Comair sends a message....again...

[surplus1]

Hold on there Surp1. Your head alittle big. Vanity, its the favorite sin.

Anyway - There is a history at this WO that would squash anything your PFT laidin, goin on strike when jobs are aplenty group has. NO OFFENSE INTENDED, THATS JUST HOW IT IS.

I see you did take offense. I'm sorry.

Your recent history is what counts. You each had a choice to make and you made it. One by one. The first to run under fire appears to have benefited, at the expense of the other two, who are suffering. That was your choice and it was your right to make it.

We also have a right to make our choice, and we have. I'll grant you the circumstances are a bit different. So are the choices. Your concessions may have been justified. Your acceptance of J4J was not. You let the company railroad you, the USAways pilots railroad you and ALPA railroad you. To each his own. JMHO.

It is neither vanity nor pride. We are not better than you, we are just different than you. Just a statement of fact. "Different strokes for different folks."

 

[Flash 7]

Were making money, we will still ultimately grow.

They will play smoke and mirrors. Probably stop hiring after December temporarly saying we had our chance.

Bottom line, whatever there growth plans were for us this concession request would not have made a difference.

Were just not the type of pilot group thats gonna bend over when simply asked.

 

[tubelo]

Having just resigned my job for (hopefully) a Nov class, I must say I support the fact that the current CMR pilots are not taking concessions. Yes, I am a bit nervous, but I would rather be sacrificed during a furlough (or non-start) than come in making even less money than CMR already pays. It may mean I move to a different profession, but I would still respect the current pilots for their fortitude.

 

[prodigal]

What am I missing???

Comair is owned by Delta. Comair is profitable. Comair's profits thus benefit Delta. Comair grows and becomes more profitable. Delta benefits more. . .
Please, surplus1 or someone, what am I missing here?

 

[MedFlyer]

Re: What am I missing???

Comair is owned by Delta. Comair is profitable. Comair's profits thus benefit Delta. Comair grows and becomes more profitable. Delta benefits more. . .
Please, surplus1 or someone, what am I missing here?

Comair isn't really profitable, that's what you are missing. Comair is only "profitable" because DL carries a large part of the costs associated with running an airline.

How many reservation agents does Comair employ? None.
How much money does Comair spend on advertising? None.
How much money does Comair spend to maintain a frequent flyer program? None.
Hou much debt has Comair taken on financing planes? None.
How much money does Comair spend on gate leases in places like SAV, CHS or SHV? None.

The list goes on and on. The regional airline business is a great racket....why do think sleazeballs like JO are attracted to it?

However, let me note that regional pilot costs are not the problem. The problem is that the current business model behind the regionals is fundamentally broken. When times were better, DL and the other majors didn't care how much money they dumped into their regionals and how much they lost funding the regionals operations. Now, times have changed and the majors can no longer accept the costs of carrying the regionals. But instead of trying to fix the broken model, the majors will try to cut costs by pitting regionals against each other and trying to squeeze concessions out of pilots and all other employees.

 

[Bluewanabe]

"carrying the regionals"?

Who is this guy?

good stuff

 

[Wacopilot]

MedFlyer,

Please tell me what your experience is??? I think you are talking just to hear your head rattle.....You see, Comair once was independant. At that point they were HIGHLY proffitable. Comair is still HIGHLY proffitable. I beg you, please know what you are talking about next time.

We have had most of the cost you listed before and then some. You see, we bought our airplanes before we were a WO...Delta thought our "debt" was worth the 2 BILLION+ they paid for us. You should also know that in the financial review our union found that COMAIR has the LOWEST operating costs of the top 7 regionals.

As for our future, looks like ASA can now get what they deserve, Comair+1% no LESS and maybe more!

Go Marlins.


Waco

 

[AFELLOWAVIATOR]

Yet another person who knows absolutely nothing about which he speaks. Comair pays Delta for all the above services, always has.

 

[FmrFreightDog]

As for our future, looks like ASA can now get what they deserve, Comair+1% no LESS and maybe more!

Waco [/B]

I'll say it again. You Comair guys are truly class acts. Everyone here at ASA truly appreciates it. Thanks again guys!!!

