Price war in the US caused by Delta

Delta Sees 'Substantial Loss' in 2005

Delta Sees 'Substantial Loss' in 2005
Thursday March 10, 8:55 am ET
Delta Sees 'Substantial Loss' in 2005; Doesn't Believe It Will Meet All of Its Liquidity Needs


NEW YORK (AP) -- Delta Air Lines Inc., the nation's third-largest air carrier, said Thursday it expects to report a "substantial" loss this year, and doesn't believe the company's cash flows from operations will be sufficient to meet all of Delta's liquidity needs. Its shares tumbled more than 14 percent in premarket trading.
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In a filing with the Securities and Exchange Commission, Delta said it continues to face significant challenges due to low passenger mile yields, high fuel prices and other cost pressures related to interest and pension expenses.

Delta reported a loss of $5.2 billion for 2004, the highest ever by a U.S. airline in a single year.

The airline said it currently expects to meet its liquidity needs for 2005, but because mostly all of Delta's assets are encumbered and its credit ratings are low, the airline doesn't expect to be able to obtain any additional debt financing.

Therefore, Delta said it expects its cash and short-term investments will be much lower at Dec. 31, 2005, than at the end of 2004, unless the airline is able to sell assets or issue stock or convertible debt.

Delta is trying to eliminate more than $5 billion in costs by the end of 2006, but said in Thursday's filing it doesn't expect to achieve the full targeted benefits of that until the end of 2006.

Delta shares closed Wednesday at $4.89 on the New York Stock Exchange, but plunged 74 cents, or 14.5 percent, to $4.35 in premarket activity.

Continental says to delta that this simplefares are stupid. I think this war of prices and competition is really stupid.

Dominicana440 said:

Continental sees bigger revenue hit from Delta SimpliFares
Dateline: Thursday March 10, 2005

Continental Airlines warned yesterday that matching Delta's SimpliFares fare reform in competing markets will cost it an estimated $200 million in annual revenue, or around 2% of 2004 revenues of $9.7 billion, well above an earlier forecast of a $50 million impact.

In a filing with the US Securities and Exchange Commission, Continental stated: "Our experience to date as a result of Delta's fare reduction has demonstrated [they] are not being sufficiently offset by increases in passenger traffic so as to make them revenue positive, and any associated cost reductions are immaterial to date."
To add insult to injury, the carrier also worried that "our operating results may be affected by an even greater amount due to the expense of handling the additional passengers stimulated by the lower fares."--Perry Flint


Source ATW-online

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Also heard yesterday in the news that Delta has removed all pillows from their flights. They claim this is a cost saving measure. American and Continental are planning to follow suit.

I sure hope "no frills" airline tickets continue to include the seats!

carlos said:

how do you guys think this will affect the DR and the fares?

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I doubt if it will affect the DR, maybe perhaps only in SDQ due to less competition with JetBlue & North American (I believe) pulling out.

Delta has the right idea, no matter whether they take a hit for this year and 2006. The low-cost carriers are here to stay. To continue to ignore them while they win-over your passengers with better customer service, a better on-time schedule, and lower fares, would be suicide. They boldly decided that now is the time to streamline their operations, if they wanted to compete in the future.

To continue to base your revenue model on the hopes of increased business travel and international business travel as well, without taking into consideration that many companies have alternate means of communicating, means that your thinking is ancient and unrealistic. Web conferences are common today.

Back to the DR, there will continue to be an increase in tourism, as Europe is too expensive for many Americans. Those same people still need to vacation elsewhere, and with the right marketing, the DR should benefit. Lower airfares, people travel.

I don't know where Delta is in the process of adding a JFK-STI, or ATL-SDQ flight, but it's gonna happen. Can't speak about Continental. They're bitching about doing the smart thing, as well as the increased capacity generated by lowering fares.

carlos said:

how do you guys think this will affect the DR and the fares?

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Well, IMHO I think it will help in some respects. Traveling to Europe, South America, Africa, The Phillipines, Australia and so forth without hardly any creature comforts will make people want to take shorter trips. Shorter trips to wonderful destinations sounds a lot like where we are, si?

