Everyone knows the woes of Delta airlines. They have been on the brink of bankruptcy for a while now with another $651 million loss in the third quarter. Strategies to put their heads securely above water have included salary concessions from their 7,000 pilots, cutting 7,000 employees, and offering notes to investors that are collateralized by debt-free aircraft, simulators, and other equipment.
It looks that just yesterday Delta took a great step away from bankruptcy as it appears the pilots have come to an agreement with management allowing for $1 billion in concessions. While this is good news, it only skims the top of the lake of debt that Delta has incurred. Of course, Salt Lake's economy will likely benefit from the closing of Delta's Dallas hub which will expand operations in Salt Lake.
2 comments:
Hopefully with the pilots consenting to pay cuts, Delta will be able to make enough headway to break into a positive quarter. The upcoming holiday's should help as well. Most people will travel either for Thanksgiving or Christmas, you know during that time of year when we have to be reminded of who were unfortunately related to.
I think this is a stopgap measure. Delta may not go bankrupt this time, but it will eventually.
Passenger transportation just isn't an industry that is very profitable. Think about all the profitable passengers lines on ships, trains, and buses.
Part of this is a prisoners' dilemna in prices. High prices are profitable, but offering low prices when your competitors don't makes a lot more of money. Thus, they all have incentive to offer low prices, meaning that they can't make those profits by grabbing market share. Passengers have very elastic demands, which means this situation is not likely to change.
This is probably an example of an industry that needs to be subsidized by the government. Regulating them less would serve the same purpose.
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