 

[FLB717]

Eyessss Riiiggghht, Saalluuute!

 

[prodigal]

Waco & Afellowav,
Thanks for clearing that up. Now back to my original question.
As Comair is very profitable does not a GROWING CMR benefit Delta even more? I admit that as a mere poolie I am still an industry outsider and don't get a lot of what is going on, but it seems to me that Delta is cutting off their nose to spite their face, or, at this point, at least threatening to.
Yes I understand that CHQ or Skywest is "cheaper" than CMR, but again, CMRs profits flow back into Delta, don't they? As long as CMR is profitable it seems that Delta would want them to grow.
Someone please enlighten me.
Thanks.

 

[FurloughedAgain]

Prodigal

Prodigal,

If we could boil it down to its most basic form the question is this:

In which scenario does Delta profit the most:

#1. Operating Comair - Comair revenue minus Comair costs.

or

#2. Codeshare - Codeshare revenue minus fee-per-departure.

It is important to remember that when Delta codeshares with Chautauqua, or ACA, or Skywest they are essentially BUYING 50 empty aircraft seats.

Delta then sells the seats to its customers and pockets the cash. All they need to pay Chautauqua is the fee (whatever that may be.)

So the big question is, if revenue is constant, then what is cheaper?

The fee? or the costs of running an airline such as Comair or ASA?

That, of course, opens up a whole bunch more questions regarding profitability in markets with high yield? With low yield? From hub-markets? From point-to-point? With high load-factor? With high cost per seat mile (i/e short distances)?

So, to answer your question, I dont believe we KNOW whether or not it is more profitable to operate Comair/ASA or Chautauqua.

What we DO know, is that Comair's profitability depends directly upon Delta. Delta decides in which markets to put their 50 and 70 seat products. Delta determines which city-pairs to serve. If a market is performing poorly then Delta makes the decision whether to leave Comair in the market or remove them from it.

Since Comair has little say in where they fly, how often, and with what equipment -- there is little they can do to impact their revenue stream. The "puppetmaster" makes the decisions.

 

[AFELLOWAVIATOR]

Waco & Afellowav,
Thanks for clearing that up. Now back to my original question.
As Comair is very profitable does not a GROWING CMR benefit Delta even more? I admit that as a mere poolie I am still an industry outsider and don't get a lot of what is going on, but it seems to me that Delta is cutting off their nose to spite their face, or, at this point, at least threatening to.
Yes I understand that CHQ or Skywest is "cheaper" than CMR, but again, CMRs profits flow back into Delta, don't they? As long as CMR is profitable it seems that Delta would want them to grow.
Someone please enlighten me.
Thanks.

You seem to have a good insight. I think a lot of what this is really about is the fact that ASA is in contract talks as we speak.

It made no sense from the beginning. Then after Comair's financials were disclosed, it made even less sense. The whole company, Delta, is run as a scam as far as the employees are concerned. They own three airlines but for labor issues, they want every one to think we are three separate airlines. All three are run out of Atlanta. So when you set up a scam like organization like they have, there can never be any trust between MGT. and the employee group. It is a bad situation.

If you think about it, Comair really did not make a dime. All profits come from one client, Delta. Delta pays itself, thru Comair. I'll let you work thru that one on your own because I know what I mean, just not sure how to say it.

 

[prodigal]

Thanks guys. That helps some. I guess I'm trying to make some sense out of this mess, which is very hard to do when you don't have the big picture. As you can imagine all this is giving this poolie a pretty good case of heartburn.
Keepin' the faith.

 

[FDJ2]

Comair will be as profitable or unprofitable as management sees fit. Since CMR is no longer an airline with its own code, revenue stream or cost structure, the numbers are easily doctored. As an example, if a passenger buys a $400 ticket from TYS to LAX, and CMR flies the TYS-CVG leg, with the mainline flying CVG to LAX, management can attribute $300 to CMR and only $100 to the mainline flight, or visa versa. The same can be done with the cost of flying that passenger. It really doesn't matter. Back in 1999 when CMR management made the strategic decision to sell to DAL, because their days of double digit profits were over, they knew that CMR would cease to be an independent airline and become a wholly owned vendor of small jet lift. Since the CMR pilots never put any change of control or successorship language in their PWA, they had to go along with it. The bottom line is that CMR really isn't profitable or unprofitable anymore, they are just a cost, which management wants to reduce. The price of not reducing their costs, since CMR pilots have no meaningful scope, is that the flying and growth will go elsewhere, where there are literally thousands of eager pilots willing to do it for less. It's just that simple.

