Hank Kingsley

Your first sentence, are you sure the note and MPP were deemed retirement replacement? I remembered that the PBGC would have frowned upon any monies given to the pilots in lieu of retirement. Any money having to do with retirement went to the PBGC, the rest was compensatory to our loss of income, etc.

Big E 757

From what I remember, it wasn’t Southwest that was the thorn in our side when it came to raising fares to a level that would have mitigated our loses. It was Northwest that refused to raise fares.

Every time we tried to increase our fares by $5-10 one way, United and American followed soon after, but within a few days, Northwest didn’t, and we dropped the fare increase. If I remember correctly, our guys were telling us that if we didn’t drop the fare increase, we would lose tens of millions within the first few hours.

Yes, Southwest was protected with their fuel hedges, but they weren’t the reason for our inability to regain our pricing power. At least from what I remember.

Denny Crane

What you say is true to an extent. We could absorb a 35% increase in employee expense and probably still have a higher profit than the other airlines. That being said, as notEnuf pointed out, this would only be for one contract cycle and it would be right back where it is now...

Denny

sailingfun

The MPP money was retirement money in our own name held by the company inside of the DB plan. We were allowed to directly rollover the money tax free into a IRA or other retirement account shortly after the DB plan was terminated. The 650 million dollar note was owed to the pilots by the company only if the frozen retirement plan was terminated. Sounds like both were retirement money to me!

sailingfun

Do you really think the other airlines would raise their employee costs 35% just because Delta did? How about the ULCC airlines and SWA?Have you looked at their order book lately? Airfare is not a required commodity. There are limits to how much and fast fares can be raised. Move to much or to quickly and people cancel vacations, switch to cars, business video conferences and reduces non essential travel. ULCC airlines would explode in size and new ones pop up. Take a look at Spirit’s growth with the current relatively high airfare costs.
If you don’t think this is true take a look at airlines earnings for the first two quarters of 2001.

notEnuf

The 35% was to point out the ability to afford and handle an increase of this magnitude. Fuel was a good example because it is a $2B increase this year. Our contracts were touted as good when they raised the pilots compensation $1B predictably over 4 years. Do you see the irony of our durable and sustainable business plan and the claim that we can't recover from our bankruptcy reset? How about the billions returned to shareholders? Major expenses are expiring and now is the time to make gains as they will be less noticeable in total costs. If we use this opportunity to add pilot costs while other major costs are coming out of the business the net is less of a shock to the financial community.

sailingfun

We hardly even competed with NW and their domestic presence was small. They were also losing a ton of money. Every fare increase I remember Delta floating SWA refused to go along. The CEO told the SWA checkairman they were going to use their fuel hedges to drive one and possibly two major airlines out of business. They came within a hair of succeeding. Only one of the largest collapses in oil prices in history prevented that.

gloopy

You're right about what SWA was attempting to do. They were targeting UAL and USAir especially. However the previous poster's point about NWA was right on. DL absolutely competed with NWA domestically big time. Route overlap is only a minor part of the equation. At the time everyone was spastically feeding every hub with hourly RJ service to and from the same outstations. If one legacy airline didn't participate in a fare increase, they'd just absorb all that business into their feeder network. NWA was almost always the one refusing to go along after every other legacy tried to make occasional modest increases stick for the sake of basic survival.

Denny Crane

Let’s consider what we are really talking about and that is pilot costs. Do I think other companies would raise their pilot costs by 35% if we did? Well, I will answer a question with a question. If we negotiated a 35% increase in pilot costs in our next contract, do you think the pilot groups at American and UCal are gonna settle for less than what we got? No, not unless (heaven forbid) another 911 event took place.

Look at ULCC Airlines right now. Their costs are less than ours now. Don’t you think those pilots would negotiate more in their next contact to maintain a comparable balance to now? The price of pilots is going up.

Now I know 35% at once would be nice but is highly unlikely. But thinking with the logic you are using above would mean we would never get an increase above other airlines because our costs would be more than our competition. The unions jobis to negotiate as much as they can. It’s the company’s job to figure out how to pay for it.

Denny

notEnuf

A 35% increase in pilot costs over the life of a contract is about a 5% annual cost increase in total compensation costs.