Re: DAL Q2 2020 earnings thread

Sat Jul 18, 2020 8:02 pm

Josh32121 wrote:
smartplane wrote:
Josh32121 wrote:
In olden days, it might have represented some up-front cash collection, but today, nearly every booking is paid by credit card, and I recently learned that credit card processing intermediaries withhold a huge chunk of cash from airlines (varies according to specific contract terms, I assume) until the revenue is earned in case they must pay refunds for airlines that stop operating in the interim. Therefore, airlines don't receive much cash benefit from bookings until the passengers fly.

The card companies are in a world of financial pain too. In most jurisdictions, whether they get repaid by their customer or not, ultimately they have to make the refund to the customer. However, there is a process where this can be dragged out, while waiting for the airline to approve the refund (in other words, the claim is justified). The card company also has to refund part of their revenue (commission), so understandable why both card companies and airlines are 'stretching' the refund process.

When refunds consistently exceed inflows from customers, the customer must obtain a bank guarantee and / or credit line to cover the refunds, and the value is many times the actual or average outflow. Not many financiers (none?) willing to underwrite refunds in the present environment.

In normal circumstances, the card companies simply debits the refunds from funds 'passing through', but it doesn't work when the funds flow is negative.


I'm not talking about lending losses from cardholders not paying their bills. I'm saying that booking using credit cards do not mean the airline has received all that cash. Unlike most other merchants, card issuers withhold settlement of cash to the airlines for credit card transactions until the flights are flown to protect the card issuer in case the airline goes under and they have to pay out refunds to their cardholders for chargebacks. Bookings do not equal cash to airlines nor do they equal revenue recognized by airlines.

I'm not talking about lending losses either.

The only reason card issuers withhold payments to merchants, is in respect to creditworthiness concerns. In the present environment, merchants (in this case airlines), have four choices - repay all the disputed transactions, cease accepting the card, obtain a bank guarantee or credit to the value required by the card issuer, or allow the card issuer to 'hold' funds. For most, the latter is the only option.

Call me cynical, but withholding funds from merchants, usefully assists card issuers liquidity, and creates a buffer if the merchant should fail.

Many new directors fail to look back through board minutes. If they did, they would understand in most jurisdictions becoming a merchant requires LLC's to obtain Board approval, and to minute the execution of the agreement. Why? So all directors are jointly and severally liable, and 'grips' new directors on appointment, and old on transactions until the date of departure (and disputed beyond). You can buy an extension to Directors Liability insurance for this risk, which in the current environment, insurers are now re-pricing and / or cancelling.

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