 

[Freight Dog]

Bravo CMR pilots!


But seriously tho surplus, how do you "aim for their bridge"?

WOE?

 

[surplus1]

FDJ2,

A lot of what you say in your last post is true and shows a good understanding of the big picture, as some call it, re profit/loss manipulation.

Comair is no different than Song, i.e., it is all really Delta. All these "names" are marketing tools and a part of the corporate shell games. The real purpose of all the divisions and subsidiaries is to permit the company to increase its leverage against labor. The only real "difference" between Song and Comair is that the pilots are on a different seniority list and there are different contracts with the union(s).

At Song, the only "union" is the pilots. The other employees are all "separate on paper" from Delta, have no contract and are compensated differently from the mainline. Do not be too surprised when those compensation differentials are ultimately applied to the pilots at the Song subsidiary. You won't see it right now because of the separate issue of concessions requested of the Delta pilots. I predict you will see it the next time you open under Section 6. It may be a "contract-within-a-contract" (as with the original Delta Express) or it may be separate. To prevent that new "B Scale" your only real option will be acceptance of additional overall concessions in round 2 of the game.

One thing I do take exception with is the following statement.

Back in 1999 when CMR management made the strategic decision to sell to DAL, because their days of double digit profits were over, they knew that CMR would cease to be an independent airline and become a wholly owned vendor of small jet lift. Since the CMR pilots never put any change of control or successorship language in their PWA, they had to go along with it.

That is not fully accurate and somewhat misleading. First, Comair management did not make a strategic decision to sell to DAL for the reasons you indicate or any other. The takeover was forced by Delta and was in fact "unfriendly". Little different from what Ornstein is trying to do at ACA. The only real difference was that the Comair Board realized that if it did not accept Delta's "offer" it would still have been acquired by force at a much lower price per share. When you hold a loaded gun to a woman's head and demand sex she may consent, but in a court of law it will still be rape. In the corporate world, rape is a way of life not a crime. Thus you may call it a "strategic decision" by the victim and get away with it. In today's world, if UAL had the money it would probably own ACA at this point, thus precluding its planned move for independence. The only difference is UAL is broke and, at the time, Delta wasn't.

On your second point, there was successorship language in the Comair contract and Delta assumed the contract as a condition of the "sale". The successorship language did not madate a "merger" with the buyer, but it did protect the exclusive right of Comair pilots to Comair's flying. The new contract under Delta ownership still pretends to do the same but is now moot, since Comair (as a company) no longer owns its flying, but has become an alter ego on paper.

Be that as it may, you are quite right about the ability of Delta's accountants to manipulate the profit/loss of ALL of the Delta family of airlines, including Delta mainline. The overall profit/loss of the Company may not be as readily hidden, but which division did what is like looking for a needle in a haystack.

The Delta pilot group does not have the ability to control the compensation packages at competitive airlines like American, United, Continental, NWA or U, which is why there is so much disparity between your compensation package and that of every other "legacy" carrier. Likewise, Comair pilots cannot control the behavior of pilot groups at SKYW, ACA, ARW, CHQ or Mesa. The pressures we face to match our compensation package to theirs is different only in the sence that the disparity is greater between DAL and AA (for example) than it is between CMR and CHQ.

In addition you face the comparison with carriers like Spirit, JBlue, and AirTran (and others). Thus the creation of Song. Song can compete in terms of product, but it cannont compete in terms of labor costs as long as its pilots work under the Delta PWA. The pressure to change that will only increase over time. When it faces you more directly in the future, I doubt there will be as much crowing in your chicken house. Time will tell.

Today CMR pilots are making the same "stand" that Delta pilots are making. If the market doesn't change very soon, and drastically, we will have to reconsider that position, just as your group is currently "reconsidering" its position.

