Airline Pilot Central Forums - Delta 3rd quarter loss

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Quote:

Originally Posted by Carl Spackler (Post 698562)

It's not hyperbolic. Hyperbole implies some sort of truth. Your statement is completely false. Delta Air Lines ended the 2nd quarter with 5.4 billion in unrestricted cash, and predicted ending the 3rd quarter with 5.1 billion. The results today show the 3rd quarter ending with 5.8 billion in unrestricted cash. 5.8 is higher than 5.4 dude.

"As predicted, this massive loss of cash..." You couldn't be more wrong.

Carl

I'm not arguing here. I'm confused. And I am heavily biased towards any news that puts DAL in a good light.

However, I just don't understand why every release on various stock boards (google, yahoo, etc.) are reporting that the 3rd quarter earnings report made by Delta equates to a $130-$160 million dollar loss for the quarter. A loss that is far, far greater than what DAL lost during the 3rd quarter of last year.

DAL, however, on the company web page, is trumpeting their 3rd quarter report as a $50 million dollar profit.

Obviously, both can't be true. Please explain what I'm missing here.

I'm perfectly aware that DAL's cash position has increased. That doesn't mean it's from profits, however. DAL's cash position generally refers to liquidity, which is mainly immediate access to cash, borrowed or otherwise. Having access to borrowed cash is good, but it's certainly not profit.

Quote:

Originally Posted by alfaromeo (Post 698685)

Not exactly. If you buy an option for a future purchase, then you have to pay for that option. If it is not exercised, then you lose the money on that option. If you buy a collar and the fuel price is below the floor price, then you lose money on the put option. If you buy a swap and the price of the commodity (usually home heating oil) is below the swap price, then you eat the difference. Also with swaps, you may have to post collateral to cover part of the future price, so you lose access to that cash until the swap is covered.

So some of the hedging losses are just unwinding from previous paper gains, but some of the hedging losses are actual cash outlays.

That said, the purpose of a hedging program is to eliminate risk in fuel. It is meant to break even over a long period of time, not to make money or lose money. We made a lot on hedges in 2008 and of course 2009 has been a negative. This is not a failure but it is how the program is designed. If we could win every time on hedging, we could quit flying passengers around and make lots more money speculating on fuel.

This quarter is traditionally cash flow negative but Delta added cash mostly by borrowing. Overall, it was a pretty good quarter in a very rough time. Next year we will start unwinding some of the costs of the merger (you only have to repaint the planes and consolidate airport space once) and will soon get the full benefits of integration. SOC in January, reservations switchover soon after that, dispatch in April (for flight plans and weight and balance). If the AFA and the IAM can work out their representation issues, then full operational integration will occur in late summer or fall. We are in pretty good shape, wouldn't trade our lot for any other right now.

When full operational integration starts to really kick in in late 2010 and 2011, then Delta forecasts a good deal of top line growth (income). If history follows, the recovery from recession should be in full force with employment rising. Hopefully, that sets us up for contract negotiations which will open near the end of 2011 or early in 2012.

Thanks for the clarification Alfarameo. That was very informative.:)

We made a 50 million dollar OPERATING profit. That means that if we did not have all of these "one time losses" we would have made money. What it means is that the operation of putting people and cargo on the jets made money. The operation of hedging, merging et al did not. We made money operationally last quarter too!

Read the full press release on delta.com, it will take about 30-40 mins but worth your time.

Quote:

Originally Posted by acl65pilot (Post 698753)

Actually, if you look close I think you'll find that the hedging losses were folded into the operating numbers. They were not included in the special items.
We would have made nearly $300 million on an operating basis if management had not lost all that money on fuel contracts.

Quote:

Originally Posted by deltabound (Post 698706)

If you exclude one time charges, then there was a $50 mm profit. The one time charges were $212 mm. About $80 mm was a paper write down (who cares), about $80 mm was for merger expenses (one time charges), and $50 mm for severance for early outs (due to over staffing from the merger). Those charges will unwind in the long term, so you look at the profit/loss without those charges to examine the long term health of the company. In this environment even a modest profit was good news. AMR had a loss around $250 mm excluding one time charges and they are a smaller company now.

In the worst recession I have ever seen, Delta is not burning through cash from flight operations. That is good, because when companies burn through cash they eventually land in bankruptcy court. Most of the debt Delta incurred was to replace other debt so they aren't running up the credit card. They are in the worst time of the merger, with expenses running high and revenue benefits relatively low. That formula will start to swap over next year with expenses unwinding and revenue benefits accelerating rapidly.

Hopefully, people can only get H1N1 once (or get vaccinated) so that impact will unwind next year also. Maybe that will cause us to stop the bleeding on Pacific operations.

Overall, not the time to pop open the champagne but maybe a Bud.

Quote:

Originally Posted by deltabound (Post 698706)

One area I think you are getting confused with is operating profit vs a loss in conjunction with write offs. Guys have alluded to this in posts above. The special charges you keep hearing about are a smart way to reduce tax liability and the Delta tax guys take as many write offs as possible. Now don't be confusing write offs as being actual cash losses. Ideally we wouldn't have any special charges (ie early retirement payoffs, early termination of contracts, etc) and just have huge net profits. Although that does not exist right now the silver lining is that if Delta were to quit taking write downs for tax reasons we would be showing a slight net profit.

One other thing that has skewed the numbers for a while is the merger with NWA. Numbers from one year to the next are not apples to apples comparisons as you integrate large volumes of another carrier. 2010 to 2011 will finally get the company to a point where you can compare year to year to see how things are really progressing.

The biggest thing as pilots that we want is to be profitable (net profit even with any write downs) like for example one billion per year 2011 to 2012 since the new contract for pay etc will be due then and it will be easier to get "restoration" to contract 2000 plus (ie a 777 Captain makes $330 per hour and a 757 FO makes $180 per hour) if the numbers are crunching really well. This also opens up more growth, moving up the latter and hiring guys like you if you are still gunning for Delta by then. Clear as mud?

Quote:

Originally Posted by alfaromeo (Post 698685)

"...SOC in January, reservations switchover soon after that, dispatch in April (for flight plans and weight and balance). If the AFA and the IAM can work out their representation issues, then full operational integration will occur in late summer or fall..."

How does it wok for F/A's, if the vote is delayed, post-SOC? Do we work with either a full complement of NW F/A's or Delta F/A's? As an alternative, is there some RLA procedure to allow them to work together in the interim, so we get a mixed crew?

Not sure if this should be in this thread or the L&G, but did anyone else notice LCC anouncing they are considering selling the rest of the E-Jets(15)? I know, DUH, but really who else is in line to buy them other than RAH? If this comes to fruition would this get us closer to a termination of contract with them? Just wondering.
Burn Notice
PS-The concern over H1N1, how? I took my 2 year old in for her regular flu shot and asked the nurse if they are seeing a lot of H1N1. She said they are seeing A LOT of flu but quit testing for H1N1 a long time ago and just started assuming it is H1N1. This is backed up by a Doc-in -a-box I visited a couple of weeks ago as well. Just my observations.
BN