Experts predict Comair may be sold

[RichO]

Is Comair sold yet?????? Just thought I would check back and see.......


Oh, I forgot to ask several weeks ago, these "Experts" that are predicting that Comair and ASA will be sold, are they the same "Experts" that keep saying the economy is in a world of hurt and we should all go jump off a bridge because the economy is not recovering....if so, I think there should be a second opinion on this whole topic.......

 

[ATR-DRIVR]

Grinstein was asked specifically if there were plans to sell ASA/CMR. His answer was, "No, they are both profitable and there is no plans to sell them." Yes, he said profitable. He also stated that the planes coming to ASA were purchased BY ASA out of those profits. THAT

 

[ATR-DRIVR]

THAT question was asked by an attending mainline pilot.

 

[sleepy]

THAT question was asked by an attending mainline pilot.

Of course the mainline pilots want us to be sold. They seem to believe that the proceeds of such a sale could fund their lifestyle for a bit longer. If we are sold, I would think that the Company would use the proceeds to pay off some debt, seems like that would be in the best interest of the shareholders.

In the long-run, however, what seems to be in the best interest of the shareholders is to retain our highly profitable operations, and enjoy the combined $70 million profit per quarter for years to come.

 

[luvthedc10]

Dear General,

I understand your passion for Delta Airlines. In fact, I admire it. I fly for Comair, yet I grew up in a "legacy carrier" and I too wish them well and hope for my familys sake that there is some light at the end of the tunnel.

After reading numerous posts, I get the feeling that it is an us against you issue. I can assure you that there are a fine group of pilots here at Comair, some who wish to stay, others who do not. There are still plenty of pilots here that have dreams of being 777 captains, and believe it or not, are mainline friendly.

With that being said, take the RJDC out of the issue, we have a group here who did fight for a better contract. I cannot take credit, I was at another regional carrier at the time, but they brought the scale up where it should be, not above what it should be. Any business savy individual can look at Comairs structure, in the worst of times, with our "high" payscales, Comair is still able to pull in a 32 million dollar profit for a quarter. This does account for lease payments and all assoc costs that Comair accrues with their business, hence, it is a self-sestaining operation.

Being a professional from Delta, I look at your statement of "maybe you should look at your peers wages at Mesa," as a pretty bold remark. You know, I'm sure Comair could make 58 million with Mesas wages. But another point in case, they could make triple that if they paid us nothing at all, we could all work for free. When is enough, enough?

Do you know what Mesa scales are? As bad as things get with Delta, I'm fairly certain none of the pilots will be making 20,000 a year. Yet, that is what you condone for Comair. We don't need those scales to survive, to make a profit, we already are doing so. We need them to compete against one carrier Mesa, I don't think so. Give it all to them if thats what it comes to because I am a professional pilot, not a burger flipper, hey, but at least I could be home every night I suppose if I chose the later.

I wish the Delta pilots could keep every cent of their paycheck, I wished it for United, American and Northwest as well. But unfortunately, Delta competes with the LCC's, and they can't make a profit, even a small one, against these young,lean operations. They cannot support their business, and its not a matter of bringing down the pay scales to the lowest carrier amoung all of your competitiors, it is about making Delta money.

You can look at the RJ any way you want, you can call it dooms day for all I care, because whatever the future holds for it, Delta has benefited from them in the past and currently the present. Its not the answer to industry problems by any means, but it is used as a money making tool for the time being. I don't think that any of us strut around as loving our RJ's---its a busines tool that our company gives us to work, thats about it, so you won't see me defending it. But, ask any Comair pilot, and we will defend our pay. It is not out of the realm of reality and what the business can support.

I know not one specific piece of information that could draw a conclusion about what your pay rates should be, so that is why you never see me comment to the 30% debate. If we go into bankruptcy, then anything is up for grabs, including Comair. Until then, why do you want to bring our paycales down, just to make yourself feel better? It won't benefit you, because there is just not that much to give. Comair asked for 8 million between the pilots and flt attdts, compare that to Delta's quarterly loss and it is a drop in the bucket. It's the business plan that needs to change, and of course, the pilot wages are a part of it, but again, not the solution. United pilots really took a hit, but I do not see Air Wisconsin at Mesa wages.

It's pretty sad that our pilot groups as a whole are so disconnected. If the RJ operators worked with the Mainline Operators, we could actually combat the race to the bottom with the wages. Instead, it turns into a who is more important game, which is such a thing of the past. There are tons of great people at the regionals that would probably be Delta pilots today if the economy would dictate it. Those same people deserve a decent wage so that they can come fight the good fight at Delta someday cause they know what they are worth. Isn't that the type of pilot that you like General, or would you rather get all the ones the low ball themselves?

