Airline Pilot Central Forums - Any "Latest & Greatest" about Delta?

Quote:

Originally Posted by Carl Spackler (Post 479811)

Hate to be a wet blanket to the prospective new hires at the new Delta, but the conference call today was not at all up beat regarding growth. This was said today on the call:

"It's probably an understatement to say it's been a challenging year with record fuel prices," Chief Executive Richard Anderson told analysts during a conference call. "And now we face economic uncertainty in the global markets."
President and Chief Financial Officer Ed Bastian said Delta is looking hard at its capacity given the economic downturn. He said that in the fourth quarter, Delta's international capacity growth will be about 2 percentage points less than previously expected.
Bastian said that Delta expects to experience a decline in demand in 2009 due to the economic environment, and the airline is prepared to act accordingly on the capacity front if that happens.
"There's no doubt we face challenges with the credit crisis," he said.

My opinion is that all growth plans and capacity plans are already being revised sharply downward, or the plans are already set to do so. The damage done to the domestic and world economy is real, and it will take some time for the patient to heal.

Carl

This also from the earnings call you quoted...
Delta Airlines, Inc. Q3 2008 Earnings Call Transcript - Seeking Alpha

Jamie Baker – J. P. Morgan

That’s right. We have noted that in the past. You talk about taking steps at the first sign of weakness…I don’t want to get too hung up on this but by our math, and I suspect the math that many others are doing, current fuel and quite frankly pretty bad demand doesn’t necessarily require you do anything. I suppose it is better if you do. I guess I’m just curious what sort of demand hit it might take at $2.40 spot jet to potentially drive you into loss production or if you want to put it differently are you now optimized to withstand a strong recession or merely a modest downturn?

Richard Anderson

Let me try to answer the question a different way. I guess we haven’t particularly quantified it. We kind of do sensitivity analysis as we are preparing our 2009 plan. When you think about what you would rather manage at an airline, you would rather deal with demand cessation rather than $150 fuel. In some respects with fuel dropping the way it is dropping we are sort of somewhat hedged against the economic downturn because the fuel prices have gotten so high. We were looking at a $4 billion year-over-year increase in fuel and when fuel goes down to normalized levels, to Ed’s point, if you took today’s spot in the fourth quarter and we didn’t have any hedge effect we’d have a couple hundred million profit. So in terms of what you would rather manage to, you would rather not have either, right? But if you had to manage to one of them, having fuel dropping like a rock is a big offset to what happens in the economy.
You actually wrote a good note on this a week ago. It sort of highlighted that. It is accurate in that regard.

Edward Bastian

To echo what Richard was saying, we also don’t want to make sure we are not just going to be stagnant and take the lower fuel prices and sit back and let that roll to the bottom line while we watch our top line soften. So we are going to be doing both. It certainly gives you a hell of a lot better cushion in operating flexibility with the lower fuel price environment than $150 oil did to make those decisions on demand.