Maybe Delta can loan them 73 million to fix their problems.

A black hole for money is never an afterthought

 

I would be surprised if you don't understand the loan to Pinnacle. Your post however suggests you don't. Pinnacle owed Delta Airlines 40 million dollars. Money that Delta was unlikely to ever see again except perhaps a few pennies on the dollar. Delta actually only loaned Pinnacle 33 million dollars. This was a very smart move on managements part. It accomplished two things. It insured in the near term we did not have major disruptions for our passengers by allowing them to continue to operate. As part of that loan however Pinnacle agreed to pay off the 40 million dollar loan. That is why the cost is only 33 million out of pocket to Delta. Here is the beauty of the concept. The entire 73 million is now DIP financing and even if Pinnacle goes chapter 7 its likely Delta will recover most if not all of the 73 million since they are now first in line to get paid for the entire amount.

 

Not just the pilots though, but everyone. I had heard the reason SWA went to hot and heavy into hedges when they did was because the pilots just got their "fat" contract and all the other labor groups were up to bat squeling "me too! me too!" as they always do so they sunk a ton of money to hide it from labor into what they believed were going to be cost neutral hedges with relatively little downside. Then the world collapsed under everyone else who wasn't uber hedged, they looked like geniuses and figured while they were at it, a legacy liquidation or two would be good for their bottom line so they started gutting the entire industry and growing like a virus. Or kudzu. Or kudzu with a virus.

 

Sailing;
Check your math.

you owe me $50. I give you another $100, you give me back $50. Now I have given you $150 and you have given me back $50.

Agree about DIP.

Can I borrow a couple hundred?

 

Oh what a tangled web they weave when they practice so much outsourcing. If they were really savvy, they would be able to pick up on ponzi scheme ACMIs and their unsustainable low ball bidding and stop signing them but they can't pass up a deal in the short term. We had years to see this coming just like Mesa and could have easilly gotten out of that mess by hiring a more competent regional or, God forbid, doing it ourselves.

Yeah yeah, there's no money in actually providing goods and/or services. Hey look, I lowered the cost unit for some DCI lift by signing an incompetent company that can't run an operation at the prices we're paying! Weeeeeeeee! Whar's mah bonus!

 

The Pilots at SW never really got a fat contract. The mechanics, gate agents and flight attendants were all paid near top industry rates. The pilots were not. The SWAPA contract you refer to brought the pilots up to about 20 percent below the going rates at UAL, Delta, USAIR. Their contract became fat only because management hit the lottery with the fuel hedges and used those hedges to put everyone else into Chapter 11. Negotiating a contract 20 percent below what much of the rest of the industry is paying is rarely thought of as a fat contract.

 

We gave them 73 million. They gave us back 40 million. Out of pocket to Delta was 33 million in this transaction. Yes they still owe us 73 million and total we have given them 73 million however last week 40 million of that was gone. Its now DIP financing and we stand a excellent chance of recovering all or most of the amount even if they go Chapter 7.
In addition we now can dictate to pinnacle how they restructure. We can force them to dump the leases on 50 seaters and return them and reduce their fleet size. No matter how you slice it this was a smart move on managements part. Because different management teams made mistakes in the past is no reason to be stupid in the future.

 

Why in flight gaming hasn't been explored is a true oversight. I know trans-state rules prohibit gambling over most domestic airspace, but how about in flight gambling on oceanic flights? Heck you could turn a A380 into a flying casino!!

 

I get all but 1 thing, if they go chapter 7 and with our DIP financing, will there be $73M of stuff to get back?

 

It was pretty fat for an uberlow LCC and it became insanely bloated compared to the soon BK legacies and other start ups popping up or expanding. It instantly thrust them to the pinnacle (no pun) of passenger pilot pay which needless to say was never the intention of their management. That 20% below suddenly becoming 30-40% above is a world rocker for any management team regardless of profitability and you can imagine how bolshevik other work groups would get at the thought of something like that. Other labor groups were up to bat next and as always were squealing "me too me too!" over the pilots dominant pay scale and percentage raises. It makes sense that they would have viewed sinking a bunch of money into hedges at those prices at that time as a low risk way to get cash off the table. They still couldn't cry "poor" but at least they could take some wind out of their sails. I really doubt they were actually predicting 147$ oil and were just acting rationally.