Experts predict Comair may be sold

[skiddriver]

General,

While neither of us is a Wall Street expert (or else we wouldn't be posting on this board), your assertions don't pass the sniff test. Sure, if we remain owned by Delta, our contract is up for grabs in a bankruptcy hearing. But if we get sold off, then our contract is like Skywest's or Chautauqua's - outside of the reach of Delta management. The terms of delivery and payment may be up for discussion, but if there are shares to be sold, those shares need to provide some hope of return. If not, no one will buy them. We have no reason to give up pay yet. If we stay as a wholly owned, it may be forced on us. As an independent financial entity, I don't think so. A separate entity financially controlled by Delta might be a possibility, but then Delta has a fiduciary responsibility to the Comair shareholders as well as the Delta shareholders.

The undertone to your posts on this subject have been - the Comair pilot group will lose pay AND we'll get rid of them by selling them off. To make a sale worthwhile however, it will need to come soon (before Delta burns through all their available cash in 18 months or so), and it will need to provide some hope of return soon, not years down the road. I don't think there is enough time to accomplish both of the things that you seem to hope for. We'll just have to wait and see.

 

[ATR-DRIVR]

Why don't we ask gg why he has a bunch of MD-11's sitting in the desert doing nothing except costing 445 k per month? Each. Seems to me those things ought to be doing a he11 of a lot of flying to pay for themselves and not adding more of a drain to the bottom line. Have the stockholders as that question!!!!!

 

[House_X]

I hope they spin you guys off...you guys are getting beat-up just like United did with us (ACA). When they spin you off, then you can buy Airbuses and you guys can take over the midwest...

ACA will take care of the East Coast...

OK Skywest...we need your non-union punk a$$ out on the West Coast to back us up...

Regional MOB is taking over...

booooooooooooooooyaaaaaaaaaaaaa!!!!!!!!!!!!!!!!

 

[General Lee]

Skiddrivr,

I am just trying to post the obvious, that before any Chap 11 hearing--there would have to be a sale of some assets first---and most of the investors (including the large investors) would ask Grinstein why he didn't sell off ASA/Comair first. That would be their first question. Remember, Grinstein does NOT want us to go Chap 11----he would lose control and he even stated that in the company report (for the share holder meeting in three days--Fri in ATL) that he believes they will NOT have to use Chap 11. So, he must have a plan---and that could include many things. (I am sure pilot pay cuts is first on the list.....)

I am just trying to lay it out the way I think it MIGHT happen. You are right, I am not a Wall Streeter. But, I think you guys (like us) are in for some rough years ahead---and we will both get pay cuts. I just think it is very possible that you guys could get spun off.


ATRDriver,

I agree with you, and I wonder what they plan to do with those 11 MD-11s that cost $15,000 a day each? Could they bring those back and start more Asia service like Grinstein says? Why keep paying for them? Can't we sell them to someone? I did hear that FedEx offered us a very very low ball offer and they refused. We still have the sim in ATL, and supposedly we are training a lot of World Airways pilots currently.

House X,

Even if we did spin them off, they would still be subject to the Dalpa PWA with the scope clause still in effect. But, I do see some 70 seater RJ relief for them eventually.

Bye Bye--General Lee

 

[bvt1151]

We've been discussing this through several forums throughout the past month, and it seems as though those who said it would never happen are starting to do the math. Now, what comes next?

For Comair, as its own entity, things will be nothing like before the buyout. Right now Comair and ASA enjoy a 7% advantage over CHQ and SKYW because of their operating margins since all of Comair and ASA's operating margins return to mother Delta. Without that 7% Comair and ASA could not compete with SKYW and especially CHQ. If you thought Delta's request for concessions last October was ludicrous, just wait until our own stock holders ask/demand them. When we inevitably deny the concessions, how many furloughs will there be? At least General will be happy to see Comair pilots on the street. Of course Comair/ASA would not be able to go independent or code-share with any other airlines due to the inevitable 10-year or longer contract. Remember that Comair enjoyed a very liberal contract with Delta before 1999, which was due to be renegotiated, and was one of the reasons Comair decided to sell. The offer on the table from Delta to maintain Comair as a code-sharing regional would not have allowed Comair to be profitable. Comair had two choices, go independent or sell to Delta. We all know which one they chose. What so many people don't seem to understand, however, is that the type of contract Comair could not accept in 1999 is the very same type SKYW and CHQ operate under today, and Comair/ASA may be forced to operate under after an IPO. Comair deemed the contract unprofitable in 1999, so what makes us think that after a significant pay raise resulting from a three month strike we would be profitable now, let alone be able to make the kind of returns Comair made in the previous code-share agreement?

For the Comair/ASA pilot, an IPO is a very bad thing. Best case scenario, there is no more growth...best case!. More likely concessions will be demanded and, god forbid, some aircraft could be reassigned to the cheaper regionals, with furloughs all around.

