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Comair not for sale to SkyWest
By James Pilcher
Enquirer staff writer
ERLANGER – Delta Air Lines is not discussing the sale of its Erlanger-based subsidiary Comair with regional airline SkyWest, Comair’s top executive said today.
“This is a fact-based situation, and there are no discussions going on,” said Comair president Fred Buttrell in an interview. “I can’t speak for any other Delta assets, but as this applies to Comair, the possibility of us being sold to SkyWest is something that just has not come up.”
Buttrell, who took over the job in late January after running Delta’s regional network in Atlanta, was responding to comments by SkyWest chief financial officer Bradford Rich on Monday.
During a presentation at the Raymond James Institutional Investor Conference in Orlando, Fla., Rich indicated the Utah-based airline was in talks with Delta to buy Comair, fellow Delta subsidiary Atlantic Southeast Airlines or both.
“We have had some discussion with Delta about this … They have expressed their desire pretty specifically to us, and we know what they’re thinking,” Rich said. “We think we’re in the best position of anyone to take advantage of this type of an opportunity.”
Rich did not specify whether Delta was considering selling Comair or ASA or both, and indicated that the talks were preliminary. He also said that an early rough estimate indicated that SkyWest could cut either airline’s operating costs by 5 percent.
“They have in some ways suddenly and in other ways not so suddenly expressed interest in liquidating or monetizing two very significant assets,” Rich said during the conference. “We know that they have this interest. And by the way, this is more than just an interest today. As you look at Delta and what their capital requirements will be over the next year, they need to generate some capital somewhere, and this is one way of doing that.”
SkyWest, which contracts with Delta and United Airlines to provide feed to western hubs, is one of the most profitable airlines in the regional industry and has more than $500 million in available cash. Its stock rose 16 cents to $18.05 this afternoon on the news of Rich’s comments. SkyWest officials did not immediately comment.
Delta has lost more than $7 billion in the past four years, and narrowly avoided a bankruptcy filing last fall. Its stock rose 3 cents to $5.30 in mid-afternoon trading today.
The Atlanta-based airline took a $1.9 billion charge associated with the write down in value of both Comair and ASA last quarter. Delta, the nation’s third-largest airline, bought Comair for $2.3 billion in January 2000.
Comair now employs more than 6,000, including 4,000 locally at the Cincinnati/Northern Kentucky International Airport, where it operates the most flights of any airline, providing feed to Delta’s second-largest hub.
Delta purchased Atlanta-based ASA for $1 billion the previous year. Since then, problems have arisen at both carriers, with Comair’s pilots conducting an 89-day strike in spring 2001 and ASA suffering from significant operational issues with on-time performance.
Delta spokesman John Kennedy would not comment on either whether the airline was discussing selling off one or both of its regional subsidiaries, nor would he address Rich’s comments.
In December, however, Delta chief executive officer Gerald Grinstein publicly discussed the possibility of spinning off or selling Comair or ASA, saying that Delta could get the same benefit from the regional carriers without owning them. He did not indicate that any talks were underway at the time, or whether Delta intended to make Comair independent once more.
Industry expert Mike Miller said that a sale of Comair or ASA or both could make sense for both Delta and SkyWest.
“SkyWest is known as a very efficient operator, and they could get a very good economy of scale by consolidating the three operations into one,” said Miller, co-partner in The Velocity Group, a Washington, D.C.-based aviation consulting firm. “And for Delta, not only would they get the cash, but this would enable them to get really aggressive and competitive with the rates they pay their regional providers, which they can’t really do now since they own two of them.”
But Buttrell said that if such talks were actually underway, he would be required to sign a confidentiality agreement, and that none of the steps normally taken during such a process were underway.
“Delta has not even asked us to start completing due diligence, which would be part of any possible deal,” Buttrell said.
E-mail [email protected]
By James Pilcher
Enquirer staff writer
ERLANGER – Delta Air Lines is not discussing the sale of its Erlanger-based subsidiary Comair with regional airline SkyWest, Comair’s top executive said today.
“This is a fact-based situation, and there are no discussions going on,” said Comair president Fred Buttrell in an interview. “I can’t speak for any other Delta assets, but as this applies to Comair, the possibility of us being sold to SkyWest is something that just has not come up.”
Buttrell, who took over the job in late January after running Delta’s regional network in Atlanta, was responding to comments by SkyWest chief financial officer Bradford Rich on Monday.
During a presentation at the Raymond James Institutional Investor Conference in Orlando, Fla., Rich indicated the Utah-based airline was in talks with Delta to buy Comair, fellow Delta subsidiary Atlantic Southeast Airlines or both.
“We have had some discussion with Delta about this … They have expressed their desire pretty specifically to us, and we know what they’re thinking,” Rich said. “We think we’re in the best position of anyone to take advantage of this type of an opportunity.”
Rich did not specify whether Delta was considering selling Comair or ASA or both, and indicated that the talks were preliminary. He also said that an early rough estimate indicated that SkyWest could cut either airline’s operating costs by 5 percent.
“They have in some ways suddenly and in other ways not so suddenly expressed interest in liquidating or monetizing two very significant assets,” Rich said during the conference. “We know that they have this interest. And by the way, this is more than just an interest today. As you look at Delta and what their capital requirements will be over the next year, they need to generate some capital somewhere, and this is one way of doing that.”
SkyWest, which contracts with Delta and United Airlines to provide feed to western hubs, is one of the most profitable airlines in the regional industry and has more than $500 million in available cash. Its stock rose 16 cents to $18.05 this afternoon on the news of Rich’s comments. SkyWest officials did not immediately comment.
Delta has lost more than $7 billion in the past four years, and narrowly avoided a bankruptcy filing last fall. Its stock rose 3 cents to $5.30 in mid-afternoon trading today.
The Atlanta-based airline took a $1.9 billion charge associated with the write down in value of both Comair and ASA last quarter. Delta, the nation’s third-largest airline, bought Comair for $2.3 billion in January 2000.
Comair now employs more than 6,000, including 4,000 locally at the Cincinnati/Northern Kentucky International Airport, where it operates the most flights of any airline, providing feed to Delta’s second-largest hub.
Delta purchased Atlanta-based ASA for $1 billion the previous year. Since then, problems have arisen at both carriers, with Comair’s pilots conducting an 89-day strike in spring 2001 and ASA suffering from significant operational issues with on-time performance.
Delta spokesman John Kennedy would not comment on either whether the airline was discussing selling off one or both of its regional subsidiaries, nor would he address Rich’s comments.
In December, however, Delta chief executive officer Gerald Grinstein publicly discussed the possibility of spinning off or selling Comair or ASA, saying that Delta could get the same benefit from the regional carriers without owning them. He did not indicate that any talks were underway at the time, or whether Delta intended to make Comair independent once more.
Industry expert Mike Miller said that a sale of Comair or ASA or both could make sense for both Delta and SkyWest.
“SkyWest is known as a very efficient operator, and they could get a very good economy of scale by consolidating the three operations into one,” said Miller, co-partner in The Velocity Group, a Washington, D.C.-based aviation consulting firm. “And for Delta, not only would they get the cash, but this would enable them to get really aggressive and competitive with the rates they pay their regional providers, which they can’t really do now since they own two of them.”
But Buttrell said that if such talks were actually underway, he would be required to sign a confidentiality agreement, and that none of the steps normally taken during such a process were underway.
“Delta has not even asked us to start completing due diligence, which would be part of any possible deal,” Buttrell said.
E-mail [email protected]
