Experts predict Comair may be sold

[General Lee]

skiddrivr,

It also makes sense to atleast two major aviation analysts. You can re-read the article if you want. NW didn't wait to get Pinnacle's new pay rates down, they IPO'd it when they needed the cash. Look at CoEX---they are in the middle of talks now, and they IPO'd it two years ago(?). Maybe they will wait awhile until you are about to go back to talks and then IPO it......I don't know.

Bye Bye---General Lee

 

[skiddriver]

General,

We don't go into talks for a couple of years. Delta can sell us with our contract intact, go into bankruptcy without selling us and try and get our contract opened in court, or "buy" paycuts from us by giving us something in exchange - then either sell us or not. I never said that Delta wouldn't sell us, what I said is that YOU haven't thought through what it is that Delta might have to offer the marketplace to make the sale, or offer us to get us to open our contract early. If we leave the fold with our contract intact, before bankruptcy, our piece of the recovery concessions goes with us. Any money that could be gained from the sale will only fund Delta's burn rate for a couple of months at the most. The idea that our sale will lessen deep paycuts from your pilot group is wishful thinking on YOUR part, as is the assumption that we will give up any portion of our contract without some reciprocal incentive from Delta management. They don't have a crowbar big enough to pry our contract open...yet.

Now that the spinoff thing is out of the bag, it is in our interest not to give up anything. Reducing our pay would just boost money going into Delta's pocket from the sale. If we have to give up pay, it makes much more sense (from our viewpoint) to do so when it makes our new separate company healthier and more competitive. That's AFTER we're sold, not before. Delta is going to have to offer us a lot to unlock the contract now.

 

[FlyComAirJets]

Interesting article, it's kinda funny how those who belittle airline "experts" suddenly champion those whose views support their own agendas.

Let's see, getting a "few hundred million dollars each" for a $2.5 billion initial investment and $670 million lost during the strike for a strike that was costed out at $175 million in pilot demands, and desperately needed aircraft wilting in the desert. Yep, there is no limit to the monumentally stupid business decisions Delta has made.

Perhaps Delta might be on its way to becoming a virtual company. All services will be performed by outside companies under more or less direct control ala Delta Ground Services insead of Delta mainline for ground handling. Their largely non union employee groups could be easily split into competing groups, each vigorously competing for work. They do it now in CVG with aircraft cleaning, instead of mainline doing aircraft cleaning, at one point they had four outside companies doing it locked in cut-throat competition.

But there is no reason to expect they would stop short with the pilot groups with this type of business model. Comair and ASA IPOs? Sure it's possible, so is Song and Shuttle and every other flight division at Delta. I think we can compete with them and the rest of the DCI carriers just fine, the question is, (and I think Skids has touched on it) why would Delta pilots want that?

One last point, IPO contractural stipulations would become subject to some sort of renegotiation in the face of Chapter 11. As an independant company, a spun off company such as ASA or Comair would be subject to alter the recently imposed terms. You can't have it both ways.

Interesting times.

 

[FurloughedAgain]

StaySeated

The amount of cash in the bank is NOT indicative of how close a company is to bankruptcy.

To be honest the company determines its own personal minimums in that regard since the more liquidity you go INTO bankruptcy with, the more likely you are to successfully emerge.

I would venture a guess that around 1 billion Delta's accountants will start recommending chapter 11 in order to restructure debt.

If Comair and ASA are spun off and/or sold prior to such a filing they will be excluded from the restructuring. The company would, however, most likely try to ammend the codeshare agreements (along with agreements with Chautauqua, ASA, Skywest etc...) through the bankruptcy process.

In doing so Delta would take the chance that the "new" Comair might terminate the codeshare agreement altogether, or rewrite the agreement (in exchange for a more lucrative fee-per-departure agreement for Delta) allowing them to pursue codeshare opportunities with other carriers.

Bankruptcy is a slippery slope. I have no doubt that the paperwork is signed and sitting in a locked drawer in Grinstein's desk with the lawyers on speed-dial to run it over to the courthouse some Friday afternoon. The filing's impact on Comair and the career expectations of Comair's pilots is entirely dependant upon Comair's relationship with Delta when it occurs.

Personally i'd much rather be an independant entity, free to negotiate normally with management, than a wholly-owned suddenly FORCED to negotiate by a judge with no knowledge of the airline industry.

When the pilot group was asked to take concessions it was in order to "buy growth". They did the right thing declining that request. You dont buy growth. If the economics of growth exist than the company will grow regardless.

If the pilot group is faced with concessions in order to SAVE the airline, save jobs, prevent the loss of flying -- I personally hope and believe that they will engage the company to prevent the loss of jobs.

