Interesting.

Basically they say a deal is a deal, and we intend to operate all the contracted 50-seaters until 2020.

Could be a wrench in Delta's plans, or atleast might require a costlier offer to get Skywest to agree to something.

Quote: SkyWest Concerned About 50-Seater Fleet Under Delta’s New Feeder Plan Delta Air Lines ’ plan to encourage its regional airline partners to end their 50-seat regional jet flying before feeder contracts expire could run into resistance at SkyWest , the largest regional operator in the U.S. Delta plans to offer its regional airline partners contracts for new or additional 76-seat flying as an incentive to break current capacity supply agreements and reduce 50-seat regional jet operations. SkyWest CFO Michael Kraupp, however, tells Aviation Week that such an offer would not be acceptable unless an alternative is provided for the 50-seat jets. "We have no interest in parking aircraft,” Kraupp says. “I don’t think you can make enough on dual-class aircraft coming in to justify the costs in parking the aircraft.” SkyWest subsidiaries SkyWest Airlines and ExpressJet operate about 150, 50-seat aircraft , for Delta, under 15-year contracts that Kraupp says do not expire until 2020. Kraupp is emphatic that Delta does not have any rights in the current contract to tell SkyWest to cease the 50-seater operations before the agreements expire.

Full story (subscription required)
http://www.aviationweek.com/Publications/aviationdaily.aspx

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My money says both sides have a plan on what to do with the other. My money also says DAL's lawyers can beat up Skywest's lawyers. They already got Ornstien's,

They might also want to consider they want any new Delta contracts after 2020.

Quoting DashTrash (Reply 1): My money says both sides have a plan on what to do with the other. My money also says DAL's lawyers can beat up Skywest's lawyers. They already got Ornstien's,

DL's beef with Mesa was completely different than this, and no doubt helped by Mesa's poor financial performance (and eventual bankruptcy filing). The two really aren't comparable.

That said i am sure OO and DL will work something out where both parties are happy.

Mesa's operational performance with Freedom was directly related to crappy scheduling by DELTA. I worked for YV planning when we launched the JFK flying - before that, we were a darling DCI carrier.

But a 3:40PM JFK-PVD departure blocked at 41 minutes won't cut it, especially since that plane was still on the ground @ JFK in queue at 4:15PM on a regular basis.

Delta refused to budge on a lot of the times.

Our MCO & CVG numbers were the best in the DCI system *east* of the Mississippi. It wasn't until planes started touching ATL and JFK that things went to hell... coincidence?

Quoting usxguy (Reply 4): Mesa's operational performance with Freedom was directly related to crappy scheduling by DELTA. I worked for YV planning when we launched the JFK flying - before that, we were a darling DCI carrier. But a 3:40PM JFK-PVD departure blocked at 41 minutes won't cut it, especially since that plane was still on the ground @ JFK in queue at 4:15PM on a regular basis. Delta refused to budge on a lot of the times. Our MCO & CVG numbers were the best in the DCI system *east* of the Mississippi. It wasn't until planes started touching ATL and JFK that things went to hell... coincidence?

Whoever did your contract negotiations was clearly sub-standard. Not having any recourse in scheduling is a MAJOR failure.

Oh we did... but they also pushed back. The first file you get is what DL wants, you send back edits, then it comes back to you, etc etc. Sometimes you get what you want, and sometimes you get f'd. Only 100% pro-rate flying does the operating carrier have total say in the schedule.

With any major, there are so many hands in the pot with scheduling that its not an easy or fun task. We may shoot back to DL that the PVD flt departing at 3:40PM needs to arrive at 5:00PM, then return PVD @ 5:25PM, arr JFK 6:25PM may not bode well with DL (ops, marketing, etc) if they wanted it to be 3:40PM / 4:22PM // 4:50P / 5:35PM -- as you can see, our #s are off by 1 hour, which means they can't fly another flight.

It also didn't help that the YV Dash 8s acquired for JFK weren't quite.... good. Some birds were fine, but there was 1 plane that I believe we had to spend over $1 million on.. the YV mechanics even found the wires to the FDR/CVR had been frayed.

Quoting klkla (Reply 2): They might also want to consider they want any new Delta contracts after 2020.

