Originally Posted by
Sink r8
I'll be glad to stipulate we're probably grossly overpaying for Section1 improvements, but it's hard to tell how much the most important section is worth. You're forgetting (/not aware yet) that this TA does a lot of cleaning up in aisle 1, not just the DCI end.
Yeah, I agree there's a lot in section 1 that needs taken care of, not just small-jet scope. I tend to focus on that because that's the segment of the industry I've seen most thus far. I'm interested in hearing more about the JV language in this T/A from the likes of georget, he seems to have a really good handle on that stuff.
Regardless, the mechanism for dumping 50-seaters is contingent upon deals with DCI carriers and lessors, and those entities aren't going to let Delta out of contracts without some quid pro quo. Now, Bombardier would probably bend over backwards to trade in 50-seaters for C-Series at mainline, but Skywest wouldn't.
True. The lessors are the easy part. I'm gaining a whole new respect for Jerry over at Skywest negotiating lucrative, bulletproof long-term contracts for his 50 seat flying 7 or 8 years ago. There's definitely some low-hanging fruit under the current contract. Comair still has 11 50-seaters (or thereabouts, not sure on the exact number now). Delta is in possession of a bankrupt Pinnacle Holdings and could likely get that contract terminated if they chose. There's nearly 140 there. Republic has 20-something ERJs on a fairly short-term contract; the termination language was just posted in another thread and its quite loose, mostly requiring Delta to provide sufficient notification. Point being, Delta could already be killing 50-seaters under the current contract (and have in fact been doing it with Comair and Mesa).
You can be livid all day long that we're funding and facilitating the trade of 50-seaters, and you can argue we're not getting paid enough, but you can't argue the company can simply upgauge the fleet without this, or some similar maneuver. You also have to acknowledge they're [deleted] if we do nothing... but we're just as [deleted] if we do nothing. Hence the marginal rates.
I'm not livid, I've tried to see the upside to this, as there are a number of posters (several of whom I've met in real life) who I really respect and know to be smart people (and scope hawks) who are pretty satisfied with this Section 1. Guys like 80kts, BuckingBar, ACL, johnson29, and yourself. And I get your guys' reasoning. Park far more 50s than the additional 76s you allow, offset the decreased ASMs with 717s at mainline, stem the DCI tide and turn it the other way. And honestly if I thought the current DCI model was sustainable I would agree with you. But it's not, it's a failing model, outsourcing is becoming unsustainable, and I don't think you should do anything to reverse that trend. In the absence of scope relief I believe Delta will do everything and anything to rid themselves of 50 seaters that are costing them money; the Mesa punt-to-JFK, termination, and subsequent lawsuit showed that. I believe you'll still get 717s as a lower-CASM replacement for terminated regional feed. But I can certainly see where reasonable people can differ on the what-if game.
Thanks for the good discussion.