I wont "buy" new jobs at this company. But i'll fight like hell to keep the ones we have. From the most junior to the most senior, each job on this property is every bit as valuable as every other job. If we do spin off and go it on our own, i'm willing to work with management to make it a success and to keep all 1800+ of us working. Thats my choice.

If we're still wholly-owned after a bankruptcy filing we simply wont have a choice. We will be solely dependant upon the will of a judge who will likely compare our agreement to Mesa's.

FurloughedAgain(?)

 

[sleeve]

IMHO it hasn't happened yet, wall street analysts know absolutely nothing when it comes to speculation. Nobody at Delta has even mentioned a selloff.This is just a goofball analyst making a statement about what he thinks will happen.He must be the almighty Mesia.

Anybody have the number to R. Branson's office. I may want a piece of that new US Virgin airline when it comes around. I will SPECULATE that they will have some good looking FA's.

 

[Publishers]

posts

Back when Pinnacle and Express were being put together, I mentioned that the possibility of spinning off a regional was one main reason that a major would never merge talks with their regionals. This is an example of why you have the regional set up in the first place.

In the other two examples, they have contracts for a speicified period and then you are on your own. That does not mean that they would not be attractive, depending on the price. They havea quality fleet and route structure.

With or without a BK consideration, the potential cash influx may be worth it.

 

[Lear70]

NW didn't wait to get Pinnacle's new pay rates down, they IPO'd it when they needed the cash. Look at CoEX---they are in the middle of talks now, and they IPO'd it two years ago(?). Maybe they will wait awhile until you are about to go back to talks and then IPO it......I don't know.

Bye Bye---General Lee

General,

I agree with you on most of your posts, but I must disagree with this one. I don't have a dog in the Delta / Comair battle, but even so I highly doubt their pilots will vote in any kind of concessions after the lengths they went through to get a decent wage (finally) at a crappy level of this industry.

Your post above makes it seem as though you expect CoEx and PCL to take pay CUTS this time around in negotiations when quite the opposite is true. If you listen to CoEx's union hotlines, the Company has already offered the CoEx pilots close to Comair rates, and the Association turned it down because of other problems in that offer.

Pinnacle is starting negotiations next month and I can guaran-fu*kin-tee you that we're not going to take pay cuts, nor are we going to sign for anything NEAR what Mesaba negotiated for our same seat jet rates which are, by the way, less over the term of their contract than our CURRENT rates if adjusted by 2.5% per year which our current contract does. Are we worried about giving that flying to Mesaba? Not really. We have 89 aircraft right now and our IPO makes it illegal to reduce us to less than 79 aircraft and we could give a d*mn about more growth as long as we have decent pay rates and QOL. Most of us are actually shooting for Comair rates and it would take a bankruptcy filing by NW mainline to change our minds.

The Comair guys might actually be better off if DAL files and they were already spun off because their contract wouldn't be up for discussion and they'd remain profitable - DAL needs the feed. As long as a regional airline is profitable, even if by a thin margin, there is absolutely NO reason to even DISCUSS a pay cut, not here, not CoEx, and certainly not Comair either. Let them find more money from more routes, better aircraft utilization, and new contracts...

Good luck to all of you, I'm back to scouring the jobs to help my dad find a new one after his 23 years at USAirways... Fu*king Bast*rd Siegel needs to be kneecapped for taking his money and running at the first opportunity.

 

[sleepy]

What will Comair have to lose if DAL spins them off? TravelNet at home, DAL flight pass, DAL scope, Limits of aircraft type. I would take the possibilities of getting more and larger aircraft and the ability to fly for other partners over the few little bennies we get from being a WO.

I only hope that ASA can gain it's freedom from DAL before the whole ship sinks into Ch 11.

 

[FlyComAirJets]

An ASA/CMR spinoff gives DAL four to six months more cash to burn through, then what? It is like amputating because of a cut, it still doesn't stop the bleeding, though.

Big words, Lear70. You talk the talk, let's see if the Pinnacle pilots will walk the walk. Best of luck.

 

[Lear70]

Thanks for the good wishes Fly... After being on reserve for three years I'm disgruntled enough to walk NOW. H*ll, I NEED a vacation; can't we just save all the time and effort and strike now?

Kidding of course; the company wanted to start early, wouldn't it be great if they had bigger plans in mind and are willing to give a little more to get a contract quickly? Come on, we can all dream...

 

[FDJ2]

It's not a question of if it's only a question of when and how DAL will spinoff it's wholly owned.

Institutional ownership at DAL exceeds the average. 81% of DAL is owned by institutions, that's 10% greater than the average airline and 17% more than the average S&P 500 company. When the institutions talk, the BOD and CEO listen, and the institutions are beginning to question why DAL owns the equity in some of its regional feed, when it can get the same service from others without owning the equity.

