delimit wrote:

JAMBOJET wrote:

delimit wrote:

2. Do you feel like VS and AM's performance is somehow relevant here? I'm not seeing what point you're trying to make by bringing them up.

Point is: Should companies that were, at best, struggling pre-pandemic be saved?
If a company can't make money in the best of times, why should the government bail it out when it stands to significantly benefit a foreign carrier's P&L (and obviously those locally employed as well)? As it pertains to Delta, if the government bails a local carrier out and dilutes Delta's ownership, should the company stay as closely aligned with Delta given a move toward negative earnings in that relationship. We can all argue whether it would've been worse for VS and/or AM profitability absent the Delta relationship, but the fact remains that in the most profitable flying period in a long time, AM and VS were losing money pre-pandemic and their profit/loss seemed to be a negative trajectory in the midst of that Delta relationship.

They were not, "at best, struggling". That's overly reductive. And that's up to their governments, because of my first point. In AM and KE's case; you would be chunking out a huge amount of each country's capacity. Do you think either country wants gaping holes in their air network?

Unprofitable in 2019 while Delta pays out a record $1.6B in profit sharing = "Struggling, at best".

And the second point made is the entire point of my post, what will those foreign governments do to preserve air service while not bailing out Delta's investment. A significant dilution/elimination (in the result of nationalization) of Delta's equity seems rather obvious/likely.

delimit wrote:

JAMBOJET wrote:

delimit wrote:

2. Do you feel like VS and AM's performance is somehow relevant here? I'm not seeing what point you're trying to make by bringing them up.

Point is: Should companies that were, at best, struggling pre-pandemic be saved?
If a company can't make money in the best of times, why should the government bail it out when it stands to significantly benefit a foreign carrier's P&L (and obviously those locally employed as well)? As it pertains to Delta, if the government bails a local carrier out and dilutes Delta's ownership, should the company stay as closely aligned with Delta given a move toward negative earnings in that relationship. We can all argue whether it would've been worse for VS and/or AM profitability absent the Delta relationship, but the fact remains that in the most profitable flying period in a long time, AM and VS were losing money pre-pandemic and their profit/loss seemed to be a negative trajectory in the midst of that Delta relationship.

They were not, "at best, struggling".

1. VS: https://news.delta.com/growth-delta-vir ... nt-venture JV starts in 2014
2013: New CEO comes in to turn things around:
2014: $14.4M pound pre-tax profit -- Promises Profits of $99M pounds by 2018 (didn't happen) https://www.ft.com/content/aab18446-c68 ... 144feab7de
2015: profitable by $22.5M pre-tax (referenced in the 2016 report below):
2016: $23M Pound pre-tax profit https://flywith.virginatlantic.com/cont ... Report.pdf
Unprofitable in 2017 and 2018, "hopeful to return to profitability by 2021 with the help of the FLYBE acquisition." i think anyone can guess how well thought-out that profitability strategy was if flybe was a part of it: https://www.reuters.com/article/us-virg ... SKCN1RM1GT


2. AM. JV with Delta starts in 2017: https://www.flightglobal.com/aeromexico ... 20.article
2017: Profit of $17M Pesos: https://www.eturbonews.com/178356/grupo ... enue-12-1/
2018: Net loss of $857M pesos https://newsroom.aviator.aero/aeromexic ... 8-results/
2019: Full Year isn't available. AM said in 3q19 that their year-to-date results were worse than in 2018, thus far. $2.3B Peso loss in the first three quarters of 2019 vs a $1.2B peso loss in the equivalent 2018 time period. https://aeromexico.com/cms/sites/defaul ... o_3Q19.pdf

3. I didn't bring up KE in my example of loss-making companies, but since it's been mentioned. JV with Delta starts in 2018 https://www.delta.com/us/en/airline-partners/korean-air
2017 Pre-Tax Profit: Profit https://centreforaviation.com/news/kore ... 017-766551
2018: Half of year with Delta: Net Loss: https://pulsenews.co.kr/view.php?year=2019&no=62775
2019: Even worse than 2018: https://en.yna.co.kr/view/AEN20200206012400320 If anything, the Delta JV should've helped offset weakness in the Won by diversifying with more USD-based travelers but it clearly didn't.

"Struggling, at best".

You seem to be confused as to who benefits here.

Delta will get it's money out of KE and AM's carcasses if they are allowed to go down; but Korea and Mexico will suffer when their dominant carriers fail.

delimit wrote:

You seem to be confused as to who benefits here.

Delta will get it's money out of KE and AM's carcasses if they are allowed to go down; but Korea and Mexico will suffer when their dominant carriers fail.

Doubtful, but that's why it's a blog here instead of fact. Usually equity investors are the last to get anything, and a foreign airline would seem to be the last in line for anything with a locally-provided government bailout to save the company. And, again, the entire point is that any bailout will lower Delta's equity through dilution (government equity stake), elimination (liquidation or nationalization), or increased debt (loan) thereby reducing the value of equity as it pertains to a steady or increased enterprise value.

For the third time: government collateralization of debt through shares is generally temporary. As the debt is repaid the original ownership returns. Unless you think they are going to renationalize the airlines?

delimit wrote:

For the third time: government collateralization of debt through shares is generally temporary. As the debt is repaid the original ownership returns. Unless you think they are going to renationalize the airlines?

I think we can both agree that nobody knows. AZ already was nationalized. France is talking about nationalization of Air France as an option. Simply making the point that any bailout of any airline where Delta owns equity is unlikely to be structured in a way that benefits Delta.
And, right now, many airlines are talking about bailout sums that are, in some cases, more than the value of their current equity.

I hope this is a wake-up call for airlines to invest in themselves before throwing their money at other airlines. Now Delta could really use all of the money they put into VS, Latam, AM, GOL

Honestly I don't think it likely enough to be worth discussing. Alitalia is a special case. Italy has been looking to renationalize for years. It's the only way Alitalia keeps going.

TTailedTiger wrote:

I hope this is a wake-up call for airlines to invest in themselves before throwing their money at other airlines. Now Delta could really use all of the money they put into VS, Latam, AM, GOL

Nope. Nonsense. Those were good investments for Delta. The US majors are dominating air travel right now and that's great for the US. But the world had a catastrophe and now the government is helping it stabilize. Then they should pay the government back it's money and go on doing what they were doing; because they've never been healthier.

TTailedTiger wrote:

I hope this is a wake-up call for airlines to invest in themselves before throwing their money at other airlines. Now Delta could really use all of the money they put into VS, Latam, AM, GOL

Right, because DL definitely wasn't investing in itself over the years...

Just off the top of my head, DL:

• Refurbished the vast majority of their mainline fleet, including installation of AVOD on most aircraft
• Invested a huge amount of money into airport terminal improvement projects at LAX, SLC, ATL, LGA, JFK, and others
• Worked on many technology upgrades for employees (e.g. tablets for flight attendants)
• Paid down debt
• Payed out industry-leading profit sharing to employees
• Took delivery of hundreds of new 739s, 321s, 221s, 359s, 339s...

Wake up, Delta! Time to start investing in yourself for once!

P.S. It's easy to argue that DL's investments in other airlines are also really investments for itself. They're not just trying to benevolently help out the little guys - they are trying to build share in important markets like U.S.-Mexico and U.S.-London that strengthens their own performance in those markets through the ability to offer a broader network than they could offer on their own.

