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AJC on the CRJ (today's business page)

FL000

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Delta's regional partners thrive

By NANCY FONTI
Atlanta Journal-Constitution Staff Writer

Delta Air Lines hopes its smallest planes will help carry it through hard times.

In the post-Sept. 11 environment, Delta has parked some big jets. But its regional partners are expanding as fast as ever.

Atlantic Southeast Airlines, Delta's primary partner in Atlanta, added nearly 22 percent more seat capacity in the first five months of the year than it had in the same period of 2001, while Delta as a whole shrank about 9 percent.

The partners' smaller planes better match reduced demand on some routes. They also are cheaper to operate than big jets because they use less fuel, and flight crew wages are lower. Operating costs for an MD-88 are about 225 percent higher than for a regional jet, Delta executives say.

Delta uses regional partners to pick up routes that don't justify big-jet service.

For instance: After Sept. 11, Delta's Salt Lake City-Omaha, Neb., load factor fell to 41 percent in Boeing 727s with about 150 seats and three pilots.

Delta replaced the big jets with 50-seat planes operated by Utah-based partner SkyWest. Load factor rose to 77 percent -- which Delta says is beyond the break-even point for regional jets.

Similarly, Delta also replaced big planes with ASA regional jets on its Atlanta-Monroe, La., route.

"We obviously didn't want to give up the routes, so we subbed in regional jets," explained Fred Buttrell, president of Delta Connection Inc., the business unit overseeing Delta's regional operations.

"People in those cities still need to fly to conduct commerce and business. We also want to maintain a network presence. This is our structural DNA, and we don't like to alter it much," Buttrell said.

The strategy means Delta passengers are more likely to find themselves on smaller planes.

But regional jets have proven popular among fliers, said business travel consultant Chris McGinnis.

"People are pleased with the regional jets because they are both comfortable and fast," he said.

Delta has more flexibility to use regional partners than most big carriers. It bought both ASA and Cincinnati-based Comair in the late '90s, giving it full control of their large and growing fleets of regional jets. Together ASA and Comair fly 35 percent of the world's regional jet fleet.

The airline has long depended on its Connection partners to feed traffic from small and medium-sized communities into its massive Atlanta hub and secondary hubs in Cincinnati and Salt Lake City.

Between 14 percent and 16 percent of passengers on a typical mainline flight connect from a Connection flight. ASA and Comair account for 70 percent of Connection flying, with the remainder done by airlines under contract with Delta.

Connection flying accounts for 8 percent to 12 percent of Delta's systemwide seat capacity.

Delta's aggressive use of regional jets is a wise strategy, one analyst said.

"It helps their pricing strategy and capacity control but also their ability to rebuild their network," said New York airline consultant Bob Mann. "That's important to business travelers who they are desperately trying to win back."

The strategy isn't entirely new. Delta and other big carriers for several years have used the new generation of smaller jets to test new markets, fly point-to-point and keep their brand in cities where traffic is too light to justify big-jet service. The minijets can fly many more routes than the turboprops they replace.

Stimulating markets

When Delta began testing service from Atlanta to Manchester, N.H., in January 2000, it used regional planes. Six months later, the market proved viable, so the airline replaced small planes with mainline jets.

"[A large jet] requires much more revenue for the route to be profitable -- it needs more passengers," Buttrell said. "When you are stimulating market and developing market quickly and you can't get those passengers, you've generated a loss without staying power."

Pilots at big airlines have long been concerned that regional jets afford airlines a way of shifting more growth toward regional partners and their lower-paid flight crews.

As at other airlines, Delta's contract with its pilots restricts regional flying, but limits are more relaxed than those at other carriers.

Now, ASA is hiring pilots, while 805 Delta mainline pilots have temporarily lost their jobs since last fall.

"We believe that there are significant growth opportunities out there for the mainline and for the regional units," said Mike Pinho, a spokesman for Delta's Air Line Pilots Association unit. "It's up to the management team to get the pricing structure in order to grow the airline."

Buttrell, a former Air Force fighter pilot who joined the airline industry after being diagnosed with diabetes, meets with pilots to explain the business plan for Delta Connection.

"Nobody is ever excited about cutting service," Buttrell said. "Because we have a stronger regional feed, we've been able to pull down less than other carriers."