"UBS analyst Sam Buttrick pointed out Delta doesn't need to own the airlines to continue using them to connect to points around the country. Delta could contract with Atlantic Southeast and Comair as it did before buying them. "

"The economic benefit could be maintained without maintaining the equity position," he said

"Analyst Raymond Neidl of Blaylock & Partners thinks Delta will ultimately sell one or both of the regional carriers to raise money. He noted rivals Northwest and Continental airlines have done the same. "

"I think they're going to do that at the end of the day," he said. "There's no reason for them to hold on to them."

The only real questions are which goes first, ASA or CMR, and will DAL sell off all the equity or part of the equity.

Certainly, small jet lift is important, but there are a host of vendors available to provide that lift, there really is no need for DAL to own ASA/CMR, when it can get the same service without owning the companies. There is no expectation that DAL will ever recoup the billions spent to own ASA/CMR, just another poor business decision, but the liquidity the sale would bring, without the loss of small jet lift, makes sense.

 

[StaySeated]

According to the 2003 annual report DAL has the following contractual obligations:

2004 $ 4.038 bil
2005 $ 4.284 bil
2006 $ 3.868 bil
2007 $ 2.993 bil
2008 $ 2.998 bil

For an airline with over $13 billion in revenues a year I fail to see any dire need for cash or any reasonable excuse to mention BK escept in an effort to win concessions. Additionally, the debt owed above is artificially high due to the fact that it includes aircraft deliveries that are going to be leased or sold to third party.

As for filing with 1bil or 2 bil in the bank as was mentioned earlier I find that very hard to believe. I remember UAL was watching there liquid position and filed around 200mil. When you know that you are going to file and start looking for DIP fincancing any cash you have in your pocket is gone. Too say DAL would piss away 1 bil prior to the start of restructing seems extreme.

My humble opinion. AMR saved billions in labor costs over the next 7 years with the threat of BK. DAL wants some of that action. Do you really think that DAL wants to be in the position UAL currently is in, unable to even exit restructuring, while aitran and jblu, and virgin usa and whomever else attacks. I don't buy it for a second. They need to find a new playbook, we have seen this hand over and over and over and over and over and over.

 

[bvt1151]

Stay seated,

The 7% difference is the pay CHQ receives from Delta that covers CHQ's profit margins. Remember, its not just about cost, but how much profit the company is making. Actually 7% was a very conservative number. Here are the 2003 Operating margins of some of the better-known fee for departure regionals:

Skywest - 12.2%
ACA - 15.7%
Expressjet - 13.8%
Pinnacle - 14.0%
Mesa - 8.8%

I would conservatively say CHQ is at or above 10%.

I would predict, however, that both Delta management and Comair pilots will get a chance to see how an IPO would work by watching it happen at ASA first.

 

[General Lee]

Lear70,

I really don't know much about Pinnacle, other than it was recently IPO'd at NW and they made some money--in the range of $300-400 million. Also, when I said that we could do that to Comair or ASA---I never said that we wouldn't still use them for feed--I actually gave a Skywest example--giving them a 10 year flying contract. I think the only major difference would be the extra cash in Delta's tight pockets.....

Sleepy,

I have a feeling Dalpa and the company will come to an agreement before then---Grinstein probably doesn't want to give up control to a judge.

Bye Bye--General Lee

 

[sleepy]

Stay seated,

The 7% difference is the pay CHQ receives from Delta that covers CHQ's profit margins. Remember, its not just about cost, but how much profit the company is making. Actually 7% was a very conservative number. Here are the 2003 Operating margins of some of the better-known fee for departure regionals:

Skywest - 12.2%
ACA - 15.7%
Expressjet - 13.8%
Pinnacle - 14.0%
Mesa - 8.8%

I would conservatively say CHQ is at or above 10%.

I would predict, however, that both Delta management and Comair pilots will get a chance to see how an IPO would work by watching it happen at ASA first.

Good points. both ASA and Comair have lower operating costs than any of these airlines (around $.06 per seat mile). I am sure that we also are more profitable to DAL than any of the codeshare partners used by DCI. Why else would they give ASA the 25 additional aircraft if they could make more money with them at Chit or Skywest?

As for spinning-off ASA, I wounder how ASA could go it alone. We only have about three GPU's that work in ATL. All of our baggage service and maintenance on GSE is contracted out to DAL. In fact, I don't think ASA really owns a single asset. We probably rent the new chairs in the crew lounges from DAL. Over time, we have become more and more entangled with DAL (payroll, GSE, reservations, medical insurance, travelnet, computer services, baggage service, etc...), it will be interesting to watch our management untangle the mess they have made.

