Experts predict Comair may be sold

[JetPilot_Mike]

This might already be in one of the 6+ pages of this thread already...

Excerpt: Delta CEO resolute on pilot wage cuts (No spin-offs)
The Cincinnati Enquirer 4-24-04
After the meeting, Grinstein shot down the possibility of spinning off regional subsidiaries Comair (based in Erlanger) or Atlantic Southeast Airlines to raise more cash.

"Comair and ASA are valuable assets," Grinstein said. "The price you would sell them for would be what kind of contract you would give for service ... and you would be tying yourself into a long-term obligation.

"It would seem to me to be counterproductive, so we would rather keep them in the role they are in - providing feed for the network."
View complete article at http://www.enquirer.com/editions/2004/04/24/biz_delta24.html

 

[General Lee]

Yes, he would like to keep them--that is obvious, but if the crap hits the fan---he will sell---or he will have to answer a lot of questions. I hope we never reach that point.

Bye Bye--General Lee

 

[601Pilot]

The main reason Delta purchased ASA in the first
place was to improve quality. It has improved,
but we still have a long way to go. If they
spin us off, I'm sure we'll go back to the way
it was in no time.

 

[skiddriver]

9rj9,

Not if you sign a 10 year contract with certain provisions stating a certain amount of time before cancelling a contract. Just remember---"A contract is a contract......" (Thanks Leo--enjoy the $16 million)

Bye Bye--General Lee

General,

That's exactly why Grinstein says he doesn't want to sell us off. Try and listen to what the man is telling the stockholders:

"Comair and ASA are valuable assets," Grinstein said. "The price you would sell them for would be what kind of contract you would give for service ... and you would be tying yourself into a long-term obligation.

"It would seem to me to be counterproductive, so we would rather keep them in the role they are in - providing feed for the network."

The deal Delta would have to cut to get any kind of price for either Comair or ASA would end up costing Delta more money in the long run than they could hope to gain from the IPO. Delta would have to lock in very favorable terms for an extended period of time to get anyone to buy the stock. The WO pilot groups would have to take a major paycut to make the deal work, and if you think the pilots at Comair will take a paycut BEFORE the sale just to drive up the stock price, think again. They'll have to offer us significant incentive to give up anything. Use your imagination.

Additionally, despite what was posted before by someone else, Delta doesn't make a dime off any stock they retain in order to keep control of the new company. The new company will have a finite value. Delta has to keep the price-to-book ratio in line or no one will buy the stock (it would be overvalued); so they can't just print more stock certificates. There has to be compelling reasons for investors to buy into an IPO, especially in an industry as depressed as ours, floating an offering with bad fundamentals at the start isn't going to raise a dime.

Finally, the "they'll have to answer questions" argument is pretty weak. They can lay out financials (inflated or not) that can show that a decision to keep ASA and Comair is sound, and that is all the majority of the stockholders will want to see. In bad times, you try to shed liabilities, not assets.

 

[wms]

The main reason Delta purchased ASA in the first
place was to improve quality. It has improved,
but we still have a long way to go. If they
spin us off, I'm sure we'll go back to the way
it was in no time.

Actually, the main reason DAL bought ASA & CA was to protect its own interests.

Business Express provided feed service for DAL in the NE and AMR bought them. That left DAL without regional service in BOS and I believe short of service in NY. DAL bought ASA & CA to prevent the same thing from happening in ATL, DFW and CVG. It was purely a defensive/preemptive move.

 

[Publishers]

Shiddriver

I totally agree --- sell the mainline and keep Song, Comair, and ASA.

The points are well taken, however, i do not think in the case of Pinnacle or Express that the time of contract for services was that long.

Secondly if you want a wild senario, Jetblue buys Comair and overnight has a world class route system.

For all of you thread watchers from old, this is why you do not allow common scope with mainline pilots. If Comair was part of the Delta pilot group, there would not even be this possibility.

 

[FlyComAirJets]

Max pay (& scope) to the last day!

And yet, they are completely ready to fly this whole operation right into the ground just like the USAirways pilots are. Unbelievable.

Nice to hear from you Publishers, sometimes only those who have been there can see where we are headed.

 

[standaman]

Re: Shiddriver

Secondly if you want a wild senario, Jetblue buys Comair and overnight has a world class route system.
.

Know that is some wild scenario. I would love to see an airline like that. We also may get that opportunity soon. The Atlantic Coast Airlines/Independence Air could look exactly like that. All else said I don't think it would be in either companies interest to do something quite as crazy as that.

 

[On Your Six]

Isn't COEX Doing Fine?

How many people a couple years back thought COEX would be spun off from Continental? I think Heavy Set is not too off base. Bethune saw a financial opportunity to get some quick cash (it had very low cash at the time) and it still maintains full operational benefits to this day...

Everyone here has responded emotionally because of the unknown job implications of a spin off. That is understandable. However, COEX has done just fine without full Continental ownership. Hasn't it? Are people concerned that without "Mother Delta's" full financial suport, ASA and Comair won't do as well? Help me understand the cause of this apparent separation anxiety....

The quality argument doesn't fly. Skywest and CHQ provide great quality and they are not owned by Delta. There is no reason to assume that Comair/ASA quality would decline after a spin off - that hasn't been the case with COEX. Plus, there would be quality metrics (on-time performance, customer complaint limits, etc.) built into any feed contract with Delta - just like there are now with ACA, Skywest and CHQ.

I don't think Delta mainline pilots are your enemies here - I think Mesa, Skywest, USAirways (MDA) and other pilots who continue to bring down average industry wages (and make Comair/ASA wage levels stick out like a sore thumb) are the people you should be directing your anger to. Growing ASA and Comair at current wage levels will be more expensive than expanding CHQ and Skywest given their lower operating costs - that's a fact. Anything on this board expressed by Heavy and General are merely statements made by most airline analysts.

I think COEX has proven that a WO regional CAN be spun off to the public successfully - and Continental wins by collecting a lot of cash and maintaining the same operational benefits.

What are the benefits to Delta of full ownership of ASA and Comair when CHQ and Skywest partnerships are working quite well without ownership? Simple question...

 

[ATR-DRIVR]

All of the money ASA/CMR makes goes directly to DAL. DAL pays a fee for SKY/CHQ. Simple answer.