FSDan wrote:

TTailedTiger wrote:

I hope this is a wake-up call for airlines to invest in themselves before throwing their money at other airlines. Now Delta could really use all of the money they put into VS, Latam, AM, GOL

Right, because DL definitely wasn't investing in itself over the years...

Just off the top of my head, DL:

• Refurbished the vast majority of their mainline fleet, including installation of AVOD on most aircraft
• Invested a huge amount of money into airport terminal improvement projects at LAX, SLC, ATL, LGA, JFK, and others
• Worked on many technology upgrades for employees (e.g. tablets for flight attendants)
• Paid down debt
• Payed out industry-leading profit sharing to employees
• Took delivery of hundreds of new 739s, 321s, 221s, 359s, 339s...

Wake up, Delta! Time to start investing in yourself for once!

P.S. It's easy to argue that DL's investments in other airlines are also really investments for itself. They're not just trying to benevolently help out the little guys - they are trying to build share in important markets like U.S.-Mexico and U.S.-London that strengthens their own performance in those markets through the ability to offer a broader network than they could offer on their own.

That does them no good if those airlines fail and are liquidated or their governments bail them out and wipes out any DL control. Sort of like my business. I've taken properties away from banks who failed to pay the property taxes. It doesn't matter how big their mortgage was. A tax lien will take precedence and wipe out the other investors.

You're kind of all over the place here. They had what was considered a very health amount of cash up until the world aviation market contracted by 75% inside of a month.

Hind sight is 20/20. I expect the conversations of what level of catastrophe an airline should expect will be interesting over the next few years. But it won't matter, because no Republican will ever allow those kinds of corporate restrictions to make it into law.

delimit wrote:

You're kind of all over the place here. They had what was considered a very health amount of cash up until the world aviation market contracted by 75% inside of a month.

Hind sight is 20/20. I expect the conversations of what level of catastrophe an airline should expect will be interesting over the next few years. But it won't matter, because no Republican will ever allow those kinds of corporate restrictions to make it into law.

It has nothing to do with Republicans or Democrats, but rather the free market. Fact is, while keeping six months worth of expenses is great in theory for a household, it's a ridiculously poor use of investors' money when you're talking about a capital-intensive business like airlines. In many cases you'd be talking about requiring airlines to keep upwards of $10B in cash on hand, minimum, and investors would demand a good chunk of it be re-invested in the business, have dividends paid, or shares repurchased to make the outstanding shares worth more.

EA CO AS wrote:

delimit wrote:

You're kind of all over the place here. They had what was considered a very health amount of cash up until the world aviation market contracted by 75% inside of a month.

Hind sight is 20/20. I expect the conversations of what level of catastrophe an airline should expect will be interesting over the next few years. But it won't matter, because no Republican will ever allow those kinds of corporate restrictions to make it into law.

It has nothing to do with Republicans or Democrats, but rather the free market. Fact is, while keeping six months worth of expenses is great in theory for a household, it's a ridiculously poor use of investors' money when you're talking about a capital-intensive business like airlines. In many cases you'd be talking about requiring airlines to keep upwards of $10B in cash on hand, minimum, and investors would demand a good chunk of it be re-invested in the business, have dividends paid, or shares repurchased to make the outstanding shares worth more.

It very much has to do with the historical positions of the GOP on government regulation. The comment isn't meant to be inflammatory. And I'm not saying that this kind of regulation makes sense. The devil would be in the details.

EA CO AS wrote:

delimit wrote:

You're kind of all over the place here. They had what was considered a very health amount of cash up until the world aviation market contracted by 75% inside of a month.

Hind sight is 20/20. I expect the conversations of what level of catastrophe an airline should expect will be interesting over the next few years. But it won't matter, because no Republican will ever allow those kinds of corporate restrictions to make it into law.

It has nothing to do with Republicans or Democrats, but rather the free market. Fact is, while keeping six months worth of expenses is great in theory for a household, it's a ridiculously poor use of investors' money when you're talking about a capital-intensive business like airlines. In many cases you'd be talking about requiring airlines to keep upwards of $10B in cash on hand, minimum, and investors would demand a good chunk of it be re-invested in the business, have dividends paid, or shares repurchased to make the outstanding shares worth more.

Given the relative frequency of bailouts for various industries, regulations to hold certain amounts of cash have certain benefits.

In the US, despite all of the other economic turmoil, the one thing you haven't heard about is any risks to the banks themselves. And that's a direct result of the reforms after the financial crisis that require the banks to hold more capital than they (or their investors) would prefer.

Coming out of this, there will be a strong argument that if airlines are systemically important, so much so that they need to be bailed out not just for macro effects, but because they provide critical services, then they ought to be required to carry more capital in their reserves (just like US banks).

TTailedTiger wrote:

FSDan wrote:

TTailedTiger wrote:

I hope this is a wake-up call for airlines to invest in themselves before throwing their money at other airlines. Now Delta could really use all of the money they put into VS, Latam, AM, GOL

Right, because DL definitely wasn't investing in itself over the years...

Just off the top of my head, DL:

• Refurbished the vast majority of their mainline fleet, including installation of AVOD on most aircraft
• Invested a huge amount of money into airport terminal improvement projects at LAX, SLC, ATL, LGA, JFK, and others
• Worked on many technology upgrades for employees (e.g. tablets for flight attendants)
• Paid down debt
• Payed out industry-leading profit sharing to employees
• Took delivery of hundreds of new 739s, 321s, 221s, 359s, 339s...

Wake up, Delta! Time to start investing in yourself for once!

P.S. It's easy to argue that DL's investments in other airlines are also really investments for itself. They're not just trying to benevolently help out the little guys - they are trying to build share in important markets like U.S.-Mexico and U.S.-London that strengthens their own performance in those markets through the ability to offer a broader network than they could offer on their own.

That does them no good if those airlines fail and are liquidated or their governments bail them out and wipes out any DL control. Sort of like my business. I've taken properties away from banks who failed to pay the property taxes. It doesn't matter how big their mortgage was. A tax lien will take precedence and wipe out the other investors.

Hindsight is 20/20, right? Those investments made sense at the time, and for what foreseen at the time. No one, again no one, could predict a virus would bring the world economy and exchanges to a halt in an abrupt manner...

blockski wrote:

EA CO AS wrote:

delimit wrote:

You're kind of all over the place here. They had what was considered a very health amount of cash up until the world aviation market contracted by 75% inside of a month.

Hind sight is 20/20. I expect the conversations of what level of catastrophe an airline should expect will be interesting over the next few years. But it won't matter, because no Republican will ever allow those kinds of corporate restrictions to make it into law.

It has nothing to do with Republicans or Democrats, but rather the free market. Fact is, while keeping six months worth of expenses is great in theory for a household, it's a ridiculously poor use of investors' money when you're talking about a capital-intensive business like airlines. In many cases you'd be talking about requiring airlines to keep upwards of $10B in cash on hand, minimum, and investors would demand a good chunk of it be re-invested in the business, have dividends paid, or shares repurchased to make the outstanding shares worth more.

Given the relative frequency of bailouts for various industries, regulations to hold certain amounts of cash have certain benefits.

In the US, despite all of the other economic turmoil, the one thing you haven't heard about is any risks to the banks themselves. And that's a direct result of the reforms after the financial crisis that require the banks to hold more capital than they (or their investors) would prefer.

