Delta may thwart Comair's growth
--------------------------------------------------------------------------------
By Alexander Coolidge
Post staff reporter
Some Wall Street analysts think Cincinnati-based Comair is unlikely to win a
bid to fly its corporate parent Delta Air Lines' newest small jets.
As it pares its fleet of large planes, Delta is expanding its use of
smaller, regional jets with 45 new 50-seat planes over the next two years.
The airline has used smaller aircraft to replace bigger planes on routes
with diminished passenger traffic.
Delta is expected to announce this quarter which regional carrier -- either
a subsidiary such as Comair or an outside airline -- it will contract to fly
the planes.
"SkyWest is a leading candidate to win growth, but so is Chautauqua," said
Robert Ashcroft, of UBS Investment Research in New York City. "We doubt
Delta subsidiaries (Atlantic Southeast Airlines) and Comair will score,
given the refusal of their pilot unions to reduce wages."
The downbeat handicapping of Comair's prospects echo worries by company
executives last fall when they asked unions to take pay cuts. Company
officials expressed concern that Comair's cost structure wasn't as lean as
other potential suitors for Delta's new planes.
Ashcroft said SkyWest and Chautauqua, which already are under contract to
fly routes for Delta, had lower costs. Also, Delta appears to be slowing the
growth of its regional fleet to 11 percent over the next two years, compared
to industrywide growth of 20 percent this year, he said.
Glenn Engel, an analyst with Goldman Sachs in New York, said he thought
Delta would look mostly outside its organization to contract the new jets,
although he speculated the airline might keep some of the planes at an
in-house carrier.
"Comair might get a small piece," he said.
If analysts' predictions come true, it would be a blow to Comair's growth
prospects as the regional segment of the industry continues to take off.
Government statistics say regional airlines' share of total scheduled
flights has increased from 10 percent of U.S. flights in 2000 to 25 percent
in 2003. Large jets' share of flights have declined during the same period
from 59 percent of U.S. flights in 2000 to 52 percent at the end of last
year.
Comair and Delta officials were not available for comment.
J.C. Lawson, chairman of the Comair chapter of the Air Line Pilots
Association, said the union wants the airline to prosper, but not at the
expense of pilots' salaries.
"Delta's hurting, but Comair is profitable," he said.
Lawson said he doubted Delta was concerned about the cost structure at
Comair. Still, he said the company should consider merging the Cincinnati
carrier with its sister regional ASA before asking pilots to work for less.
He noted ailing Delta rival US Air is consolidating its regional
subsidiaries to cut costs.