I think we are all on the same team, it would be nice if we could act like it. I know any time money is involved, it will be a deeply emotional issue. I too, General, love Delta Airlines. They are a great family of people, and I love the heritage that it represents (I was especially excited to see the FLY DELTA JETS sign lit up in Atlanta a few weeks back-very nostalgic). I don't wish ill will towards anyone at Delta, so why do so for Comair?

 

[RichO]

Keep in mind, actually as of the last year, it's not the economy effecting the profitability at the airlines, it's the fact that they can't sell seats to make a profit. The low cost airlines have beat the majors to the bottom thus creating a demand for those low cost seats. It's basic supply and demand....the demand is for low cost seats, (because the race to the bottom succeded), so the supply has to be low cost seats, under this structure the mainline guys can't make a profit.....the economy has nothing to do with it at this point...the economy is strong and getting stronger.....the problem with lowering the regional wages even lower is then Delta mainline is going to use that lower wage at the regionals to get their pilots to come down lower on their's ...if they don't they will just replace those routes with an RJ...(come on this is old news)........so, mainline guys should support higher wages at the RJ level.......that way we're not as cheep...but you throw in the guys like Mesa, skywest, etc....and the whole idea goes out the window because there are always guys who will fly for free........the only thing that will change the cycle we're in, I hate to say, is a decrease in the amount of pilots........once again, supply and demand........decrease the supply of pilots, and the demand will increase........don't you just love supply and demand.......

 

[General Lee]

lovethedc10,

My response with the line"maybe you should look at your peer level wages---at Mesa" was a response to someone telling me we should take the 30% pay cuts. I know we should have pay cuts, that is obvious. But, I don't want one group telling us how much to take when they themselves aren't willing to cough up a dime. If that is the case, then stay out of it. We will give up money when we NEGOTIATE a pay cut. I am frustrated with the fact of slow progress---and that is what Grinstein wants---to frustrate us. It is all a game of chicken. I am very glad that Dalpa takes it slow and analyzes everything carefully.

This whole thing with "you against me attitude" started with Comair managment's unwillingness to help our furloughs in their time of need. I will not go through all of this again, and I know some of the Comair pilots do not like this policy---but some do and that shocked me. I don't know of one Delta pilot who didn't want you to win your strike. The longer it went on, the more amazed we were that it wasn't going well. That is the truth, and the eventual backhanded slap from your managment and some of your pilots, and then the RJDC suit even after we gave huge RJ relief after 9-11, has put a sour note on relations.

Your pay wages at Comair are good---considering the "profits" you bring in. But, what happens when you guys start to compete more with LCCs as they grow? Then the RJs will NOT bring in the required "profits"--especially against LCCs that charge $49 a fare. Also, the excess number of RJs have added to major delays (look at ORD) and RJs also limit the number of passengers coming into our hubs---at a time when fares are dropping. What is the magic answer? Lower fuel prices and larger aircraft with more seats to spread out the costs. Even Airtran has seen this. And then airlines like Chataqua and Mesa have come in and offered services for half the price. We know that our pay gap is large and we are trying to negotiate a new one---but with a plan to go along with it. I know you guys are paid less and don't want to have to flip burgers on the side like you say---but just like us--our peer groups are lowering the bar because of increased competition and LCCs in both arenas---mainline and regional. To say that either of our pay scales will remain where they are in a few years is not seeing the full picture here. This is a downward trend for both of us. And, the only way guys in your position are going to make up the difference eventually is to move up the ladder at Comair(CR7 Capt), or move on to a Major or a LCC like Southwest or a Cargo outfit like Fedex. Unfortunately for you---Comair hasn't made too many friends with DL management (due to your strike), and with Dalpa (due to the RJDC suit and lack of help with our furloughs). Your senior guys over there are digging a large hole. But, I personally don't hold a grudge really---I have been stating my opinion here on this thread on what may or may not happen with a possible sale of ASA/Comair pre Chap 11 if that should occur. I realy have no clue, and have just posted opinions from some analysts. I hope this whole industry turns around and we all can have secure jobs----even though they will pay less.

Bye Bye--General Lee

 

[smarc130]

IM WITH STAYSEATED...

Hi ive been a bit busy, havent checked in in a while, but I see that blokes like the General still haven't got any hobbies. If I was a new kid trying to get into this line of work, listening to you guys would make me want to go S#$K D#$@s down at the bus station to regain my dignity. Sit Back, Relax and enjoy your industry, your never going to be the CEO.