 

[sleepy]

Lear70,

I really don't know much about Pinnacle, other than it was recently IPO'd at NW and they made some money--in the range of $300-400 million. Also, when I said that we could do that to Comair or ASA---I never said that we wouldn't still use them for feed--I actually gave a Skywest example--giving them a 10 year flying contract. I think the only major difference would be the extra cash in Delta's tight pockets.....

Sleepy,

I have a feeling Dalpa and the company will come to an agreement before then---Grinstein probably doesn't want to give up control to a judge.

Bye Bye--General Lee

General,

I seriously wonder how much GG cares? Why wouldn't he take the 20% you offered now. Why counter you with 36% (more than the original 30% he asked for?).

He has nothing to lose in a bankruptcy filing. If he goes into Ch 11, he can make adjustments to your PWA that will have an impact on DAL's costs for 12 years or longer. If he makes a deal outside of CH 11, he cannot get those kinds of changes.

My neighbor is a Bankruptcy Attorney with a BIG ATL law firm that has done work for DAL in the past. Without giving me any specific information, he indicated to me in a recent conservation that the DAL Ch11 filing is coming soon.

 

[General Lee]

Sleepy,

I am glad he knows that---maybe he was telling you to short the stock. DL cannot just go into Chap 11----devaluing the stock to almost worthless, and then change contracts. There would be huge lawsuits, especially if there is still plenty of cash and loads and operating profits are up. I am sure your lawyer friend would love to work on that case---it would probably allow him to buy three more houses in your neighborhood. Take a look at the analysts---they don't think Chap 11 is possible for a year or two---without concessions. But, they do think you will be spun off. Even Grinstein himself just stated in the stockholders guide that was just sent out that he thought he would not have to bring it to Chap 11. Also, I think he does care---he is 71 and he just moved himself and his wife from SEA to ATL---and I have heard that she wasn't too happy about it. He doesn't want to do all of this and then lose control.

Bye Bye--General Lee

 

[MedFlyer]

According to the 2003 annual report DAL has the following contractual obligations:

2004 $ 4.038 bil
2005 $ 4.284 bil
2006 $ 3.868 bil
2007 $ 2.993 bil
2008 $ 2.998 bil

For an airline with over $13 billion in revenues a year I fail to see any dire need for cash or any reasonable excuse to mention BK escept in an effort to win concessions. Additionally, the debt owed above is artificially high due to the fact that it includes aircraft deliveries that are going to be leased or sold to third party.

As for filing with 1bil or 2 bil in the bank as was mentioned earlier I find that very hard to believe. I remember UAL was watching there liquid position and filed around 200mil. When you know that you are going to file and start looking for DIP fincancing any cash you have in your pocket is gone. Too say DAL would piss away 1 bil prior to the start of restructing seems extreme.

UAL had about 1 Billion in the bank when they filed. You can NOT wait until your down to 200 million to file. If an airline waits that long, it won't be a CH11 reorganization, but instead a CH 7 liquidation. As DL stands today, they can NOT service all of the debt coming due in the next three years. If DL does not get its house in order, BK will happen by no later than Summer '05 (barring something major like USAirways collapses).

Selling off Comair/ASA would buy DL a little time, but it would do little to solve DL's problems. DL needs to make money (and not just lame "operating profits" which are meaningless) and be a competitive carriers. Right now, DL is NOT competitive.

The ONLY reason General Lee (or DALPA) want to see Comair/ASA sold off is because it buys them a few extra months of "industry leading" pay. Beyond that, selling Comair/ASA will not solve DL's problems.

Heed the warning from the ex-TWA guy:

"It would be a Band-aid," said Paul Biederman, a professor at New York University and former Trans World Airlines chief economist. "It's what we did at TWA -- we just sold off assets until we didn't have anything."

 

[rumorhasit]

While taking a crap in cal's Hq mens room I heard someone say merger talks were starting between CAL and DAL...I hope not!!!! The big boys merge then shrink and start merging flights which could lead to a slow down at the regionals...DAL would sell comair just to use "cheaper" skywest...

It gets really old relying on the the majors for a lifestyle or job security while working for the "regional (that goes international)!!!!

 

[BoilerUP]

I was but a YOUNG lad back then, but after reading Hard Landing and Flying the Line Vol. II, it looks to me like the shadow of Frank Lorenzo is weighing on DAL management.

I've said it before and I'll say it again... DALPA needs to go on a PR offensive, telling the media just how much money Delta would save by accepting the pay cuts ALPA has previously offered. They need to publicly question why management continues to let the airline bleed instead of taking proactive steps already on the table to get the company back into the black.

Average Joe sees the Delta pay scale in the media compared to AAL and UAL, then to JetBlue and SWA and wonder why you guys are paid so much. You need to tell them why, and how much you are willing to give up for the company to survive, but that you aren't a concession stand! Win the PR battle and you win the war!