When he argues that regional jets are best suited for small routes, "I tell the pilots that you wouldn't use a C-5 for ground attack," he quipped.

Geographic changes

In addition to growing its regional operations, Delta also is rearranging them geographically.

Delta in June announced Chautauqua Airlines, a newly added contract partner, would take over intra-Florida flying from Comair.

Comair, Buttrell explained, now serves Florida with turboprop planes, which it is phasing out. Comair crews, in new regional jets, will expand flights at Dallas-Fort Worth and New York's Kennedy International Airport, as well as in Cincinnati.

Mann, the analyst, said aggressive use of regional jets isn't right for every market. Small markets of less than 400 miles are flown more efficiently by turboprop planes.

"Small jets have higher operating costs [than turboprops]. If you are the only guy with a small jet, the market will choose you, but if every airline in the market flies small jets, nobody has the marketing advantage."

Service is another pressure point. Delta bought ASA in 1999 in part because it faced customer complaints.

Buttrell said Connection now completes 97 percent of all scheduled flights, up from 94 percent in 2001. His goal is 98 percent.

"Consumers expect the service levels at the feeders to be the same as Delta's," said consultant McGinnis.
 

Timebuilder

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Is it just me, or does this sound as though the smaller jets are helping to keep mainline jobs by providing a source of income for Delta paychecks and retirement income?

How many more mainline guys would be on the street were it not for the RJ and its crew?
 

surplus1

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Timebuilder said:
Is it just me, or does this sound as though the smaller jets are helping to keep mainline jobs by providing a source of income for Delta paychecks and retirement income?

How many more mainline guys would be on the street were it not for the RJ and its crew?

There is no question at all that the small jets are helping to keep the mainline afloat in this time of crisis (as I've been arguing all along).

There is also no question that before the 9/11 tragedy and the economic downturn, the revenue generated by the small jets was a significant addition to the bottom line of Delta. Allthough the small jets at Comair and ASA alone carry only about 8-10% of Delta's traffic, their net profits have represented nearly half of Delta's net profit in the "good" times and a majority of its domestic profit.

Before Delta bought my airline (Comair) it was consistently the most profitable airline in the world. The profits did not suddenly disappear on the day of the acquisition. The money we made was and is being used to help pay the high wages of the Delta pilots.

The fact that Delta, Inc. was willing to and did loose over $680 millons (their number) of the shareholder's money in 89-days, to break the Comair pilots' strike is all telling. The cost to give the pilots everything they wanted would have been about $50 million additional over a 5-year period. Either Delta's decision to lose all that money was a classic case of management stupidity or they fully expect to amortize it over a relatively short period, using the net profits generated by Comair alone.

Don''t overlook that ASA also has high net profits and the remaining DCI carriers are all operated on a "fee for departure" basis, where Delta has no risk, no capital investment and makes a profit on every seat sold.

With their present cost structure, mainline aircraft require load factors in the high 70%tile to break even. Regional jets have a break-even load factor between 40% and 50%, sometimes less. It is not rocket science to see why they are essential to the financial health of the parent company or why they have replaced larger aircraft on some routes.

I don't know how many more mainline guys at Delta would be on the street were it not for the RJ and its crews, but it would certainly be substantially more than today's number. Nonetheless, the Delta pilots are determined in their quest for gold, to kill the goose that lays the egg, and the union that "represents" both the Delta pilots and the regional pilots is helping them to do it.

It's a clear win for management on all counts. I don't want management to lose, but as a pilot, I would much prefer a win/win for both sides.
 

FlyDeltasJets

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The rj is a wonderful tool which has made lots of money for Delta Air Lines. None of us are arguing that point, yet people keep bringing it up.

We are not fighting the use of rjs. We do not want to limit them.