 

[General Lee]

smarc130,

I have plenty of hobbies---and I have shared them with most of the guys/gals on this board. When I am not flying I lift wieghts, ride bikes with my wife (when it isn't too cold here in ATL), and go to movies etc....I just really enjoy aviation and this board, and I am just giving my opinion here---which could be absolutely wrong.

Bye Bye--General Lee

 

[RichO]

LOL!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!.......................................smarc, come on now, you know where I 'm at right now, and there isn't much of a night life here............LOL!!!!!!!!!!!!!!!!!!! Dude, what's up with the Yanks this year??? Their starting to look like Seattle..........

 

[wms]

An analyst, not in an official capacity with DAL, gives his opinion on something he knows nothing about (Mr Grinstein's words) and 5 pages later we're doing more to whip-saw ourselves than the company ever could do on its own.

If there were a spin-off it would have to be attractive to investors. The most attractive would be to merge ASA and CA and guarantee them revenue. Who is going to invest in a company that doesn't have a guarantee from its primary source of income? Yes, DAL would have a 10 year contract to keep us exclusive, but it would also include a commitment for revenue from them, not to keep us happy, but to keep the investors happy. We would probably still keep our travel privileges and travelnet just like coex did after the spin-off from CAL.

If there were CH11, it would have to be approved by the BK courts. More analysts say this is unlikely than say there will be a spin-off. DAL needs to get concessions quickly before the economic dip ends. That's why they're pulling the stops and want it all at once.

The only thing this has done is turned us against each other. DCI WOs want out, and DALPA wants us on food stamps to ease their own pain. They say this will give us industry standard pay.

At ASA a:
5 year 50 seat CA makes about $60.
5 year 70 seat CA makes about $67. $7 more for twenty more seats.
Theoretically at that scale a:
5 year 90 seat CA would make about $74.
and a 5 year 100 seat CA would make $78.

What does a 5 year 100 seat CA at DAL make? A $7 increase for every 20 seats from 50 to 90, then double the pay from 90 to 100. The real gap is not between ASA/CA and the other regionals, but in the increments of pay between the regionals and mainline. I don't advocate bringing mainline pay down, but I do believe the increments in pay should be consistent across the DAL/DCI fleet.

 

[Ganja60Heavy]

Delta still using the "old rules"

Dudes;

All this talk is predicated on hub-and-spoke remaining as-is forever.

It ain't happening.

You think Delta would risk losing control of a large fleet of RJ's which have allowed it to keep the hub-and-spoke system alive this long, way past it's expiration date?

Delta has become a no-frills carrier with sullen employees and high costs, and it ain't ever gonna make it in todays' world.

If it sells CMR or ASA, assuming some idiots are stupid enuff to buy them with all the requisite strings attached to a sinking ship, how can it survive as a large-city-only hub carrier??

And a stand-alone CMR or ASA would walk all over mainline with low-cost labor, despite higher CASM, since there are MANY MORE cities available to the RJ that a SONG-jet cannot justify.

And all this talk about "fairness" is hot bleed air. Nothing in life is fair. You get what you can thru NEGOTIATION, and if you are too stubborn a parasite (like DL pilots), you kill your host and you both perish.

/G

 

[wms]

.

And a stand-alone CMR or ASA would walk all over mainline with low-cost labor, despite higher CASM, since there are MANY MORE cities available to the RJ that a SONG-jet cannot justify

That's what Midway thought. Then to fix it they brought on the 73s, but too late and at a time when they still had to pay a high price for them. An all-RJ airline can't provide itself the volume to cover its costs in a comptetive market. It would need to be in markets without competition where it could increase prices. That's why right now the best mission for the RJ is to bring in pax from smaller communities to connect on larger aircraft with better margins.

If Indy makes it it won't be because of the RJs. It'll be because of the Airbusses

 

[Ganja60Heavy]

That's what Midway thought. Then to fix it they brought on the 73s, but too late and at a time when they still had to pay a high price for them. An all-RJ airline can't provide itself the volume to cover its costs in a comptetive market.
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That's a good point, wms, but the wild card here is POST- 9/11, where the majors are the underdog, empty planes lose money, loyalty is gone, and there are LOTS of "relief" airports near big cities where people will pay a slightly-higher ticket price to avoid dealing with the main cluster-airport.

Midway was a boutique airline which was already mortally-wounded at 9/11. It had already failed during the BOOM of the late 90's.....remember when Delta made a Billion in profit?

