RockyBoy

And he will probably be holding a line on the ER in six months and have over 600 newhires in 08 behind him due to the international growth. The domestic mainline cuts are a transfer of domestic aircraft to international routes which requires more pilots. The rest of the domestic cuts are RJ's. Delta is still gonna need lots of pilots in 08. The worst news for pilots here is the reduced margin which means 1.5% pay restoration instead of 6% in Jan.

seaav8tor

Since deregulation a significant amount of air travel was built on an elastic demand curve. For every price level, including ZERO, there is a finite number of passengers that will show up to fly. Finally, after 30 years, for the first time I'm going to give airline management credit. They are getting on the same page to shrink supply. It has never worked before due to competitors adding supply. This time, for the first time, they are all saying it together, "Supply must come down". The wild card remains new entrants.


If they are successful,

- Yield will go up
- Ticket prices will go up
- Load on ATC and the nations infrastructure will go down
- Carbon outputs will go down
- Delays will go down
- Pilot shortage, real or imagined will go away
- Pilot jobs will go away

In its current form the industry is unsustainable. Capacity cuts are the answer. If you are in the left seat a third or more up the list where you want to be and your airline makes it, this could be good. For everyone else, not so good.

SJF15E

This rather important statement from the article (among others) was left out of the original post for some reason:

"Even as it it's taking measures to trim overhead costs and reduce its domestic operations, Delta said it is still hiring pilots, ticket agents and other airport workers, and plans to boost international capacity by 15 percent next year."

You can read the article in its entirety here:

http://www.ajc.com/business/content/...elta_1204.html

As a DAL poolie awaiting a class date I was decidely less alarmed when I read the entire article, although still not completely comfortable....glad I joined the AF Reserves.



By the way Ed Bastian is not the CEO as posted in the title to the thread, Richard Anderson is. Bastian is the President and the CFO (or the number 2 man).

JiffyLube

Explain what you're talking about for those of us that don't know what you're talking about?!?

jsled

Dead on. Another thing is...since all the majors are on board with this capacity constraint, it will be very difficult for new entrants to fill the void. In fact, almost impossible because it is a big void. Plus, with $90 oil, new entrants are not exactly coming out of the woodwork. It might just come together.

rvr350

I think he was referring to the pay increase that DAL pilots will receive if the company makes certain financial benchmark. Naturally, mgmt will try to "cook" the book, to make sure their numbers aren't exactly stellar, so the senior exec. can have a bigger bonus.

Flare Armed

I have a lot of trouble with the "excess capacity" argument. Our planes are 85% full most of the time, and most other airlines are right there too. Fares need to go up, plain and simple. And losing the "leisure traveler" is not much of a loss, sense they believe they have the right to fly for free anyway.

Albief15

FWIW, this isn't just a Delta issue. SWA was going to buy 32 planes last year, but went to 16 (hence the pool!). What I read yesterday was a the retiring of old birds/purchase of new birds meant a net gain of 5-6 jets. They are also trying to reduce their pilot/plane ratio. At FedEx, management is doing what they call a "hard freeze", or lock down on spending not directly related to moving freight.

All of this points to companies anticipating/experiencing a slight downtown in revenue with increasing costs. SWA and FDX have historically tried to manage costs in down markets with pretty good success. The leaner Delta appears to also be trying, but we'll see how well they do. Point to this is that everyone is adjusting at the moment, and any company is a bit pinched this season.

acl65pilot

The load factors come from rock bottom prices. Raise the prices and people go away. The big fear is that too many will go away, and the airlines will not be able to offset the loss of load factor with the increase in per seat yield.
The airline managers are very scared of this. I think that there is some more elasticity of the current price point. Not much, say 10-30 dollars per ticket, but there always is some one that does not play along.
With reducing capacity, it takes out some of the infrastructure cost associated with the operating margin, thus allowing higher ticket prices on the remaining seats.
Shrinking to profitability goes against business 101, but for some reason it is the only way that the airlines can do it. Lets just hope that the shrinking is done right.
I also believe that the only reason that no one has merged to date is with a merger comes a loss of lift. History shows that the lift is replaced by someone else. There is never a long term increase in ticket price. It only lasts as long it takes someone else to over serve a route. Until the airlines can find a way to avoid this, mergers may not happen. That is if they have learned from history.

rvr350

Very good observation. Also, the airline execs have to always play "the wolf's coming" with the Wall Street, in a sense that if they don't tell investors that the company stock may not do well in the next quarter, and it does tank, the high-paid exec. may be to blame (what a concept, huh?

Also, the price war is always a very fine line. All the fuel surcharge is doing is trying to find a fine line between maximum profits vs. loss of customers due to this price increase. In another way, they want to find the top price that an average traveler can afford to go from point A to point B without the guy saying "Screw XYZ, i'm gonna drive/I'm taking SWA instead" It's rather sad actually, when AmTrak charges more than an airline ticket these days.