True, I doubt if they'd like to lose ANY of the DL flying, particularly at SLC. Mr. Kraupp needs to know what the term compromise, is, or find another way for the 50 seaters to be economical. After all it IS Skywest and ExpressJet that is flying them......they should know how to make it pay. I would think he would compromise rather than lose the 70/76 seat flying, too.

In my experience, OO doesn't randomly do something without having a plan or long term goal in mind. I suspect there is more to this than SkyWest management simply being stubborn. With the Comair shutdown rumor, and 9E bankruptcy issues, I can't help but think there is more to all of this.


On the OO/YV note, OO has half a billion in the bank, finding lawyers that could spar with DL's legal team wouldn't be too far fetched for them. OO also provides more lift for Delta than YV did (IIRC), and is especially prominent out west. It seems that it would be in the best interest for each carrier to find a medium that works for both here.

2020 is just around the corner and Skywest + ASA depend on Delta. If Skywest wants to play hardball...so can Delta. In the end Delta will win.

The questions are...can Skywest survive without Delta? Can Delta survive without Skywest?

I think Skywest better realize this........50 seat flying is on the way out.......the coming 717s show that .......the pax want them gone, DL wants them gone, DL's pilots want them gone and I doubt if DL is going to reverse course, now. The most OO can hope for is some sort of compromise. Digging in your heels, as Kraupp has done is not the way to do it.

[Edited 2012-07-19 11:39:24]

[Edited 2012-07-19 11:40:10]

I think the point here is Delta has a commitment that it simply cant walk away from.

Somehow it must make an offer rich enough for SkyWest to agree to a modification.

Look it this way, you own a company that makes widgets. You have a 15-year agreement worth $x Billion with a customer, who now walks in and says they essentially want to shalve that agreement.
So not only would your revenues drop, you are still left with an oversize your factory, equipment, staff and overhead.


To me the burden is on Delta, to come up with something sweet enough to compensate SkyWest with. Otherwise they are still bound to the terms of that contract that runs till 2020.

OO is acting in bad faith, and if this continues, OO should prepare to get sued by Delta.

Quoting mayor (Reply 10): the pax want them gone

Quoting mayor (Reply 10): DL's pilots want them gone

Neither of which have much say in the matter. As long as 50 seat jets are more profitable than 76+ seaters, they will stay. As it is, they are not, which is the ONLY reason why DL wants them gone.

Quoting LAXintl (Reply 11): I think the point here is Delta has a commitment that it simply cant walk away from.

They absolutely can. I know the JO haters like to say it was all his fault, but Delta really screwed Mesa over, and their lawyers are far better than some low-bid outfit.

I figured this was going to happen. The big thing happening here is now the 50 seat lift is limited by the new Delta CBA. The 50 seat jets have to come from somewhere. Right now you have Comair, Pinnacle, Expressjet, Skywest and Chautauqua providing 50 seat lift for Delta. Chautuaqua I believe would be more than happy to park the few 50 seaters they have for Delta. Comair seems likely to be out of business in the near future. Even so, the lift that they provide is not enough to shrink the 50 seat fleet down. On paper, it would appear that the easiest place to pull the lift from would be Pinnacle, since they are bankrupt. However, Delta owns most of the planes that PInnacle flies, and with the bankruptcy, would be likely to get more favorable flying terms due to labor costs being reduced. This combines to put pressure on SkyWest since they own both Expressjet and SkyWest. Where the bind comes in is the contracts are good until 2020, but Delta cannot honor those contracts without honoring the recently ratified ALPA contract at the same time. For this reason...I believe that lawyers from everybody will get involved. But at the same time, I can't help but remember what happened to Air Wisconsin 7 years ago. They had just recently signed a deal with UA of a similar length of time which was 70 CRJ's and 18 146's, and then all of a sudden UA found a way to pull the plug on the whole deal, and left Air Wisconsin hung out to dry. While I don't think this will happen with SkyWest since Delta is not in bankruptcy the way UA was...you can be sure that DL has lawyers looking at every angle of their contract with SkyWest carefully, and there will be pressure on SkyWest in the future. I don't think it will be total gloom and doom for SkyWest, but they are not in a good position at the moment.