In the next round of concessions the fee for departure carriers will discover that they just can't cut any more. At that point, carriers like Mesa will simply become unprofitable. Management's greed will kill the goose in its effort to extract the gold. At that point the senior excutives will simply collect their golden packages and move on to scew up some other business. Let us not forget that airlines are no longer run by people in the "airlne business". They are run by executives in the money business. The Juan Tripps and the Rickenbackers are dead. We live in a world of Lorenzos, Icahns, Wolfs, Crandalls, Bethunes et al, they just have different surnames. Maybe the don't quite have six thousand dollar shower curtains, but none of them is sharing any pain with everyday employees. When they mismanage they get a bonus and a tax-free pension. We get a pay cut and lose our retirement.

It's not too much different in the union where we have a president making over $400,000 and members earning $19,000. The era of such salaries in cockpits at the legacy carriers will unfortunately end long before us regional folks are reduced to an average of $25K per annum.

We are all in the same boat my friend and the ocean is full of icebergs. You top bananas of the hour are however a lot closer to emulating the Titanic (with respect to your compensation) than we are. Comair may be about 10% + - a Chautauqua, but a 5 year Delta copilot makes more than a 12 year American captain, in the same equipment. That can't last.

Best wishes to all of us.

 

[surplus1]

But seriously tho surplus, how do you "aim for their bridge"?

Some things are better left unspoken.

WOE?

Sorry, I don't get that.

 

[FDJ2]

First, Comair management did not make a strategic decision to sell to DAL for the reasons you indicate or any other.



E N Q U I R E R B U S I N E S S C O V E R A G E
Sunday, October 24, 1999
Comair faced tough decision to sell



BY AMY HIGGINS
The Cincinnati Enquirer
This much was certain: Comair Inc. would cease to exist as it had for the past two decades.

Years of record-setting profits would come to an end. A track record as the fastest appreciating airline stock would be over. And the story of the little airline that changed the industry would have an abrupt ending.

David Mueller knew that two Saturdays ago when he stepped off the plane from Atlanta and 15 minutes later, stepped into the boardroom at Comair's Erlanger headquarters. The fate was sealed in another five hours, after the airline's board of directors voted unanimously to sell the company to Delta Air Lines for $23.50 a share.

''Was there an emotion of, 'God, I wish there was things that we could do to keep this thing going as it was the last 15 years?' That wasn't going to happen. It's not going to happen,'' said Mr. Mueller, who founded the airline 22 years ago and continues to be its holding company's chairman and CEO.

''Our company was going to be a different company one way or another in the very near future, and it was our job to figure out what that looks like.''

During those five hours Oct. 16 in the boardroom -- the third meeting in two weeks -- the directors contemplated three possible paths that had emerged:

Sign another agreement with Delta. That would enable Comair to continue feeding the major carrier passengers from small and midsized cities. Because of increasing competition in the regional airline arena, any new agreement promised to significantly cut Comair's revenues and potential for growth. The 10-year agreement under which Comair has been flying as a Delta Connection carrier expires this month.

Don't sign the contract. That would allow Delta to join with another airline and leave Comair to either seek another major carrier or risk the uncertain skies alone.

Sell the company to Delta. The cost: a share price that's a 31 percent premium over its most recent close.

None of the options were what Mr. Mueller -- who piloted Comair's first flights to northern Ohio in 1977 -- or other executives wanted to do. The option they chose, however, might have been inevitable.

''There's a lot of things in life that you may want to do or may not want to do -- but know you have to do because it's best,'' Mr. Mueller told The Enquirer Wednesday, two days after announcing Comair's sale to Delta.

Mr. Mueller said the first two options were seriously considered. Company executives spent weeks compiling and analyzing industry data, such as looking at similar agreements between major and regional carriers. Other regionals are catching up with Comair's use of the jets that revolutionized the industry and led to record-setting profits -- but they're flying them for a smaller piece of the revenue pie.

Comair executives concluded that a new agreement with Delta -- or any other major carrier -- would be different enough that Comair's revenues, profits and stock value could not be sustained. Analysts agree that one way or another, the good times were over.