The airlines have long been in trouble and nothing except higher airfares will ever resolve it. The US needs airlines, though, because businesses require traveling so much. The Internet (web meets, etc) will never replace a face-to-face meeting.

My prediction is that the low cost carriers will focus on the "rank and file" and the high cost carriers will focus on businesses. Heck, it's mostly that way already.

Personally, I never liked Delta anyhow so they can go ahead and go away.

I can say nothing bad about Delta. They are my carrier of choice.

Well..

Lowering fares is not a smart idea in this sort of economic environment. Airlines should be able to raise fares to match increased fuel costs... Competition is important to keep fares fair... but not to plummit prices to the point that they are all going bankrupt. I think one or two legacy carrier (USAir, United, AA, Delta or Continental) has to go for the market to function better again.

carlos said:

Which one of the airlines do you think has the biggest influence over the others' nowadays?

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This is easy, domestically (USA) it's Southwest & Jetblue. They changed the way the majors do business. Low-overhead, low flight prices, less frills, timeliness, great customer service. Every single major US airline (American, United, Delta, Continental, US Air) is now trying to compete with them, not the other way around. Now United chimes in with Ted, Delta with Song, even Virgin's trying to jump into the fray.

Internationally, can't say. Personally, I'm with Virgin. Love the whole experience. But I've heard that British Air is very good as well. At the top of the heap is Singapore Air, but I doubt if I'll go that far just for a great travel experience. QUICK NOTE: I did have a bad flight attendant experience with Delta last year, but they've since really stepped it. All is forgotten with me.

carlos said:

how about airlines that fly to DR? which one has the most control now? You still think AA is up there?

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AA controls the DR market. People aren't quite open-minded enough to try other options. AA relies on that. AA flys to various DR markets, they've been there for a while.

If I'm AA, why should or would I change my way of operation in the DR market, if no matter who the competitors are, my customers won't try any other airlines, no matter how poorly I treat them?

toneloc24 said:

AA controls the DR market. People aren't quite open-minded enough to try other options. AA relies on that. AA flys to various DR markets, they've been there for a while.

If I'm AA, why should or would I change my way of operation in the DR market, if no matter who the competitors are, my customers won't try any other airlines, no matter how poorly I treat them?

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AA has the control period. But the more competition better fares. I dont see the problem

Hey guys, to Major airlines to become a Low Cost carrier, fist need to get rid of most of the Employees. because you cant compare a 5 years employee that work for AA or Delta with some one on Airtran or JEt blue.

Delta pilots make as musch a 300.00usd per Hours....
so look and see the difrerence.
.

Delta is now ready for JFK-sti may 1st, they will open a ticket office also in santiago.

I've travelled to the DR on Delta twice this year and been pleased both trips!

Interesting to note that my return home with Delta will be via a codeshare on a Continental flight. So if Continental is servicing Delta passengers via codeshare they can't be all that displeased with Delta. It will be interesting to note how many passengers are on the flight because anytime I've travelled Continental (which has been several times over the years) there have never been more than 20 passenger on the SDQ/ Newark segment!

carlos said:

what do you like about them?

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They have gone above and beyond with me. I made a stupid mistake by bringing an expired passport with no birth certificate to the airport. After getting the proper paperwork they put me on the next flight first class with no extra charge. Also last year I was in the DR and there was a death in the family in New York. They put me on the next available plane no extra charge. After the funeral I flew back to the DR to be with my family and I was given a decent rate. A couple of weeks ago my Delta overbooked. I voluntarily got bumped with my family. We were put up in the Hamaca and given four free round trip tickets. Right now Delta can do no wrong in my eyes.

Latino2002 said:

Hey guys, to Major airlines to become a Low Cost carrier, fist need to get rid of most of the Employees. because you cant compare a 5 years employee that work for AA or Delta with some one on Airtran or JEt blue.

Delta pilots make as musch a 300.00usd per Hours....
so look and see the difrerence.
.

Delta is now ready for JFK-sti may 1st, they will open a ticket office also in santiago.

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Delta's pilots earned more than jetblue and Air tran. I dont know if US air is trying to be a low cost carrier (LCC).

Latino2002 there any news about delta service from Atlanta to Santo domingo in the near future or SJU-SDQ routes.