Monday, October 27, 2014

Delta Squabbles With Analysts While American Eulogizes One

NEW YORK (TheStreet) -- American CEO Doug Parker has a uniquely personable, almost quirky style, one that was apparent on the American earnings call on Thursday, when Parker paid tribute to a recently deceased airline analyst. The tribute to Ray Neidlawas in contrast to the comments on the Delta call on Oct. 20, when executives seemed irritated by the analysts' assertions that the carrier is adding too much capacity, breaking the code of capacity discipline. Must Read: Delta to Wall Street: Don't Tell Us How to Run Our Airline Neidl worked for many firms during a long career in the airline industry. He was liked by everyone, including the reporters: He seemed to value talking to us. On the earnings call, Parker declared, "I have been doing these calls, these quarterly calls, with airline investors since I was CFO of America West in 1995, and so that is almost 20 years or almost 80 calls. And I think Ray Neidl was on every one of them. "He loved the business and he cared a lot about those of us that worked in it," Parker said. "And mostly he was just a really good guy. So here is to Ray, a really good example to all of us. We will miss him and we were really glad to know him." The tribute not only said something about Neidl, but also it said something about Parker, who seems to work to maintain congeniality in the airline business. Not to say that Delta is uncongenial. Last month, it gave every employee a 5% profit-sharing payout and promised 2015 raises of 3% to 4% for nearly all of its frontline employees. Additionally, Delta's customer ratings have been improving. Last year, CEO Richard Anderson gave up his seat on a late-night Washington National-Atlanta flight so that a woman could get home. Anderson moved to a jump seat and the woman took his coach-class seat. As for analysts, at first glance their assertions that Delta is straying from capacity discipline seem a bit odd. Delta has been a leader in the effort, although it must be said that each of the big three carriers has repeatedly staked claims to being the most disciplined. But some analysts seemaperturbed that Delta is adding capacity in Seattle, on routes already served by Alaska , where it might be OKatoaadd capacity in markets it already dominates, such as Atlanta-Detroit. Must Read:aDelta CEO Moves to Jump Seat So a Mom Can Get Homea Reviewing capacity information from the third-quarter earnings calls, American said its 2014 consolidated capacity will grow 2.2% and its 2015 capacity will grow about 2% to 3%. United said its fourth-quarter capacity will grow 0.5% to 1.5% while its 2015 growth will be 1.5% to 2.5%. Delta said 2014 capacity growth will be 3% and 2015 growth will be 2%. In the third quarter, Delta grew Seattle capacity by 25%, President Ed Bastian said in the earnings call. That is a lot, but it has hardly been a mistake for Delta: Bastian said Seattle passenger revenue per available seat mile grew by a healthy 6%. Moreover, the reason Delta is adding capacity in Seattle is so that it can have a good trans-Pacific hub. In San Francisco, United has the best trans-Pacific hub. In Los Angeles, carriers battle to build hubs, but they are limited by lack of gate space and by foreign competitors who undercut their trans-Pacific fares. It is not unreasonable to view Delta's effort to establish a trans-Pacific hub in Seattle as a brilliant strategy. "In general analysts want to see less capacity added than GDP growth," said Jim Corridore of S&P Capital IQ, a veteran airline analyst, in an interview. "We want the airlines to maintain pricing power. Too many seats can put the entire industry revival, which has come from disciplined capacity, at risk. "In Delta's case they are building a hub in Seattle with the potential to enter into a market share battle with Alaska Air," Corridore said, noting that he does not buy the objections. "I think in their case it's worth the fight as building an international gateway out of Seattle is a compelling opportunity that Alaska cannot take advantage of." Written by Ted Reed in Charlotte, N.C. To contact this writer, click here. Follow @tedreednc a a a a a a a a a a a


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