Delta-NWA news conference

After the investor conference call, the same three airline officials had a press conference for the ink-stained wretches.

Here’s the audio. (Sorry, it’s RealAudio. Just pretend it’s 1999 and airlines are profitable.)

The most frequently asked questions of the last few months were once again frequently asked.

Q: What about the NWA pilots?

A: “We still have 8 or 9 months to ‘bring them on board,’ and if we do, it’ll be a game changer. If we go past that date it’s the traditional policy, which is normally the way these things proceed during a merger. (Translation: There’ll be a labor battle)

Q: How quickly do you think you’ll achieve profitability?

A: “We expect the combination to be profitable in the first year of operation.” (2009)

Q: When did the decision to merge come up?

A: December.

Q: Surveys show a decline in service of major carriers, will these combined companies potentially weaken the level of service?

A: Northwest was tops on network carriers, Delta was second on J.D. Power survey. “At a baseline level, these two carriers have good operating performance.” (Reaction, anyone?) Gives more service options to consumers. Frequent flier program will be much more valuable. More capital available to “enhance experience for our customers.

Q: Why is there a need to have hubs in Memphis and Cincinnati? And why use less efficient aircraft?

A: We have the right size of operation to make Memphis profitable (Steenland). It offers its own unique sense of destinations. All of the hubs have a “very secure future.” It’s not a political decision.

Q: If oil had remained at $60 a barrel, would you be here today?

A: “The strategic basis for this announcement is a sound strategic basis whether fuel is at $60 or what it is today.” (English translation: “Yes, because the hedge fund that owned a bunch of our stock made us merge with another carrier.”)

Q: Why is getting bigger better?

A: Steenland: Northwest is pre-eminent airline, particularly to Japan. Our domestic operation is not “appropriately sized.” Now, because of the strong presence that Delta has — at JFK, for example — we can get back into the JFK-Tokyo market. Larger scale domestically allows us to better use that resource.”

Combined carriers will have an unprecedented scale and scope. Our ability to go to caterers, suppliers to “streamline operations” will be considerable.

Q: What about non-frontline employees?

A: Administrative and management, we are going to have voluntary programs to avoid “involuntary.” But at the end of the day there may be involuntary action. (Translation: Well, do I really need to translate that?)

Q: How merger will affect regional partners?

A: Will be operating combined fleet of 600 regional airplanes. Northwest owns two very good regional carriers — Mesaba and Compass. Delta owns Comair. “We’ll be optimizing the number of carriers to maximize the efficiency of the carriers. Our goal is to have the margins in that business to be equivalent to mainline airlines.” (Translation: Cuts)

Q: Worried about strikes or job actions?

A: We”ll continue to discuss the benefits of the combination. Confident we’ll continue to provide an excellent product. (Translation: The fact there was no yes or no answer allows you to fill in your own.)

Q: In the future, will you be more Boeing or more Airbus?

A: Both Boeing and Airbus make very good airplanes. The combined airline will be the largest operator of A330s and 757s. We would expect that balance to be the case going forward. The combined enterprise has 80 airplanes on order over the next five years; the vast majority have “backstop financing.” Airplanes are financeable assets. We will not buy an airplane that doesn’t make economic sense.

Q: What does it mean for consumers if there are only 3 big carriers.

A: We can’t predict the future but confident the U.S. market will be competitive. “Let’s not forget we have Southwest out there. It will provide ‘pricing discipline.’ Entry in this business is wide open; there’s plenty of airport gates, facilities, airplane manufacturers are willing to finance. The market will remain competitive. There’s no other business out there that has as much transparency in selling their products. You can go online and see every choice available to you (Bob notes: Do they actually look at Travelocity and see that every airline seems to charge the same price?)

Q: Experts say there’s needs to be capacity cuts. Are you planning that?

A: We already are cutting capacity. We’re pulling back unprofitable routes. Delta will be down 10 percent compared to last year. Northwest is making a 5 percent cut. The merger isn’t predicated on cutting capacity.

  • bsimon

    “Q: What does it mean for consumers if there are only 3 big carriers.

    A: We can’t predict the future but confident the U.S. market will be competitive. “Let’s not forget we have Southwest out there. It will provide ‘pricing discipline.’ Entry in this business is wide open; there’s plenty of airport gates, facilities, airplane manufacturers are willing to finance. The market will remain competitive.”

    Did anyone ask for clarification on this comment? My understanding of local competition (i.e. MSP) is that the so-called competition can’t get gates in order to compete here. If Southwest doesn’t serve MSP, how can they provide ‘pricing discipline’?

    If a larger airline has more hubs, doesn’t that suppress the opportunity for competition to go head-to-head in more markets – thus actually providing less ‘pricing discipline’?

  • Bob Collins

    Bottom line, bri? They can’t. Not at MSP. And you may recall that NWA pressured MAC to move all those upstarts over the Humphrey Terminal.

    Secondly, Southwest doesn’t LIKE to compete head to head with the hubs. At Chicago, for example, they’re pretty much a Midway carrier, not an O’Hare carrier.

    At Dallas, I htink they still fly out of Love Field, rather than DFW (don’t quote me).

    In New England,t hey fly to Manchester, New Hampshire instead of Boston.

    The question becomes whether the Justice Department views that competition question in terms of individual airports or individual markets.

    I still think that as the metro further moves north, that St. Cloud becomes a Southwest market. And the expansion of the airport up there in the last few weeks tells me that officials up there think so too.

  • bsimon

    So, if I’m understanding you correctly, when they say “Let’s not forget we have Southwest out there. It will provide ‘pricing discipline.’” They’re really using a bogus example of a company they don’t compete with head-to-head, which means the alleged ‘pricing discipline’ is a fallacious argument.

  • Bob Collins

    They don’t compete with them head-to-head here. But keep in mind Northwest’s strong suit isn’t its domestic routes, it’s the international routes.

    Delta,on the other hand, has domestic route strength ESPECIALLY in the Northeast. There, Southwest IS a player. Out here, of course, not so much.

    So, yes, pricing discipline is a fallacious argument at Minneapolis-St. Paul, but not in New York or Chicago, or Boston. or Phoenix, or for that matter.

    Two markets Southwest doesn’t touch? Atlanta and Minneapolis. They’re monopoly cities, but they were before the merger, too, I suppose one could argue.