Coming out of this, there will be a strong argument that if airlines are systemically important, so much so that they need to be bailed out not just for macro effects, but because they provide critical services, then they ought to be required to carry more capital in their reserves (just like US banks).

I would say bailing out businesses that "can't" keep money on hand is a ridiculous use of tax payers money. If they can't be held accountable by destruction in a free market (for reasons) then they should have to be compelled to do certain things to protect themselves.

WayexTDI wrote:

TTailedTiger wrote:

FSDan wrote:

Right, because DL definitely wasn't investing in itself over the years...

Just off the top of my head, DL:

• Refurbished the vast majority of their mainline fleet, including installation of AVOD on most aircraft
• Invested a huge amount of money into airport terminal improvement projects at LAX, SLC, ATL, LGA, JFK, and others
• Worked on many technology upgrades for employees (e.g. tablets for flight attendants)
• Paid down debt
• Payed out industry-leading profit sharing to employees
• Took delivery of hundreds of new 739s, 321s, 221s, 359s, 339s...

Wake up, Delta! Time to start investing in yourself for once!

P.S. It's easy to argue that DL's investments in other airlines are also really investments for itself. They're not just trying to benevolently help out the little guys - they are trying to build share in important markets like U.S.-Mexico and U.S.-London that strengthens their own performance in those markets through the ability to offer a broader network than they could offer on their own.

That does them no good if those airlines fail and are liquidated or their governments bail them out and wipes out any DL control. Sort of like my business. I've taken properties away from banks who failed to pay the property taxes. It doesn't matter how big their mortgage was. A tax lien will take precedence and wipe out the other investors.

Hindsight is 20/20, right? Those investments made sense at the time, and for what foreseen at the time. No one, again no one, could predict a virus would bring the world economy and exchanges to a halt in an abrupt manner...

Hindsight is 20/20, but it didn't take a genius to realize that investing in unprofitable airlines wasn't the smartest strategy at any point, pandemic or not.

And, it does beg the question... since many of the Companies Delta invested in have had negative margin growth since their JVs, did Delta not do their due diligence? Were their assumptions too grand about what a JV could mean for both companies? Or is there something in the JV that benefits Delta disproportionately so that some of Delta's profits came at the expense of those weaker JV partners...

Delta's profits have definitely grown along with their JVs... The same doesn't appear to be true for their JV partners.

What happens to all the equity Delta holds in the struggling companies...obviously, if those companies cease to exist, or go through their own state reorganizations, Delta's equity could be effectively cancelled and Delta stands to lose a ridiculous amount of its overall foreign investment?

What are the specific pros and cons to Treasury having access to airline equity? Wouldn't that, potentially, significantly limit how each airline could perform in terms of how it operates?

delimit wrote:

EA CO AS wrote:

delimit wrote:

You're kind of all over the place here. They had what was considered a very health amount of cash up until the world aviation market contracted by 75% inside of a month.

Hind sight is 20/20. I expect the conversations of what level of catastrophe an airline should expect will be interesting over the next few years. But it won't matter, because no Republican will ever allow those kinds of corporate restrictions to make it into law.

It has nothing to do with Republicans or Democrats, but rather the free market. Fact is, while keeping six months worth of expenses is great in theory for a household, it's a ridiculously poor use of investors' money when you're talking about a capital-intensive business like airlines. In many cases you'd be talking about requiring airlines to keep upwards of $10B in cash on hand, minimum, and investors would demand a good chunk of it be re-invested in the business, have dividends paid, or shares repurchased to make the outstanding shares worth more.

It very much has to do with the historical positions of the GOP on government regulation. The comment isn't meant to be inflammatory. And I'm not saying that this kind of regulation makes sense. The devil would be in the details.

Perhaps it's because government regulations can also come with many unintended consequences or perverse incentives. Many times, the overall costs are also not accurately assessed or accounted for. Pushing through knee-jerk regulations during a time of panic without taking the time to consider the possible consequences and risks may not be the best idea. I'm not "anti-regulation", it's just I think there's needs to be consideration of all the drawbacks and a cost-benefit analysis. The world is full of nuance and the whole "us vs. them" mindset in virtually every situation strikes me as incredibly superficial.

JAMBOJET wrote:

Hindsight is 20/20, but it didn't take a genius to realize that investing in unprofitable airlines wasn't the smartest strategy at any point, pandemic or not.

And, it does beg the question... since many of the Companies Delta invested in have had negative margin growth since their JVs, did Delta not do their due diligence? Were their assumptions too grand about what a JV could mean for both companies? Or is there something in the JV that benefits Delta disproportionately so that some of Delta's profits came at the expense of those weaker JV partners...

Delta's profits have definitely grown along with their JVs... The same doesn't appear to be true for their JV partners.

In some ways that's a desired result for Delta when it comes to these JVs, or it's at least a natural result of the JV model. With the JVs Delta can move unprofitable routes and operations off of their books and on to their JV partners, while keeping the better performing operations at DL. That way they can still offer the same service to their customers but they aren't exposed to the operational costs of doing so, the only thing they really have at stake is a relatively modest investment which won't lose anywhere close to the operational losses they would be subject to without the JV.

Midwestindy wrote:

SESGDL wrote:

DDR wrote:

It's a given that ATL is safe. Anything else is up in the air. I do hope they retrench from SEA and keep to their other historic hubs.

Totally disagree. ATL, DTW, MSP, SLC and LGA/JFK are all safe. Why would DL abandon "captive" markets? Air travel will eventually rebound. Giving up markets would be lunacy. LAX, BOS and SEA could definitely be at risk, though.

Jeremy

LAX is not at risk, they won't drawdown SEA & LAX, that would leave them with nothing on the west coast & no-TPAC gateway(Excluding DTW)

With DL retiring some 767s RDU/CVG/IND-CDG & TPA/MCO-AMS are probably at risk, not to mention p2p routes from RDU/CVG

They have parked about 20 767 at ILN. Many of them may be retired.

JAMBOJET wrote:

WayexTDI wrote:

Hindsight is 20/20, right? Those investments made sense at the time, and for what foreseen at the time. No one, again no one, could predict a virus would bring the world economy and exchanges to a halt in an abrupt manner...

Hindsight is 20/20, but it didn't take a genius to realize that investing in unprofitable airlines wasn't the smartest strategy at any point, pandemic or not.

Usually with an investment you don't want to pick a company that's already performing at its peak. You want to invest in companies that have potential so that your investment can grow. Let's be real here - DL isn't bought into money pits like AZ, SA, and AR, they are invested in market leaders (AM, LA, AF-KL, KE) and next-best-options (VS, VA) in regions of importance where it was an uphill battle to gain a foothold organically.

FSDan wrote:

JAMBOJET wrote:

WayexTDI wrote:

Hindsight is 20/20, right? Those investments made sense at the time, and for what foreseen at the time. No one, again no one, could predict a virus would bring the world economy and exchanges to a halt in an abrupt manner...

Hindsight is 20/20, but it didn't take a genius to realize that investing in unprofitable airlines wasn't the smartest strategy at any point, pandemic or not.

Usually with an investment you don't want to pick a company that's already performing at its peak. You want to invest in companies that have potential so that your investment can grow. Let's be real here - DL isn't bought into money pits like AZ, SA, and AR, they are invested in market leaders (AM, LA, AF-KL, KE) and next-best-options (VS, VA) in regions of importance where it was an uphill battle to gain a foothold organically.