One thing Delta could do with SkyWest is move another carrier into SLC and move much of the SkyWest flying into NYC and DTW. This obviously would not be a good thing for SkyWest at all, but it would give Delta a bit of leverage over SkyWest since they control most of the schedules.

Keep an eye on the UA negotiations as well. UA has basically the same regionals providing lift for them as Delta (Save for Pinnacle), and depending on what their pilots get in negotiations with UA, it could put pressure on regionals operating for them as well.

Also the AA bankruptcy is key, because if there is scope relief involved, it could give airlines another place to put airplanes that would otherwise sit in the desert.

Quoting 1337Delta764 (Reply 12):

How? By asking Delta to uphold the contractually agreed upon terms? Believe it or not mainline partners can't just do as they please.

Quoting LAXintl (Reply 11): I think the point here is Delta has a commitment that it simply cant walk away from. Somehow it must make an offer rich enough for SkyWest to agree to a modification.

This. SkyWest has an issue with simply exchanging 50 seaters for 70 seaters because they own many of their 50 seaters. That's a huge expense to park those aircraft and go through the process of bringing new aircraft to the fleet. If Delta wants to shrink their 50 seat fleet, they either park aircraft that they own or hold the lease on, or they make a deal that works for SkyWest.

Quoting 1337Delta764 (Reply 12): OO is acting in bad faith, and if this continues, OO should prepare to get sued by Delta.

How is honoring a contract acting in bad faith?

Quoting Maverick623 (Reply 13): Neither of which have much say in the matter. As long as 50 seat jets are more profitable than 76+ seaters, they will stay. As it is, they are not, which is the ONLY reason why DL wants them gone.

Doesn't make any difference WHY DL wants them gone.....they just do. Can you see ANY scenario where the 50 seaters would suddenly become profitable? NO? I can't either. BTW, the pilots have enough say in the matter to make it part of the latest contract.

Quoting LAXintl (Reply 11): I think the point here is Delta has a commitment that it simply cant walk away from. Somehow it must make an offer rich enough for SkyWest to agree to a modification.

  

Quoting OOer (Reply 9): 2020 is just around the corner and Skywest + ASA depend on Delta. If Skywest wants to play hardball...so can Delta. In the end Delta will win.

Could DL walk away from SkyWest? After 2020, sure. But DL also *needs* 76 seat RJ partners. Guess what, there is little chance the other RJ providers could afford to buy the required aircraft in time.

I suspect OO wants to negotiate a transition based on MRJ deliveries and CRJ maintenance or lease expiration (do they own or lease their aircraft). No one holds any illusions as to the life left in CRJs. But DL should hold no illusions on the financial health of OO's competition to finance a large purchase.

OO has also committed to a next generation of aircraft. Who would want to buy the previous generation with the inherent resale risk?

There will be a compromise. This large of a negotiation is a dance. What is in question is the number of DL 76 seaters in the next contract.

Lightsaber

Quoting 1337Delta764 (Reply 12): OO is acting in bad faith, and if this continues, OO should prepare to get sued by Delta.

I would venture to say that it is Delta acting in bad faith. Just because they are the mainline carrier doesn't mean they can just cancel contracts at will.

One question I have is how much longer with what is going on is SkyWest going to be able to keep the Skywest side union free? Talking to pilots at SkyWest...the work has been brutal as of late, and with potential Shrinkage, wouldn't they want protection for furloughs, since as a non union carrier, could OO just lay people off? I don't know the ramifications of being non union, so someone needs to clear this up.

Quoting Caspian27 (Reply 19): I would venture to say that it is Delta acting in bad faith. Just because they are the mainline carrier doesn't mean they can just cancel contracts at will.

And how is trying to improve efficiency acting in bad faith? Delta has perfectly valid reasons to increase 76-seat flying, while OO has NO valid reason to continue to fly 50-seaters.

Quoting apodino (Reply 20):

Being non-union has nothing to do with contracts between SkyWest and their mainline partners. Otherwise I agree. A union is a good idea.

Quoting 1337Delta764 (Reply 21): Delta has perfectly valid reasons to increase 76-seat flying, while OO has NO valid reason to continue to fly 50-seaters.

OO is contracted to fly 50 seaters until 2020. Seems like a valid reason to me to fly them.