All that we are trying to end is the continued outsourcing of our flying.
 

~~~^~~~

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FlyDeltasJets said:
We are not fighting the use of rjs. We do not want to limit them.

Who is we? We must not be ALPA. Duane Woerth has been clear on the "proliferation of low wage aircraft" and "natural dividing lines" to keep small jet pilots out.

ALPA does not want the RJ to fly in significant numbers for two reasons (1) reduces the power of "big" aircraft pilots to control the union by their majority vote and (2) potential pay erosion.

Obviously your union's tactics are not achieving your stated goals and have in fact been an total failure. What do you propose to remedy the situation?
 

surplus1

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~~~^~~~

Excellent post. To the point and right on target. Kudos!
 

FlyDeltasJets

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Actually, I think fins' post was highly inaccurate regarding ALPA's goals. As far as a solution, I have posted waaaayyyyyy too many posts illustrating what I think the solutions should be. Don't have the time to list them all now.

Fly safe.
 

PuffDriver

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FlyDeltasJets said:
Actually, I think fins' post was highly inaccurate regarding ALPA's goals. As far as a solution, I have posted waaaayyyyyy too many posts illustrating what I think the solutions should be. Don't have the time to list them all now.

Fly safe.

What better way to start the show off than this one!! You are correct FDJ, completely and totally inaccurate. Somebody else posted that DCI was responsible for close to half of Delta's profit. The numbers I have heard are closer to 20%. Let's not inflate statistics here folks.

When cutting through all of the BS, a couple of things are clear:

1) ALPA does in fact give the regional pilots fair representation--as witnessed by Duane's refusal to sign LOA 81, and his acceptance of the Delta PWA.

2) The more and more the RJDC open their mouths, the clearer and clearer their true motive becomes--and it ain't fair representation.

3) Comair did an outstanding business beofre the buyout. It was solely due to the lucrative code share they used on their routes. As a stand alone company without a code share, they would have been gone long ago.

4) The <70 seat market is limited. The scene is being set, and the RJDC doesn't like it. Management has been looking at 80-100 seat jets from Embraer and also some Airbuses. Seems as if this has been mentioned in the past before, hmmmmmmm. This is the true right size aircraft which is going to be the cards management plays in the race against the low cost carriers. Who will fly them?!? Let's just say it won't be the RJDC litigants.

5) Did y'all miss me???????????????

Puff
 

9rj9

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100 seat aircraft

The 100 seat aircraft will be flown by DCI. Delta will find a way around scope, and the top 70% of mainline will swallow hard to protect their jobs. I predict Delta mainline will never hire another pilot. Sad state we're in, but with thousands lined-up to work for 15,000 a year its supply and demand. Thanks ALPA, ...still working on guns in the cockpit.
 

FlyDeltasJets

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Re: 100 seat aircraft

9rj9 said:
The 100 seat aircraft will be flown by DCI. Delta will find a way around scope, and the top 70% of mainline will swallow hard to protect their jobs


I believe that you are GREATLY underestimating the Delta pilot's committment to scope. I will grant you that we have not exactly been too strong on scope in the past, and we are currently paying the price of such a lack of foresight. However, I think we have learned our lesson. I predict that we will NEVER relax the 70-seat limit, and I am quite certain that if we do get 100-seaters, they will be flown by Delta pilots.


Of course, I don't know that for a fact, and our pilot group has disappointed me in the past, but I am pretty sure that the majority of us recognize the importance of holding the line at 70-seats (should have been 50-seats!).

I guess we'll see.
 

bigD

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I'm curious - before the RJ came around, how many seats did the typical regional aircraft have? I know it's a dumb question, but cut me some slack - I've only ever had to fly between large cities!
 

DaveGriffin

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PuffDriver said:

Did y'all miss me???????????????
Puff

Puff;
Aren't you the the same poster on a couple of other boards who has ranted about the superiority of civilian trained pilots due to the poor safety record of military trained commercial airline pilots because you say they are basically hotdogs and responsible for more commercial crashes and accidents?
 

PuffDriver

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DaveGriffin said:


Puff;
Aren't you the the same poster on a couple of other boards who has ranted about the superiority of civilian trained pilots due to the poor safety record of military trained commercial airline pilots because you say they are basically hotdogs and responsible for more commercial crashes and accidents?

Sorry, dude, I'm not going to bite. You're going to have to go cry somewhere else. Maybe the moderagtor will remove your post due to thread creep.
 

DaveGriffin

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PuffDriver said:
Sorry, dude, I'm not going to bite. You're going to have to go cry somewhere else. Maybe the moderagtor will remove your post due to thread creep.

Puff;

"Thread creep?!" Good way to weasel out of answering the question.

It was your first post on the this board and you closed your post by asking if anyone missed you.

How can one answer your question without first knowing who you are (from your posts on other boards)?
 
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