Thread: Any "Latest & Greatest" about Delta?
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Old 10-10-2014 | 12:42 PM
  #170117  
LeineLodge
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Joined: Apr 2008
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From: DAL FO
Default A Look Further Ahead: C2019
Originally Posted by Sink r8
Instead of have you girls get your panties in a wad over what Mike said or didn't say, and providing your own cliffnotes, why don't you post the language, and let APC'ers decide for themselves?

Jerry's posts alone, are probably more reading than the article itself.
From the Fall Roar:

Most likely C2015 will be a three- or
four-year contract. By the time we
ratify C2015, it would not be un-
reasonable to believe that our next contract
amendable date will be sometime around
2019. I predict that “Contract 2019” will be
very unlike C2015. Here’s why:

Airline profitability has historically fol-
lowed GDP growth of greater than 2 percent,
if network growth is similar or slightly less.
This is also true on a global scale. Network
expansion that grows at slightly less than
economic expansion allows the industry to
grow profitably. So how does this impact
Contract 2019? Let’s look at the Middle East,
Emirates, and GDP growth of the surround-
ing countries.

The chart below shows Emirates adding
capacity at what is a profitably unsustainable
rate for the last several years. Historically,
this type of growth is neither profitable nor
sustainable. If this continues, either Emir-
ates or a competitor will be driven out of the
market. Has this happened?

It happened with Qantas. Their network
has been decimated by Emirates, Etihad, and
Qatar. They have few remaining nonstop
flights to Europe, and if you are traveling
from Europe to Australia, most likely you
stop in Dubai on an Emirates flight. Recently,
the Australian government has recognized
the mistakes they made in allowing in-
creased levels of foreign ownership, but at
this point, putting the genie back in the
bottle is impossible. Qantas is done.

We have all read the news about Etihad
taking a 49 percent ownership stake in
Alitalia. Alitalia has been in dire financial
straits for a considerable amount of time.
Moving their main hub from
Milan to Rome was a strategic mistake,
with Emirates attempting to capture
the vacated Milan-to-JFK route. While
the Italian courts ruled against Emirates
flying that route, the pressure on Alitalia
continues. For all practical purposes,
European airline Alitalia follows
Airberlin and Air Serbia. They are done.

Lufthansa is also under attack.
Competition from Turk Hava (Turkish
Airlines) and the Middle East carriers is
impacting flow from Germany to Asia
and Africa. They are not done, but are
being impacted by the surge in capacity.

The same could be said for Air France/
KLM. Air France freighters have shrunk
from 16 to 12 and are now forecast to
drop to 4 aircraft. The belly freight ca-
pacity of the A380s and B-777-300s from
the Middle East present such an increase
in capacity that AF/KLM’s independent
freighter business is no longer profitable.

So how does all this impact Contract
2019? Most likely, by 2019, Delta, Air
France/KLM, British Airways, United,
American, and Lufthansa will be com-
peting to retain normal North Atlantic
passenger flights. The oil revenue–fund-
ed growth of the Middle East carriers
will produce a bubble of overcapacity,
with too many seats chasing too few
customers. While it will be a great time
to nonrev, it will drive weaker carriers
into another cycle of bankruptcy, and
senators and members of Congress will
be looking for someone to rescue their
hometown airlines in order to preserve
jobs. Enter foreign ownership—Emirates
and their sheikhs backed by billions of
dollars—and the industry as we know it
is over. C2019 will not be about money,
but about survival.