Quoting Caspian27 (Reply 22): Being non-union has nothing to do with contracts between SkyWest and their mainline partners. Otherwise I agree. A union is a good idea.

Agreed, but if Delta starts doing things with SkyWest that starts to affect the crews QOL, then it does become an issue and without Union protections in place, who knows what can happen. SkyWest has worked very hard to stay non union, but I am not sure how much longer crews will hold out at this rate.

Quoting Caspian27 (Reply 22): A union is a good idea.

A union is there to protect you from management, not personnel quotas.

Quoting 1337Delta764 (Reply 12): OO is acting in bad faith, and if this continues, OO should prepare to get sued by Delta.

Deltas really has no standing to sue Skywest. On what grounds? Delta is the one who wants to change the contract midterm.


The problem comes down to all regionals having too many 50 seaters on lease. My guess is OO cant simply return parked 50 seaters and there is no market for them elsewhere with another carrier or in the secondary market.

This will have to be worked out but I'd say OO has the better argument right now.

Quoting 1337Delta764 (Reply 21): And how is trying to improve efficiency acting in bad faith? Delta has perfectly valid reasons to increase 76-seat flying, while OO has NO valid reason to continue to fly 50-seaters.

OO has every reason to continue to fly 50 seaters, namely a contract to do so for another 7+ years. Their planning and investments are based on that contract. No doubt dropping the 50 seaters is good for DL, hence the onus is on DL to provide incentives to OO. Its not OO's problem that things have changed at DL therefore it is certainly not OO's obligation to shoulder the burden of accommodation..

Quoting Caspian27 (Reply 19): I would venture to say that it is Delta acting in bad faith. Just because they are the mainline carrier doesn't mean they can just cancel contracts at will.

Quoting Flaps (Reply 27): Its not OO's problem that things have changed at DL therefore it is certainly not OO's obligation to shoulder the burden of accommodation..

If Skywest wants to control their own destiny they need to start an airline and not a services company. DL will win in the end. It may involve courts, fees etc. but DL will not contribute to paying for money losing feed. The worst case scenario the judge orders tell to pay a sum to OO and that will be the end of the 50 seat issue. OO gets cash and then OO can park the 50 seaters. All good for DL and OO except for those pesky OO employees that think they can tell DL what to do with the assets. The employees will be on the street, OO will have the cash and DL will have the feed issue solved. So it cost DL a few bucks in the courts to end the contracts. Overall it is better than operating a fleet of gas guzzling, high cost, zero profit barbie jets.

OO survives as a parasite that depends on the host for survival. They can complain all they want but without a host OO is toast. Nothing says a regional carrier is guaranteed a life. Look at ComAir and what has transpired there. ACA/Independence is another good example of a regional trying to dictate to the major. The history does not favor the parasite.

Quoting Flaps (Reply 27): Its not OO's problem that things have changed at DL therefore it is certainly not OO's obligation to shoulder the burden of accommodation..

Surely it's been obvious to OO, as it has been to everyone else for quite awhile, that the 50 seaters are inefficient. Could they not see the handwriting on the wall?

Quoting 1337Delta764 (Reply 21): And how is trying to improve efficiency acting in bad faith? Delta has perfectly valid reasons to increase 76-seat flying, while OO has NO valid reason to continue to fly 50-seaters.

This is a scary mindset. Delta contracted with SkyWest for flying but it's fine if they just blow off SkyWest because they changed their mind?

I hope union contracts aren't viewed the same way by Delta or things could get interesting in a few years.

-Dave

Quoting LAXintl (Reply 11): I think the point here is Delta has a commitment that it simply cant walk away from. To me the burden is on Delta, to come up with something sweet enough to compensate SkyWest with. Otherwise they are still bound to the terms of that contract that runs till 2020.

        

I do not think this is about faith (good or bad). It is about the fact that Skywest wants to protest the interests it has. (employees, shareholders, etc). If they didn't then management would be fired by the board for not doing their job.
It is not their job to let Delta make changes to contracts without a carrot being in place for them.
It is about leverage, yes, Skywest needs to be careful because they want a bigger slice of the 76seat flying, but really how many regionals exist. They are the largest, so lets not say they don't have any power in this discussion given the size that they are. Are they as big as DL or UA, no, but they are very important as regionals go.