If Delta were a Private Equity and/or investment firm, sure. But they aren't. They invested in companies that needed cash to build a network where Delta was weak. That sometimes coincided with market leaders like Latam.

Regardless, as I mentioned in post 551, Delta's investments have nearly all moved toward negative margins after Delta's equity investments and/or JVs were enacted. So, whether Delta meant to invest in companies with potential or not, the ultimate answer is that Delta either did a bad job forecasting the potentials of their investments or didn't care so long as they got JV terms that boosted Delta's profits. All of those negative P&L results mentioned happened during the peak of a remarkably profitable time in air transport. They didn't invest in money pits like AZ, SA, and AR, but the companies they did invest in like AM, KE, and VS are certainly looking like major money pits now and for the last two years before the pandemic even hit.
As for Latam, it's too early to tell how the investment will play out but it's VERY hard to imagine Delta starting a Miami mini hub anytime in the near future to help LATAM out in 2020 or 2021. A failure of Latam wouldn't be Delta's fault given that it's due to the pandemic, but it sure was a bad time to be switching partners for LATAM and Chile is rejecting the idea of a LATAM bailout (just like Mexico did for AM: https://simpleflying.com/will-mexico-ba ... in-crisis/ ) : https://simpleflying.com/latam-5-international-routes/

I mean it's pretty obvious DL got involved with a lot of projects and purchases when the market was hot with no cliff in sight. And they probably thought they were invincible to the type of downturn we are seeing now. So nobody questions DL when they invest in these JV airilines. Now, they all look like disasters. They allow look like terrible investments now.

At some point, investors should hold Delta leadership accountable for some of these projects and investment they got themselves into.

Well, one of the projects was funding all over our pensions (still 10's of 1000's of us here that have one). Not a terrible investment.

How about all of the GSE they've been updating? The same things we've been screaming we needed for years. You'd be hard-pressed to find a single frontline employee that would call that a "terrible investment."

Less than 50 days ago, the company returned over $1.5B back to it's employees. Was that a terrible investment? As an employee, should I hold DL accountable for any of those three items? I'm also a shareholder; does that change things?

These witch hunts and holding people accountable are ridiculous statements when nearly every company in every industry in every sector globally is in an unprecedented situation.
Complete black swan event that every level of organization is in an emergency planning scenario and making decisions rapidly as the situation evolves.

NWAESC wrote:

Well, one of the projects was funding all over our pensions (still 10's of 1000's of us here that have one). Not a terrible investment.

How about all of the GSE they've been updating? The same things we've been screaming we needed for years. You'd be hard-pressed to find a single frontline employee that would call that a "terrible investment."

Less than 50 days ago, the company returned over $1.5B back to it's employees. Was that a terrible investment? As an employee, should I hold DL accountable for any of those three items? I'm also a shareholder; does that change things?

NWAESC, I really enjoy your post since you are an active employee and are on the front lines. Can you explain to me the Delta’s use of part time employees? Is that what ready reserve means for ground ops or is that something totally different?

I think one thing we’re forgetting is the me-tooism that the industry experienced after the DL/NW merger. After that happened, other carriers also started merging to remain competitive. The surviving carriers remained in their respective alliances. That left DL with AF/KL and a number of small players in Europe, AM only for LatAm and an isolationist KE for a partner in Asia. Though DL was set up for Transatlantic, it remained weak at LHR, so it invested in VS. They failed to get a JV with JL and saw how AA/JL and UA/NH were working together, so after being ignored by KE for years, DL also made an investment so it could be stronger in Asia and eliminate a competitor. It also had a crappy partner in G3, so it aggressively pursued LA. DL now has a covetable network of partners as do UA/AA. Many of their partners were not expected to do well anyway and with the exception of AM and LA, were often unprofitable anyway. DL felt the need to mirror the partnership structure other carriers had, so they went ahead and forced the hands of several good carriers. If DL’s partners are now suffering, it likely has more to do with things like Brexit and an inability to expand (VS), high costs (AZ), ULCC competition (AM) and excessive diversification (KE). Blaming the problems these carriers have had on DL bringing them more passengers is mind-boggling. DL’s domestic network is a huge cash cow that makes carriers like BA envious. Let’s not forget where the real money is.

EA CO AS wrote:

It has nothing to do with Republicans or Democrats, but rather the free market. Fact is, while keeping six months worth of expenses is great in theory for a household, it's a ridiculously poor use of investors' money when you're talking about a capital-intensive business like airlines. In many cases you'd be talking about requiring airlines to keep upwards of $10B in cash on hand, minimum, and investors would demand a good chunk of it be re-invested in the business, have dividends paid, or shares repurchased to make the outstanding shares worth more.

I'm not sure I agree with you on this. I think the American tax payers are going to require that airlines do better and be better prepared.

Granted no one thought the entire aviation system would be brought to its knees in 4 weeks time, but now that we know it can happen airlines need to be better prepared for this type of event in the future. The world as we knew it has changed and airlines can not reasonably expect tax payers to bail them out when the next pandemic hits and brings the industry to a halt. I think once this pandemic is over you are going to see airlines move toward keeping more cash on hand. Now that the world knows something like this can happen in todays environment the publics expectation for preparedness going forward will be much higher than it was coming into the COVID-19 pandemic.

I think going forward airlines will have to keep more cash on hand because the tax payers are loosing their appetite for these bailouts.

What’s the deal with the refinery? Is it still operating or did they sell it?


Sent from my iPhone using Tapatalk Pro

JAMBOJET wrote:

Those billions could've been spent renewing their fleet, something Delta will still have to do at some point, given the hundreds of recent retirements, if they want to be competitive with the capacity American could launch once conditions start to change.

Yes, let's continue ignoring that DL has taken delivery of hundreds of shiny new 739s, 321s, 221s, 359s, and 339s over the last few years. Or that they have hundreds more still on order. Also, I'd guess that DL has spent more on renewing their existing fleet than either AA or UA, with all 319s, 320s, 752s, 753s, 772s, and 77Ls having gone through interior refreshes recently, with the 764s still in progress. DL has invested plenty in its fleet. End of story.

Also, so far AA has announced the imminent retirement of way more aircraft (E90s, early 738s, 752s, 763s, 333s) than either DL or UA have announced, so let's reign in the enthusiasm regarding "capacity American could launch once conditions start to change".

EA CO AS wrote:

It has nothing to do with Republicans or Democrats, but rather the free market. Fact is, while keeping six months worth of expenses is great in theory for a household, it's a ridiculously poor use of investors' money when you're talking about a capital-intensive business like airlines. In many cases you'd be talking about requiring airlines to keep upwards of $10B in cash on hand, minimum, and investors would demand a good chunk of it be re-invested in the business, have dividends paid, or shares repurchased to make the outstanding shares worth more.

Another thing I just thought of is how the industry changed after 9/11 and all the bankruptcies and mergers that came. We heard AA's CEO say AA would never loose money again. I can tell you here at UA both Munoz and Kirby stated long before COVID-19 UA learned the lessons from that era and we (meaning the airline) would never be in that position again. I'm going to assume DL's CEO was telling DL employees the same thing. If we rewind back to mid-February UA thought they had a handle on COVID-19 and Kirby told employees the airline was ready for another 9/11 type event because 9/11 was the benchmark most US carriers measured themselves against.

