Kodiak-
Here's that CSFB report:
• As expected, Delta has advanced a new request for heftierthan-
previously-indicated cost savings from its pilots, and the
pilots have reacted with extreme skepticism. This situation
remains too fraught with risk for us to be interested.
• Since the pilots launched a counter-proposal, which they
valued at $655-705 million, to DAL’s original request, DAL
has proposed about $1 billion in savings as a minimum
needed to sustain itself.
• With DAL’s offer in the hopper, the pilots union is now
responding. Saying that management’s demands “far exceed”
DAL’s economic needs, the pilots are, moreover, concerned
that DAL has not addressed the union’s call for a restructuring
of other stakeholders’ contributions, or for equity, profitsharing
and a board seat.
• The pilots union has furthermore said “Either management
will figure out what it ‘needs,’ address our equity requirement
and make other stakeholders participants in a comprehensive
restructuring, or we will take another path.” What that “path”
is was not disclosed.
• We await, later this month, details of DAL management’s
restructuring proposal, which may begin to address some the
pilots’ concerns about the “other stakeholders”. But the
economic gap here is looking increasingly unbridge-able, we
firmly believe that Delta is not bluffing in its request, and
increasingly feel the pilots will drive this process close to the
bankruptcy wire.
• With record high fuel prices and a weak revenue environment
leaving little margin for error, we continue to recommend
avoiding DAL shares, and are underscoring our conviction on
that front by lowering our target price to $3 from $6. There is
nothing magic about the new target other than that it is
halfway between where we were and zero. We will release
new estimates for DAL as soon as the company provides
Region / Country Americas / United States
Sector Airlines
Analyst's Coverage Universe Airlines
Weighting (vs. broad market) MARKET WEIGHT
Date 5 August 2004
* Stock ratings are relative to the coverage universe in each
analyst's or each team's respective sector. |