In all of this do you not think that DL took this contract into account when they came up with these plans? Did they, maybe, find a loophole in the contract that would allow them to do this? Or maybe they've come up with something, to present to OO in the next few months before the 717s come on property..........there are so many things that could be coming up that we don't know about, YET..........  

[Edited 2012-07-19 13:16:33]



Another thing I thought about...........did not Skywest muddy up the waters in all this by going ahead and ordering the MRJs, knowing that, possibly, 50 seat flying would be disappearing?

[Edited 2012-07-19 13:18:20]

Quoting Flaps (Reply 27): Its not OO's problem that things have changed at DL therefore it is certainly not OO's obligation to shoulder the burden of accommodation..

And as contracts expire, will DL consider further work for OO. Probably not..

Quoting ridgid727 (Reply 33): And as contracts expire, will DL consider further work for OO. Probably not..

Exactly. Does OO think there's enough work out there to replace the DL flying?

Quoting mayor (Reply 32): In all of this do you not think that DL took this contract into account when they came up with these plans? Did they, maybe, find a loophole in the contract that would allow them to do this? Or maybe they've come up with something, to present to OO in the next few months before the 717s come on property..........there are so many things that could be coming up that we don't know about, YET

Agreed.

Quoting ridgid727 (Reply 33): And as contracts expire, will DL consider further work for OO. Probably not..

I never said or implied that OO shouldn't compromise. It's in both parties interest to do so. You cannot however just make a business practice of blowing off contracts whenever it suits your fancy. Sooner or later its going to come back to bite you.

This is so much to do about nothing. OO is just positioning itself before what will be very difficult negotiations. These two carriers will eventually work out an amicable arrangement.

Some of you guys are jumping to crazy conclusions.

DL said something. OO responded.

That doesn't mean the 2 are gonna battle in court, OO is going to be the next Mesa, DL is sending OO to JFK, OO won't fly for DL after 2020, etc

I'm sure DL will respond back, OO will respond ... eventually ... an agreement. My money is on that scenario

Quoting jetlanta (Reply 36): This is so much to do about nothing. OO is just positioning itself before what will be very difficult negotiations. These two carriers will eventually work out an amicable arrangement.

I think this is likely exactly what's going on.

What's unfortunate is how quickly some here just jumped on the "Screw SkyWest" bandwagon. I mean, SkyWest has been a partner of Delta's since the Western Airlines days. I appreciate the loyalty to Delta for some, but can we avoid the "shoot first and ask questions later" kneejerk remarks?

I guess it's just how it is on here though...

-Dave

Quoting DashTrash (Reply 1): My money says both sides have a plan on what to do with the other. My money also says DAL's lawyers can beat up Skywest's lawyers. They already got Ornstien's,

Quoting DashTrash (Reply 1): They might also want to consider they want any new Delta contracts after 2020.

Both good points.

The over-riding issue is that the CRJ is notoriously inefficient and ill-suited as a long term (ie. to 2020) mainline feeder, barring a sustained collapse in oil prices. SkyWest needs to question its bet to rely on the CRJ, contract or not.

Quoting mcdu (Reply 28): So it cost DL a few bucks in the courts to end the contracts. Overall it is better than operating a fleet of gas guzzling, high cost, zero profit barbie jets.

If they are going to pay out OO for the incremental lost dollars, they don't need to go to court. That is probably what will happen. OO gets reimbursed for the costs of parking the 50's and gets X number of 70's in return for the considerations.

Quoting mayor (Reply 29): Surely it's been obvious to OO, as it has been to everyone else for quite awhile, that the 50 seaters are inefficient. Could they not see the handwriting on the wall?

Yeah, but it's not like you can just return an airplane out of the blue that you leased for 15 years at the start of the contract! They know the 50's are goners, but there is nothing they can do about getting rid of the aircraft without a penalty to themselves.

If it came down to it and OO had to "park" the 50 seaters, is it possible they could at least put a fraction of the fleet to service on at-risk routes? They've flown routes like FAT and PSP - LAS for years at-risk under the UA branding most if not all the time I believe. I know the number of routes that need 50 seaters based on O&D is limited, but oil is not all that expensive at the moment (enough time to re-work or get another contract with some one else for contracted flying long-term down the road).