Now that COVID-19 has happened airlines can't go back to business as usual, and 9/11 is no longer the benchmark airline will be judge by. Airlines in the future will be judge by their preparedness for another COVID-19 style event. If US airlines are not prepared in the future for another COVID-19 type event the government might change its attitude and it will be survival of the fittest.

delimit wrote:

You're kind of all over the place here. They had what was considered a very health amount of cash up until the world aviation market contracted by 75% inside of a month.

Hind sight is 20/20. I expect the conversations of what level of catastrophe an airline should expect will be interesting over the next few years. But it won't matter, because no Republican will ever allow those kinds of corporate restrictions to make it into law.

We all have that one relative who likes to get political at every family gathering.

usdcaguy wrote:

Blaming the problems these carriers have had on DL bringing them more passengers is mind-boggling. DL’s domestic network is a huge cash cow that makes carriers like BA envious. Let’s not forget where the real money is.

What you just said has a big flip-side to it. Their fortress hubs (ATL, DTW, MSP, SLC) which you allude to as cash cows for DL mean absolutely nothing to any of their partners. How many of these DL partners actually fly (or are even are remotely interested in flying) to any of these airports? AA and UA on the contrary have hubs in one of the largest O/D markets in the US and are natural destinations for most of their partners. DL's partners are left to fly some of the most predominant O/D routes without feed and facing competition from larger carriers while DL flies DTW/MSP/ATL to their hubs. It makes sense for DL, but from the partners' perspective, DL brings little to the table in terms of network for them - which is why DL has been trying to create hubs in more important markets like BOS and SEA - and they are not even the biggest carrier in any of these markets; which leaves them heavily exposed during times like these...

tphuang wrote:

you are attacking my comments without knowing what I mean by "projects"?

More like pointing and laughing, but whatever.

jayunited wrote:

EA CO AS wrote:

It has nothing to do with Republicans or Democrats, but rather the free market. Fact is, while keeping six months worth of expenses is great in theory for a household, it's a ridiculously poor use of investors' money when you're talking about a capital-intensive business like airlines. In many cases you'd be talking about requiring airlines to keep upwards of $10B in cash on hand, minimum, and investors would demand a good chunk of it be re-invested in the business, have dividends paid, or shares repurchased to make the outstanding shares worth more.

Another thing I just thought of is how the industry changed after 9/11 and all the bankruptcies and mergers that came. We heard AA's CEO say AA would never loose money again. I can tell you here at UA both Munoz and Kirby stated long before COVID-19 UA learned the lessons from that era and we (meaning the airline) would never be in that position again. I'm going to assume DL's CEO was telling DL employees the same thing. If we rewind back to mid-February UA thought they had a handle on COVID-19 and Kirby told employees the airline was ready for another 9/11 type event because 9/11 was the benchmark most US carriers measured themselves against.

Now that COVID-19 has happened airlines can't go back to business as usual, and 9/11 is no longer the benchmark airline will be judge by. Airlines in the future will be judge by their preparedness for another COVID-19 style event. If US airlines are not prepared in the future for another COVID-19 type event the government might change its attitude and it will be survival of the fittest.

You are 100% right. It's kind of crazy how much trouble all the airlines are in.

Just using DL as an example here, since this is the thread on them.

$6 billion in cash when this started in February. Added $2 billion in loan. Have been burning on average $50 million a day since then and probably for the rest of Q2 at least. That comes out to be $1.5 billion per month, probably $6.5 billion through first half of the year if we count all of March on that loss pace + good chunk of February. Let's say that improves a little bit in Q3 to losing more like $3 to 3.5 billion in that quarter and Q4 to $2 to $2.5 billion. Without the bailout, they will be declearing chapter 11 this summer. Even if they just get the grant, they will be close to out of money by the end of this year (especially if loans have minimum cash requirements).

Given where things are at and the high fixed costs of the legacy airlines, I think they will all have to end up taking both the grant and the loan. And they will have to do pretty large furloughs decisions this summer with the actual furlough starting after Oct 1st.

You can help me here a little bit here, but this seems inevitable especially if TATL/TPAC travel are not coming back for this year.. I'd imagine this is what UA is looking at. Airlines are not going to be able to break even until probably at least Q2 of next year.

DDR wrote:

NWAESC, I really enjoy your post since you are an active employee and are on the front lines. Can you explain to me the Delta’s use of part time employees? Is that what ready reserve means for ground ops or is that something totally different?

Thanks for the kind words.

DL structures it's frontline workforce differently than other places. Instead of Part-time and Full Time like we usually know it, it's split between "benefitted employees" and Ready Reserves.

You can can work less than 40 hrs./week, and still have benefits.

Ready Reserves can work a max of 1400hrs. a year, and have limited access to benefits (no medical, for example).

The stated goal is to have a 50/50 split between benefitted and RR employees. Some stations are way below that, and some are right there.

onwFan wrote:

usdcaguy wrote:

Blaming the problems these carriers have had on DL bringing them more passengers is mind-boggling. DL’s domestic network is a huge cash cow that makes carriers like BA envious. Let’s not forget where the real money is.

What you just said has a big flip-side to it. Their fortress hubs (ATL, DTW, MSP, SLC) which you allude to as cash cows for DL mean absolutely nothing to any of their partners. How many of these DL partners actually fly (or are even are remotely interested in flying) to any of these airports? AA and UA on the contrary have hubs in one of the largest O/D markets in the US and are natural destinations for most of their partners. DL's partners are left to fly some of the most predominant O/D routes without feed and facing competition from larger carriers while DL flies DTW/MSP/ATL to their hubs. It makes sense for DL, but from the partners' perspective, DL brings little to the table in terms of network for them - which is why DL has been trying to create hubs in more important markets like BOS and SEA - and they are not even the biggest carrier in any of these markets; which leaves them heavily exposed during times like these...

While DL serves their network well in their own way, I feel like their fortress hubs are their number one weakness, at least on the international side of operations. While AA/UA have hubs in MIA/ORD/DFW/IAH/SFO, DL has ATL/DTW/MSP/SLC. Yes, DL has JFK/LAX/BOS/SEA, but the hubs of AA/UA have much greater O&D demand for major international hubs such as LHR. Not to mention AA/UA have been in LHR since 1991, DL 2008 (stupid Bermuda II).

It interesting we now are at a point where the capacity of the government to intervene is not even questioned, its assumed that the government can borrow the money itself (as there is already a deficit) to pass on to companies rather than themselves go to the market to borrow the cash. If companies had to borrow only at commercial rates because of lower customer demand, they might be more circumspect on what they did in the good times. No one can predict what will happen exactly but it is amazing what problems can be mitigated by a large pile of cash.

Government should handle unemployment benefits, medical coverage, and probably beef up Social Security. Airlines should fly planes, and get out of the insurance business. This would entail higher individual and corporate taxes. The government is very effective and efficient at insurance. My non-profit has a fully funded retirement plan. It was expensive. But the division hiring me could rightly say at the end of my employment they were no longer responsible for my benefits.

onwFan wrote:

usdcaguy wrote:

Blaming the problems these carriers have had on DL bringing them more passengers is mind-boggling. DL’s domestic network is a huge cash cow that makes carriers like BA envious. Let’s not forget where the real money is.