It's a whole new ballgame now, and those conditions (bottomless wallets, pre-internet, oligopaly tactics) will never return.

 

[standaman]

Delta will not sell these guys unless somebody holds a gun to thier heads.

 

[General Lee]

Good chance they will sell them if the heat gets too hot. Every stock holder would ask why they did not if Chap 11 occurred and there was no sale. That is the truth.

Ganja,

Yes, the plan has changed---and that is the RJ plan. Look at the successful airlines at the moment---Southwest, Jetblue, and Airtran-----all have no RJs or will be getting rid of them. Jetblue can see that the 100 seater is the smallest thing they would want to support the low cost model. They think 100 seats will still spread out the costs low enough for them to squeeze out a profit even with low fares and TVs. The others will have to do the same---and they will when they get the costs down--which is inevitable. The name of the game now is low fares and lots of seats. The passengers are back now---this summer is supposed to be better than the summer of 2000. 50 seat RJs take up space on the taxiways and approach paths---and can't bring in enough revenue. But, there will always be certain markets that will support them---the ones with no LCC competition---but they are growing.....

As far as bottomless wallets, etc---you are probably right--those days may be over. But, there will always be a need for business class and first class on some flights to attract that high end customer that will be out there--especially with the growing economy. But, expect to see more Song and Ted type flights to go after that one segment of customer that is growing---the "I only care about the price..." type of passenger. That is why Song and TED are out there---to try to take some of those people away form the LCCs---and Song was supposedly profitable last quarter--so it may be working.....

Bye Bye--General Lee

 

[sleepy]

General,

The few rich are getting richer, and more of us are getting poorer under King George. The demand will be for more Greyhound bus in the sky type service. That is where DAL needs to be an industry leader. They should end the FF program, sell the international routes, eliminate Business Class, and further compact the coach seating to cram even more scumbags into the aircraft. That is where the money will be in the future.

 

[Splert]

Maybe I missed it but the question is not if COMAIR will be sold but instead who would buy them and at what price.

The code share business model is not what is used to be and will probably will never be. Put that in a HP12C and find the IRR of cash flows from a potentially declining or dying business model plus scope and what do you come up with. A very low sales price or no buyer.

Good Day

 

[Heavy Set]

What is the benefit of full ownership???

There is no reason to maintain full ownership of ASA and Comair. Continental does not fully own COEX (it maintains a decent-sized share though) but it enjoys the same operational benefits as it had before given its contractual service. CHQ provides service to Delta equal to or better than Comair and ASA from what I have heard - and yet it is not owned by Delta. ACA's current DoJet operation out of CVG "does the job" and yet it is not owned by Delta.

Why shouldn't Delta SPIN OFF (through a stock offering to the public) Comair and ASA to the public? It would result in much-needed cash to Mother Delta (sure, less cash than 3-4 years ago - but some cash is better than no cash near bankruptcy) and yet operational benefits would remain because Delta would have to guarantee a contract for a certain amount of time (probably at least 3 years for the stock valuation). COEX is the model in this case.

Reducing ownership would have these direct benefits for Delta:

1. Needed cash from public offering (probably $300-500 million)
2. Maintain same operational benefits as before (like COEX)
3. Delta can shift some debt to the new regional entity (from balance sheet to balance sheet)
4. Delta would reduce its future debt financing obligations - new entity would finance new RJs
5. New ASA/Comair would likely need to bid for feed contract in the future like CHQ and Skyway - it would reduce costs and boost profits for DAL - otherwise you leave money on the table by maintaining more expensive feed...
6. Fewer HR headaches - if Comair strikes, increase CHQ feed

Above all, operational benefits remain in tact - that is the same message from Sam Buttrick - airline analyst at Smith Barney. It actually makes a lot of sense when you think about it. UAL doesn't directly own its feed. Continental only partially owns its feed. USAirways owns a lot of its feed and it continues to bleed. AirTran will soon cut its CRJ feed.

Playing devil's advocate - why should Delta be responsible for all of those regional airplanes and employees when it doesn't have to be? Why shouldn't Delta outsource to lower bidders like Skywest, CHQ and Skyway given that they do provide good and dependable service like ASA and Comair? The LCC environment has changed ALL OF THE RULES and lower cost will be the name of the game.... Never say never. I am sure DAL management is already considering these sobering facts...

 

[sleepy]

DAL really should just become a reservations network. They could contract all of their flying out to the lowest bidder. They might be able to pull it off under Ch11.