Delta Airlines Bankruptcy Filing Averted

...for now. This company is still not in good shape. I think all they've done is buy themselves a little bit of time.

After days of almost round-the-clock talks, Delta Air Lines and negotiators for the Air Line Pilots Association reached a tentative agreement calling for wage and benefit cuts. Details of the agreement were not released. But there is speculation the agreement calls for pay cuts of 30% to 35%. The agreement must still be presented to the union leadership and then to the rank-and-file for approval, and there is always the possibility it could be rejected.

(The Wall Street Journal, The Washington Post, The New York Times)

AirTran to acquire ATA assets

AirTran Airways plans to assume the Chicago Midway Airport gate leases and acquire other related assets including takeoff and landing slots at New York's LaGuardia and Washington's Ronald Reagan National airports from ATA Airlines for approximately $87.5 million.

Delta Airlines Bankruptcy Filing Imminent

According to articles on the CNN Money and USA Today websites.

U.S. Airways

Pilots at US Airways voted to approve a five-year, cost-cutting contract that will reduce their pay 18%. Eighty-nine percent of the 3,291 eligible pilots cast ballots, with 58% voting in favor of the agreement. The contract also reduces pension benefits, eliminates retiree medical coverage, and increases the number of hours pilots must fly each month. It is estimated the pact will save the airline $1.8 billion over five years.

Delta Airlines

Delta's (DAL) net loss widened to $646 million, or $5.16 per share, compared with $164 million, or $1.36 per share, in the third quarter of 2003. Delta reported $3.87 billion in revenue, up from $3.66 billion in revenue in the third quarter of 2003.

Let's do some quick arithmetic. Revenue is up almost 6%, but their loss quadrupled?! How is that possible? Jet fuel costs are to blame. Surely airlines use derivative contracts to hedge their fuel costs? Well, yeah, but . . .

Delta had long-term hedge contracts to buy fuel at 76 cents a gallon but sold them in February for $83 million in cash. The move was a bet that oil prices were going to fall. But jet fuel prices skyrocketed to $1.58 a gallon, and Delta — which burns about 2 1/2 billion gallons of jet fuel a year — has lost millions of dollars in the untimely sale. Delta said in July that surging fuel prices would cost it $680 million more this year than last. But the airline issued that statement when oil was selling for about $40 a barrel. Since then, oil prices have surged more than 25 percent.

Yet Another Blog

As you've probably noticed by now I like things neat and orderly - a different blog for every topic. Delta Airlines announced earnings yesterday (not pretty), and I wanted to post something about it. However, my observations didn't fit into any of the other blogs. I was thinking about putting it in http://pensionactuary.blogspot.com, but it doesn't really go there. So here we are.