''In my opinion, Delta was going to use their leverage to take some of Comair's revenues,'' said Jim Parker, airline analyst and managing director of SunTrust Equitable Securities in Atlanta. ''Profits would come down, and in turn, the stock price would come down.''

Mr. Parker said slashed profits and share prices also would result if Comair risked becoming an independent airline.

Still, taking risks is nothing new to the Mueller family. David Mueller started at age 15 taking those risks by learning to fly. He sought to get into commercial aviation during the late 1970s, during the uncertain atmosphere of federal deregulation.

In 1977, Mr. Mueller and his father, Raymond, sunk almost $60,000 -- mostly from their collective savings -- into buying the assets of Wings Air, another commuter airline that was in bankruptcy. They wanted to risk succeeding where another had failed.

The elder Mr. Mueller remains on Comair's board but has not been involved in the operation of the airline for about 12 years. He retired as chairman in 1990. Contacted at his Florida home last week, he declined to be interviewed.

David Mueller said he and his father leveraged many of their assets, especially in those early days when cash flow tightened after a crash in 1979. An engine inexplicably died, sending the plane down and killing 8 people. The start-up carrier then had such a hard time attracting Cincinnati passengers that it moved the bulk of its operations to Dayton for eight months.

''Dad had to make some (investment) moves, I had to make some moves, but we got out of that relatively quickly,'' Mr. Mueller said.
During even those hardest times, with two small children at home, Mr. Mueller said he never thought about giving up.

''I would always take a big risk for something that I believe in,'' he said. ''You've got to have the idea and the intelligence to pursue that idea.''

Comair's biggest risk came in the early 1990s when Mr. Mueller sought to introduce regional jets to the flying public. No one had considered using the aircraft, which are more expensive to buy and operate than the industry-standard turboprops.

But jets are quieter, are more comfortable, are faster and can fly farther than other commuter aircraft.

And they were right. The jets' popularity, along with a revenue-sharing agreement signed in 1989 that didn't account for the jets' profitability, are keys to Comair's wild success on Wall Street.

''We bet the company in 1990 when we ordered the first jet. That was a billion-five ($1.5 billion for 50 jets) on a company that at that time had a net worth of $100 million, $150 million,'' Mr. Mueller said. ''But we all believed that was the wave of the future and as it turned out now everybody's trying to play catch up.''

Indeed, most regional carriers -- including others that fly as the Delta Connection in other parts of the country -- have added jets to their livery and have hundreds more on order. Atlantic Coast Airlines last month signed a contract to fly 45 of their jets for Delta in the Northeast.

''I will bet my bonus that it's nowhere near what our contract that expires is like,'' Mr. Mueller said.

The explanation is still hard to take for shareholders like Joe Dooley, a 28-year-old cellular technician who bought several hundred shares of Comair for $25.50 each in March.

Mr. Dooley said he bought Comair as a long-term investment after researching the company and finding it performed well for shareholders. But now, he wants to avoid selling.

''I'm going to take a substantial loss,'' he said. ''It's not going to bankrupt me, but it's a disappointment to me.''

Mr. Mueller said the disappointment could be worse with the alternatives the board considered. Airline stocks in general have been sluggish in recent months, and Comair's showed no promise of repeating its 10-year average annual return of almost 35 percent.

''The way our stock was headed, they might have woken up Monday morning with a $15 stock price,'' he said.

At $23.50 a share, Mr. Mueller personally stands to make $23.4 million from selling his 1.3 percent stake in the company. His stock options are worth at least another $12 million, while his contract with Comair guarantees him almost $1.7 million if the company changes hands.

Mr. Mueller knows that he's set for life. With almost nothing out of his financial range, he plans to travel and pursue other interests after fulfilling his three-year commitment to Delta as an adviser.

He might breed horses; he might travel to Asia; he might spend more time with his family. Whatever he does, he'll do it with the knowledge that in October 1999, he did the best thing he could.

''Is it emotional? Hell yes, it's emotional,'' he said.''But I can tell you that the board members, employees, shareholders, customers, we can all hold our heads high.''

 

[Freight Dog]

Surplus, WOE - withdrawal of enthusiasm.