What you just said has a big flip-side to it. Their fortress hubs (ATL, DTW, MSP, SLC) which you allude to as cash cows for DL mean absolutely nothing to any of their partners. How many of these DL partners actually fly (or are even are remotely interested in flying) to any of these airports? AA and UA on the contrary have hubs in one of the largest O/D markets in the US and are natural destinations for most of their partners. DL's partners are left to fly some of the most predominant O/D routes without feed and facing competition from larger carriers while DL flies DTW/MSP/ATL to their hubs. It makes sense for DL, but from the partners' perspective, DL brings little to the table in terms of network for them - which is why DL has been trying to create hubs in more important markets like BOS and SEA - and they are not even the biggest carrier in any of these markets; which leaves them heavily exposed during times like these...

AF/KL/VS/AM have all flown to ATL/DTW/MSP/SLC since the implementation of DL/NW's agreements with them and will continue to do so according to the scheduling decisions they make with DL. Markets like JFK/ORD/IAH/LAX/MIA require larger aircraft that DL historically did not have available as the few 747s/777s they had were already flying to places outside of Europe. The eventual retirement of the old NW 747s didn't help things, either. Keeping more 767s and the A330s at the main DL hubs to fly to Europe was therefore a given, as they could offer more frequencies with those aircraft with feed from multiple banks at their hubs. When you're in a JV, carriers are agnostic as to which carrier the passenger flies, as each carrier earns revenue regardless of who is operating the flight. Many variables go into scheduling aircraft, and they have nothing to do with whether a specific carrier will benefit. If AF/KL/VS/AM felt as though they did not benefit financially from being in a JV with DL, they would have dropped out years ago and would have never flown to the smaller DL hubs. Now they do, and they reap the benefits of doing so. Today, the CEOs of those companies know that their operations with DL are some of their most profitable, so they have a huge incentive to stay in the JVs they have set up with them.

WidebodyPTV wrote:

WayexTDI wrote:

Well, (some) fares didn't go down: I checked a round-trip to Europe for end of June-early July and prices are what they were 2 years ago. So, whatever route is flown is not done at discounted fares.

All fares went down, but the decrease hasn't extended into late June yet.

wv399 wrote:

ATL hasn't been mentioned because it's not going anywhere. It's blessed by geography, and exceedingly low costs per enplanement. To be fair, it's flights and pax counts will definitely shrink, but it's status as Delta's preeminent hub is unquestioned.

I highly doubt anybody expects ATL to be dehubbed (if they did, then they should lose their ability to participate here), but ATL will get hit pretty hard. It's simply unavoidable, by virtue of its size and exposure to leisure traffic, particularly Florida and points south.

BTW, ATL's success has nothing to do with CPE. CPE is simply total costs charged to airlines / total enplaned passengers. Math makes ATL's CPE low. In reality, most of DL's costs are fixed, and variable costs are similar to its other hubs. If you're UA or AA... it isn't materially cheaper to operate from ATL than MSP. We really need a primer on CPE, and sticky it to this fourm...

ckfred wrote:

Ben Bernancke just said today that he sees a deep recession with a very quick recovery. When the markets collapsed in 2008, we were in a bathtub recession. We hit bottom and stayed at the bottom for quite some time, before GDP and employment numbers improved.

...and many other economists think we're headed into a longer, more painful recession/recovery period than 10 years ago. Time will tell, but projections that by next summer we'll be on pace to surpass 2019 traffic levels seem ridiculously silly at the moment.

I learned while majoring in economics that if you get 12 economists in a room, you will get 13 opinions. That said, the people I keep seeing on CNBC (Wall Street analysts, economists, hedge fund managers, etc.) believe we are in for either a U-shaped recovery or a V-shaped recovery. No one is predicting a bathtub recovery, which is what we went through after the financial meltdown of 2008. If a person's earnings have not been affected, spending will probably be normal after shelter-in-place orders are lifted. And it's surprising how many non-essential services are operating. I've seen lawn services, roofers, and other residential services out and about. The major addition work at my son's high school is still going full tilt, even though the school is closed.

Best Buy is doing well, because people are buying equipment to work from home (computers, monitors, headsets, etc.) and items you need to stay-at-home 24/7 (TVs, gaming systems, video games, etc.).

My wife and I already have the list of restaurants that we want to go to, once shelter-in-place is lifted, because they are too far for take-out.

In my mind, the travel business that will suffer for a long time will be the cruise lines. Seeing how many people got stuck on ships for extended periods, confined in cabins, or put into quarantine after disembarkation, I think there are millions of people who will never set foot on a ocean-going vessel, with the possible exception of the Queen Mary in Long Beach.

ckfred wrote:

I learned while majoring in economics that if you get 12 economists in a room, you will get 13 opinions. That said, the people I keep seeing on CNBC (Wall Street analysts, economists, hedge fund managers, etc.) believe we are in for either a U-shaped recovery or a V-shaped recovery. No one is predicting a bathtub recovery, which is what we went through after the financial meltdown of 2008. If a person's earnings have not been affected, spending will probably be normal after shelter-in-place orders are lifted. And it's surprising how many non-essential services are operating. I've seen lawn services, roofers, and other residential services out and about. The major addition work at my son's high school is still going full tilt, even though the school is closed.

Best Buy is doing well, because people are buying equipment to work from home (computers, monitors, headsets, etc.) and items you need to stay-at-home 24/7 (TVs, gaming systems, video games, etc.).

My wife and I already have the list of restaurants that we want to go to, once shelter-in-place is lifted, because they are too far for take-out.

In my mind, the travel business that will suffer for a long time will be the cruise lines. Seeing how many people got stuck on ships for extended periods, confined in cabins, or put into quarantine after disembarkation, I think there are millions of people who will never set foot on a ocean-going vessel, with the possible exception of the Queen Mary in Long Beach.

You do bring up some very good points and I do agree with your part of your comment about the cruise ship industry. I'm 41 years old and I took my first cruise when I was 26, I loved it and in addition to all my other yearly travels I take at least one 7-12 night cruise every year. The cruise industry has a very loyal following people of all ages, having said that I have no intention on getting on a cruise in 2020. I've canceled my cruise but I do have a cruise booked for early 2021 and for now I'm going. The loyal cruisers will probably get on a ship next year, the crazy cruisers will get on a ship this year because prices will be dirt cheap. The cruise lines are not worry about people like me, where cruise lines face their biggest hurdle is with first time cruisers and people who tried it once or twice had a great time they aren't loyal cruisers and now are having second thoughts about doing it ever again. Those are the people cruise lines will have to convince to give them another try. You are absolutely right it will take years for cruise lines to convince those types of people to give them a try.

I said all of that because cruise ship can be confining (depending on the cabin you book) but so can airlines. Prior to Covid-19 the biggest complaint the airline industry faces was the lack of SPACE. Both the cruise line industry and the airline industry are in the same boat, in the short term once the pandemic part of the crisis is over people are not going to want to cram into a tin can like sardines like we were prior to COVID-19. While airlines will recover a lot quicker than the cruise industry I think (and I could be wrong) but I think in the short term will have to tackle the issue of personal SPACE. In my own personal life and community here in Chicago when stay at home was first ordered I would still take my dogs out for a walk let the dogs play with other dogs and talk to the dog owners while the dogs played. Fast forward to today April 3rd, now when I take the dogs out when I see other people I know there is a huge amount of space between us and the dogs hate it because they can't say hi to their friends up close and personal but you see people taking social distancing a little more serious. Airlines in the short term are going to have to tackle this problem. I've been on a few conference calls with my bosses here at UA where there is talk on how will UA tackle this issue short term so far NO ANSWER. Airlines are going to struggle with this because up until now the motto has been cram in as many passengers as we possibly can. Come June, July, August or whenever things start to open up airlines will need to have an answer because cramming 300 people on an airplane for international flight is not going to cut it short term especially in the era of social distancing.