Quoting iowaman (Reply 41): is it possible they could at least put a fraction of the fleet to service on at-risk routes?

That is just too big a fleet. They could probably move 15 or 20, but what good is that really out of 150? The combined SKYW has 488 RJ50's is active service right now, just for scale of reference.

Quoting mcdu (Reply 28): If Skywest wants to control their own destiny they need to start an airline and not a services company

Quoting mcdu (Reply 28): OO survives as a parasite that depends on the host for survival.

It goes both ways. Delta would be a much smaller airline without the feed provided by regionals.

Did you know that according to Airfleets.com SkyWest Holdings has more active aircraft than DL does? It's a narrow margin, and obviously the guage is not the same, but it's true.

SkyWest IS an airline whether you like it or not. And one that happens to be damn good at what it does.

Lots of rubbernecking going on. Please move along...
OO is not suicidal. This is just an exersise in building leverage for negotiations. DL knows it has contracts. It just wants them tweaked. OO very much would like to become part of the tweaking and speaking up helps. That's all folks.

Interesting related news story:

http://aviationblog.dallasnews.com/2...int-refurbish-jets-for-delta.html/

• - Southwest is PAYING $100MM in costs to repaint the 88 B717s into DL colors and put in DL-standard seats.
  
• - Boeing is REDUCING the value of the planes by $40MM, ultimately netting DL better lease rate on the planes than WN/FL was paying previously.
  

The reason I think this is related is that DL now has a pretty big bag of money that they can use to pay off "transition costs" to regionals for dropping or parking the CRJ1/2s since they didn't have to pay the cost to move the B717s to DL standards. OO's CFO seems to be saying in his statement that they'll have to use a lot of this transition cost to pay them off to park the CRJ1/2s and that they aren't going to take a 58/76 seater in return on a 1:1 basis without a payment to settle the current contract.

[Edited 2012-07-19 16:06:22]

Quoting BNAtraveler (Reply 44): OO's CFO seems to be saying in his statement that they'll have to use a lot of this transition cost to pay them off to park the CRJ1/2s and that they aren't going to take a 58/76 seater in return on a 1:1 basis without a payment to settle the current contract.

I'm sure OO would love to take CR7s/CR9s on a 1:1 basis but the problem is DL probably wants OO to dump 2 or 3 CR2s for every larger RJ. Assuming DL shuts down OH, which looks likely, DL will still have ~315 50 seat RJs under CPAs. That number needs to get down to 125 in 3 years which means 190 50 seaters must go away. DL only has 70 new 76 seaters, 16 large RJs that used to be operated by 9E, plus the 28 OH large RJs to dangle in front of the regional carriers. So it almost certainly must be close to a 2:1 basis.

[Edited 2012-07-19 17:19:45]

Quoting apodino (Reply 24): Agreed, but if Delta starts doing things with SkyWest that starts to affect the crews QOL, then it does become an issue and without Union protections in place, who knows what can happen. SkyWest has worked very hard to stay non union, but I am not sure how much longer crews will hold out at this rate.

If Skywest pilots decide to bring a union on the property, there will be nothing to stop corporate from merging the Skywest and Expressjet certificates into one carrier. The costs associated with the two tickets could be eliminated. Merging the two pilot groups into one could do more to impact QOL than just about anything else the company is doing right now.

Quoting jetlanta (Reply 36): This is so much to do about nothing. OO is just positioning itself before

Kinda like what Expressjet worked out with CO a few years back?

What good would a union do?

You either have the business or you don't. If you don't have the business, you can't pay people.

The only thing a union would do is force a shutdown.

NS

Quoting 1337Delta764 (Reply 12): OO is acting in bad faith, and if this continues, OO should prepare to get sued by Delta.

Quoting 1337Delta764 (Reply 21): And how is trying to improve efficiency acting in bad faith? Delta has perfectly valid reasons to increase 76-seat flying, while OO has NO valid reason to continue to fly 50-seaters.

Please stop because you really don't know what you're talking about. Parties that are signatories to an agreement are contractually obligated to abide by its terms. If the contract says that OO must fly a certain number of 50-seaters until 2020, then DL's desire to increase efficiency is immaterial until the contract is amended. Holding up your end of the bargain is not "bad faith" no matter how you look at it.