If I were Grinstein I would IPO ASA/CMR. Take the $700 million total and run. Negotiate a lucritive contract with the two regionals to boost the IPO, and then declare bankruptcy. The contract is then renegotiated at Delta-favored terms, and Comair and ASA suddenly find themselves in the red. The only way to save Comair and ASA then, would be to take concessions, because of course Delta would spin us off with no cash, and a butt-load of debt.

I'm frustrated by the many Comair pilots who are excited about a spin-off because, as they argue, Comair always made money. The kind of returns Comair saw in the past will never rematerialize because the code-share contract they operated under is dead, and never to be resurrected as long as there are the CHQ's and MESA's out their begging for more aircraft at razor thin fee for departure rates. After an IPO, the only difference between Comair/ASA and CHQ/MESA is that Comair/ASA will cost more.

Good morning...*sniff* Is that coffee I smell?

 

[StaySeated]

Delta is starving for cash? With 2bil in the bank I think we should be talking about how hot the olson twins looked on tv earlier this evening instead. Everyone needs to calm the he11 down. Yeh, yeh, delta has 20 billion in debt payments, due over the next five years. Compare that to revenue and this is one BIG propaganda campaign to get concessions from dalpa. Nothing more, nothing less. BVT, what is this 7% thing your talking about? Are you comparing pilot wages? If pilot wages drove profitability than USairways would be the most profitable airline in the world.

Everyone, step away from flightinfo, walk to the fridge, and drink a beer.

mmmm, I still can't believe that a pint of guiness is only 125 calories!

 

[DDpaysoff]

Delta is starving for cash? With 2bil in the bank I think we should be talking about how hot the olson twins looked on tv earlier this evening instead. Everyone needs to calm the he11 down. Yeh, yeh, delta has 20 billion in debt payments, due over the next five years. Compare that to revenue and this is one BIG propaganda campaign to get concessions from dalpa. Nothing more, nothing less. BVT, what is this 7% thing your talking about? Are you comparing pilot wages? If pilot wages drove profitability than USairways would be the most profitable airline in the world.

Everyone, step away from flightinfo, walk to the fridge, and drink a beer.

mmmm, I still can't believe that a pint of guiness is only 125 calories!

True.

 

[SSDD]

Oh no! The shame of it all! How could those guys live with themselves? Going from being a wholly owned "Delta pilot" to flying for one of those scumbag portfolio carriers. WOW.

 

[General Lee]

bvt1151,

First of all, I don't want anyone to be furloughed. You obviously have missed all of my comments on how I would like our own furloughs to fly for someone, even though Comair managment would not allow that without seniority resignation---and ASA's did.
My whole thought here was that it is inevitbale for ALL of US to get pay cuts it seems----and I am not happy about that. And, Grinstein cannot just declare Chap 11 after getting needed cash----that is not allowed. The deal here is that Delta could possibly get cash from an IPO---and still uses ASA and Comair the same way---with a ten year contract like Skywest got. Remember, until shortly after 9-11 Delta owned about $120 million worth of Skywest stock--and then sold it and signed a 10 year feeder agreement. It would make sense to do the same with ASA or Comair, get the cash--pay some bills---and then move forward.


Stayseated is also correct. Delta does have some large debt payments---and the majority start next year. We are looking pretty good for the rest of this year, and hopefully we will be able to come to an agreement and refinance some of that upcoming debt. We don't have $20 billion in debt owed in the next 5 years--that is wrong. We do have some large debt payments---and we have reduced some of our larger capital expenditures due in 2005---like those 777 orders and 11 738 orders. But, we still have $500 million in RJs due in 2005---of course that is our fault (the DL mainline pilots'). Our management, even though they seem to be bailing, has been moving things around to try to make sure we come through with payments in 2005, and a concession package from us is very possible also. I have a feeling it will work out for mainline and Dalpa will agree with management on something, but not everything they want. But, a sell off or IPO of Comair and or ASA is possible.

Bye Bye--General Lee

 

[skiddriver]

General,

I'm just trying to state the obvious, just wanting to sell assets isn't enough. You have to to offer something worth buying. Airline IPO's aren't open to the "bigger fool" theory. Wall Street will run the numbers everyway from Sunday. If there isn't any potential for profit, the institutional buyers won't bite. No one is going to buy based on a "and all you have to do is negotiate lower pay from the pilots" profit plan. The numbers for the sale will be built around our contract at the time of sale.

And some folks may be stupid enough to buy shares in an IPO based on a Delta plan to make the spinoff look profitable, and then declare bankruptcy and renig on the terms of sale within a few months, but the big institutional buyers who will be required to float an IPO don't number among those rubes.

The only way to make that work is to negotiate lower pay rates before a sale. They can either enter bankruptcy to force our contract open, or offer something that makes it worthwhile for us to open it ourselves. So while your assertion that Delta may WANT to sell Comair/ASA prior to BK may be correct, the fact is that unless they can create a saleable entity that has the potential to turn a profit for investors in a reasonable period of time (not at some indefinite point in the future) no one will buy it. No matter how much sense it makes to Delta pilots.