It’s definitely a good question with no easy answers. Do you block the middle seat? Cap total capacity on planes to allow distancing? If so, what’s the number?

I think a number of comments don't reflect the nature of Joint Ventures. Saying that DL offloaded unprofitable routes and kept the profitable ones ignores the fact that DL shares all of the revenue AND expenses on JV flights with their respective JV partners. DL may take some routes, partners may take others, but the overall JV shares in everything. The JV is essentially one company for the routes covered by the JV. If efficiencies are gained by having one carrier over another fly a particular route, those efficiencies are shared by the entire JV. Delta crew may be upset that some routes have been transferred, but that is about the crew revenue for particular flights, not the DL's revenue.

usdcaguy wrote:

onwFan wrote:

usdcaguy wrote:

Blaming the problems these carriers have had on DL bringing them more passengers is mind-boggling. DL’s domestic network is a huge cash cow that makes carriers like BA envious. Let’s not forget where the real money is.

What you just said has a big flip-side to it. Their fortress hubs (ATL, DTW, MSP, SLC) which you allude to as cash cows for DL mean absolutely nothing to any of their partners. How many of these DL partners actually fly (or are even are remotely interested in flying) to any of these airports? AA and UA on the contrary have hubs in one of the largest O/D markets in the US and are natural destinations for most of their partners. DL's partners are left to fly some of the most predominant O/D routes without feed and facing competition from larger carriers while DL flies DTW/MSP/ATL to their hubs. It makes sense for DL, but from the partners' perspective, DL brings little to the table in terms of network for them - which is why DL has been trying to create hubs in more important markets like BOS and SEA - and they are not even the biggest carrier in any of these markets; which leaves them heavily exposed during times like these...

AF/KL/VS/AM have all flown to ATL/DTW/MSP/SLC since the implementation of DL/NW's agreements with them and will continue to do so according to the scheduling decisions they make with DL. Markets like JFK/ORD/IAH/LAX/MIA require larger aircraft that DL historically did not have available as the few 747s/777s they had were already flying to places outside of Europe. The eventual retirement of the old NW 747s didn't help things, either. Keeping more 767s and the A330s at the main DL hubs to fly to Europe was therefore a given, as they could offer more frequencies with those aircraft with feed from multiple banks at their hubs. When you're in a JV, carriers are agnostic as to which carrier the passenger flies, as each carrier earns revenue regardless of who is operating the flight. Many variables go into scheduling aircraft, and they have nothing to do with whether a specific carrier will benefit. If AF/KL/VS/AM felt as though they did not benefit financially from being in a JV with DL, they would have dropped out years ago and would have never flown to the smaller DL hubs. Now they do, and they reap the benefits of doing so. Today, the CEOs of those companies know that their operations with DL are some of their most profitable, so they have a huge incentive to stay in the JVs they have set up with them.

I wasn’t suggesting that the partners were losing money because they were forced to fly to DL non-hubs. I was merely referring to the struggles that the carriers have had in sustaining some of the most relevant non-stop O/D routes for them. E.g. Take ORD-LHR, EWR-CDG/AMS/LHR... As far as VS/AF/KL are concerned, they have several times more passengers going to EWR or ORD than to MSP, DTW, SLC or ATL from not only CDG/AMS/LHR but from all over Europe. Connecting passengers through DTW or MSP from such important markets is not an attractive option - they just lose these customers. On the contrary, I sincerely doubt LH or BA cares about the minor O/D traffic from MSP or SLC to FRA or LHR who choose to fly DL or its partners.

But the fact remains that none of DL’s partners are profitable... It is easy to blame the partners for it, but all of them? I am not entirely convinced that is true. I just don’t see DL’s hub system being particularly beneficial to any foreign carrier....

onwFan wrote:

usdcaguy wrote:

onwFan wrote:

What you just said has a big flip-side to it. Their fortress hubs (ATL, DTW, MSP, SLC) which you allude to as cash cows for DL mean absolutely nothing to any of their partners. How many of these DL partners actually fly (or are even are remotely interested in flying) to any of these airports? AA and UA on the contrary have hubs in one of the largest O/D markets in the US and are natural destinations for most of their partners. DL's partners are left to fly some of the most predominant O/D routes without feed and facing competition from larger carriers while DL flies DTW/MSP/ATL to their hubs. It makes sense for DL, but from the partners' perspective, DL brings little to the table in terms of network for them - which is why DL has been trying to create hubs in more important markets like BOS and SEA - and they are not even the biggest carrier in any of these markets; which leaves them heavily exposed during times like these...

AF/KL/VS/AM have all flown to ATL/DTW/MSP/SLC since the implementation of DL/NW's agreements with them and will continue to do so according to the scheduling decisions they make with DL. Markets like JFK/ORD/IAH/LAX/MIA require larger aircraft that DL historically did not have available as the few 747s/777s they had were already flying to places outside of Europe. The eventual retirement of the old NW 747s didn't help things, either. Keeping more 767s and the A330s at the main DL hubs to fly to Europe was therefore a given, as they could offer more frequencies with those aircraft with feed from multiple banks at their hubs. When you're in a JV, carriers are agnostic as to which carrier the passenger flies, as each carrier earns revenue regardless of who is operating the flight. Many variables go into scheduling aircraft, and they have nothing to do with whether a specific carrier will benefit. If AF/KL/VS/AM felt as though they did not benefit financially from being in a JV with DL, they would have dropped out years ago and would have never flown to the smaller DL hubs. Now they do, and they reap the benefits of doing so. Today, the CEOs of those companies know that their operations with DL are some of their most profitable, so they have a huge incentive to stay in the JVs they have set up with them.

I wasn’t suggesting that the partners were losing money because they were forced to fly to DL non-hubs. I was merely referring to the struggles that the carriers have had in sustaining some of the most relevant non-stop O/D routes for them. E.g. Take ORD-LHR, EWR-CDG/AMS/LHR... As far as VS/AF/KL are concerned, they have several times more passengers going to EWR or ORD than to MSP, DTW, SLC or ATL from not only CDG/AMS/LHR but from all over Europe. Connecting passengers through DTW or MSP from such important markets is not an attractive option - they just lose these customers. On the contrary, I sincerely doubt LH or BA cares about the minor O/D traffic from MSP or SLC to FRA or LHR who choose to fly DL or its partners.

But the fact remains that none of DL’s partners are profitable... It is easy to blame the partners for it, but all of them? I am not entirely convinced that is true. I just don’t see DL’s hub system being particularly beneficial to any foreign carrier....

To an extent, this is true. But I will flip it around the other way... If an American is traveling to London or Paris... than sure they will take the direct flight there. But if they are going to a non-primary European city, most travelers in the know would prefer to connect in AMS or FRA over LHR or CDG, because the former are generally nicer connecting experiences. And I think that is important to remember that not all European travelers are going to NYC, LA, or Chicago. And for Europeans traveling to cities without a convenient direct flight, ATL/DTW/MSP tend to offer much more pleasant connection experiences than most.

And while I will agree JFK/ORD/LAX are obviously much bigger draws (two of which are Delta hubs), there isn’t that significant of a difference in international draw between ATL/DTW and places like DFW/IAH. And finally if you are going use MSP/SLC in the comparison, you also have to bring in places like PHX/CLT/DEN on the UA/AA side. I am not fully discounting your point, but really it is only more significant difference with UA compared to AA/DL. Between AA/DL, there isn’t that big of a difference between the European allure of the 8 or so biggest AA hubs vs DL hubs, if you take all 7 or 8 major hubs of each in fair comparison.

kavok wrote:

onwFan wrote:

usdcaguy wrote:

AF/KL/VS/AM have all flown to ATL/DTW/MSP/SLC since the implementation of DL/NW's agreements with them and will continue to do so according to the scheduling decisions they make with DL. Markets like JFK/ORD/IAH/LAX/MIA require larger aircraft that DL historically did not have available as the few 747s/777s they had were already flying to places outside of Europe. The eventual retirement of the old NW 747s didn't help things, either. Keeping more 767s and the A330s at the main DL hubs to fly to Europe was therefore a given, as they could offer more frequencies with those aircraft with feed from multiple banks at their hubs. When you're in a JV, carriers are agnostic as to which carrier the passenger flies, as each carrier earns revenue regardless of who is operating the flight. Many variables go into scheduling aircraft, and they have nothing to do with whether a specific carrier will benefit. If AF/KL/VS/AM felt as though they did not benefit financially from being in a JV with DL, they would have dropped out years ago and would have never flown to the smaller DL hubs. Now they do, and they reap the benefits of doing so. Today, the CEOs of those companies know that their operations with DL are some of their most profitable, so they have a huge incentive to stay in the JVs they have set up with them.

I wasn’t suggesting that the partners were losing money because they were forced to fly to DL non-hubs. I was merely referring to the struggles that the carriers have had in sustaining some of the most relevant non-stop O/D routes for them. E.g. Take ORD-LHR, EWR-CDG/AMS/LHR... As far as VS/AF/KL are concerned, they have several times more passengers going to EWR or ORD than to MSP, DTW, SLC or ATL from not only CDG/AMS/LHR but from all over Europe. Connecting passengers through DTW or MSP from such important markets is not an attractive option - they just lose these customers. On the contrary, I sincerely doubt LH or BA cares about the minor O/D traffic from MSP or SLC to FRA or LHR who choose to fly DL or its partners.

But the fact remains that none of DL’s partners are profitable... It is easy to blame the partners for it, but all of them? I am not entirely convinced that is true. I just don’t see DL’s hub system being particularly beneficial to any foreign carrier....

To an extent, this is true. But I will flip it around the other way... If an American is traveling to London or Paris... than sure they will take the direct flight there. But if they are going to a non-primary European city, most travelers in the know would prefer to connect in AMS or FRA over LHR or CDG, because the former are generally nicer connecting experiences. And I think that is important to remember that not all European travelers are going to NYC, LA, or Chicago. And for Europeans traveling to cities without a convenient direct flight, ATL/DTW/MSP tend to offer much more pleasant connection experiences than most.

And while I will agree JFK/ORD/LAX are obviously much bigger draws (two of which are Delta hubs), there isn’t that significant of a difference in international draw between ATL/DTW and places like DFW/IAH. And finally if you are going use MSP/SLC in the comparison, you also have to bring in places like PHX/CLT/DEN on the UA/AA side. I am not fully discounting your point, but really it is only more significant difference with UA compared to AA/DL. Between AA/DL, there isn’t that big of a difference between the European allure of the 8 or so biggest AA hubs vs DL hubs, if you take all 7 or 8 major hubs of each in fair comparison.

Since AMS/CDG are DL’s primary TATL hubs because of partner connections, I would like to see how AMS/CDG O&D compares to LHR O&D for DL, especially to/from JFK.

kavok wrote:

onwFan wrote:

usdcaguy wrote:

AF/KL/VS/AM have all flown to ATL/DTW/MSP/SLC since the implementation of DL/NW's agreements with them and will continue to do so according to the scheduling decisions they make with DL. Markets like JFK/ORD/IAH/LAX/MIA require larger aircraft that DL historically did not have available as the few 747s/777s they had were already flying to places outside of Europe. The eventual retirement of the old NW 747s didn't help things, either. Keeping more 767s and the A330s at the main DL hubs to fly to Europe was therefore a given, as they could offer more frequencies with those aircraft with feed from multiple banks at their hubs. When you're in a JV, carriers are agnostic as to which carrier the passenger flies, as each carrier earns revenue regardless of who is operating the flight. Many variables go into scheduling aircraft, and they have nothing to do with whether a specific carrier will benefit. If AF/KL/VS/AM felt as though they did not benefit financially from being in a JV with DL, they would have dropped out years ago and would have never flown to the smaller DL hubs. Now they do, and they reap the benefits of doing so. Today, the CEOs of those companies know that their operations with DL are some of their most profitable, so they have a huge incentive to stay in the JVs they have set up with them.

I wasn’t suggesting that the partners were losing money because they were forced to fly to DL non-hubs. I was merely referring to the struggles that the carriers have had in sustaining some of the most relevant non-stop O/D routes for them. E.g. Take ORD-LHR, EWR-CDG/AMS/LHR... As far as VS/AF/KL are concerned, they have several times more passengers going to EWR or ORD than to MSP, DTW, SLC or ATL from not only CDG/AMS/LHR but from all over Europe. Connecting passengers through DTW or MSP from such important markets is not an attractive option - they just lose these customers. On the contrary, I sincerely doubt LH or BA cares about the minor O/D traffic from MSP or SLC to FRA or LHR who choose to fly DL or its partners.

But the fact remains that none of DL’s partners are profitable... It is easy to blame the partners for it, but all of them? I am not entirely convinced that is true. I just don’t see DL’s hub system being particularly beneficial to any foreign carrier....

To an extent, this is true. But I will flip it around the other way... If an American is traveling to London or Paris... than sure they will take the direct flight there. But if they are going to a non-primary European city, most travelers in the know would prefer to connect in AMS or FRA over LHR or CDG, because the former are generally nicer connecting experiences. And I think that is important to remember that not all European travelers are going to NYC, LA, or Chicago. And for Europeans traveling to cities without a convenient direct flight, ATL/DTW/MSP tend to offer much more pleasant connection experiences than most.

And while I will agree JFK/ORD/LAX are obviously much bigger draws (two of which are Delta hubs), there isn’t that significant of a difference in international draw between ATL/DTW and places like DFW/IAH. And finally if you are going use MSP/SLC in the comparison, you also have to bring in places like PHX/CLT/DEN on the UA/AA side. I am not fully discounting your point, but really it is only more significant difference with UA compared to AA/DL. Between AA/DL, there isn’t that big of a difference between the European allure of the 8 or so biggest AA hubs vs DL hubs, if you take all 7 or 8 major hubs of each in fair comparison.

TSA passenger counts are down by as 95%. I was on a DL flight from LAX-DTW earlier in the week. DL cancelled nearly two dozens flights, including three options to ATL, and consolidated them onto the DTW flight....and yet it didn't even total 100 passengers. Trying to make arguments based upon big cities, lots of O/D, what flights are being kept, etc. is just silly. Nobody is flying at the moment. Except me, I guess.