Experts predict Comair may be sold

[General Lee]

Lear70,

The 50 seat RJ demise I am talking about is the ongoing troubles faced by RJ operators on routes directly competing with LCCs. There are some routes that warrent 50 seat RJs--primarily ones that do not compete with LCCs---like MSP to GSO. NW and Pinnacle can charge whatever they want on that route--and with the lack of competition from LCCs nonstop to that city----that RJ may do well. But, with the addition of all of those RJs at your hubs, comes more delays (holding in VFR, long taxi times, etc)---and there will be a point at which the losses due to excess fuel use and missed connections will cause the mainline operator to think twice about how much help the 50 seater is adding to the program. As soon as more LCCs invade MSP and DTW (only Spirit and a little Southwest action there now)--the fares will drop and the mainline people will have to use larger airplanes with more seats to compete with the lower fares. It is happening to us in ATL with Airtran, and it will happen more and more in the future. I never said that there will not be a need for 50 seaters----I think those aircraft will also be upgraded with 70 seaters because those extra 20 seats might make a difference. But, Boyd was right with his "50 seat economics" article.....(and I don't always agree with that guy)


Medflyer,

I agree with you on that--and there are some good city pairings that 50 seaters fly to with no LCC competition. You are right there. But look at CVG. 50 seat RJs go to every big East Coast City from there----and somebody who has a choice to go on an RJ through CVG to connect onto a larger plane or can go on a LCC or other Legacy mainline sized plane will probably choose the latter---and especially if he/she is a business traveller.

Bye Bye---General Lee

 

[FDJ2]

General, what was that about the 50-seat RJ demise? Where is that premise coming from? The 50-seat RJ has a break-even operational CASM at 40% load factor, that is, only 20 seats have to be occupied to break even, which includes all costs - fuel, lease payments, crew, mx, ground ops, etc.

First off, thanks for making the clarification as to how many CRJs Pinnacle is flying. Obviously far more CRJs than AVROs as Surplus incorrectly stated.

Second, are the RJs flying NWA code flying with less than a 40% load factor, because according to NWA's latest SEC filing their regionals have a -17% operating margin, whereas system wide the operating margin is only about -4%.

 

[FDJ2]

General...I was being sarcastic and just showing the fallacy in his logic.

Keep in mind, a lot of the RJ's fly to small markets with no LCC's as well.

Fallacy in my logic. NEVER

Medflyer, the LCC don't fly long haul international flights, and wide bodied aircraft do have a lower CASM and higher load factor, international yields are increasing and domestic yields either are remaining flat or slightly decreasing, so your sarcams missed the mark, since we are talking about different markets.

However, you do make a good point, that RJs have a niche market in some small communities that would otherwise not receive any air service if it were not for the RJ. Obviously Airtran thinks otherwise in the small communities that they serve, but time will tell if they got it right by ditching the CRJ for their mainline aircraft. Time will also tell if DAL got it right by vastly increasing their use of RJs. JMO, but I think that this is all part of GG's big "strategic review". I doubt management would be so bold as to publicly admit an error, but their actions later this year and into next will be telling.

I also believe that Sam Buttrick of UBS got it right when he told GG that DAL could retain the edconomic benefits of regional feed, without owning the equity in it. Considering the fact that DAL is predominantly owned by the institutional investor, far more so than other airlines or S&P 500 corporations, I think GG will ultimately take that advice. Again, that doesn't mean DAL won't continue to use RJs, it just means that DAL has no reason to own the companies that provide that lift.

 

[MedFlyer]

Fallacy in my logic. NEVER

Medflyer, the LCC don't fly long haul international flights, and wide bodied aircraft do have a lower CASM and higher load factor, international yields are increasing and domestic yields either are remaining flat or slightly decreasing, so your sarcams missed the mark, since we are talking about different markets.

My sarcasm was aimed at the ridiculousness of comparing DL's fleet structure to that of Airtran,WN,JBLU.

Keep in mind that nearly half of DL's widebody fleet isn't flying international either. According to the General's theory, DL needs more big planes to fight against the LCC's, because the small RJ's have too high a unit cost. He might be right. But so far his theory hasn't exactly worked. DL has for years and years flown widebodies on routes like ATL-MCO, ATL-FLL, ATL-LGA, ATL-TPA, ATL-BOS, ATL-JAX, etc. However, even with all those widebodies with their costs spread across hundreds of seats, Airtran has been able to easily enter these markets and eat away at DL's marketshare. What went wrong?

In fact, DL's ATL hub has the most substantial mainline presence of any hub...yet it was the hub where Airtran thrived. Why is that? Even in a smaller market like ATL-PNS where DL flies mostly MD88's...it didn't stop Airtran from entering the market and taking marketshare. According to the General, all those mainline planes should have been quite a force to stop Airtran...yet it didn't work.

Ironically, the one hub that the LCC's have avoided is CVG where DL has a very high percentage of RJ traffic. Why are the LCC's so afraid of CVG and all its high cost RJ's?

I wholeheartedly agree that the boom of RJ's at DL is winding down and that there is a need to move back to bigger planes. There are plenty of RJ routes that are packed to the gills and need to be upgraded.

However, as my ATL example shows, DL's problems are far bigger than simply using too many RJ's. Spinning off Comair/ASA won't solve those problems.

 

[General Lee]

Medflyer,

I never said we needed widebodies to compete against the LCCs---that is stupid. We need more mainline sized planes to bring in more connection passengers to the hubs. The RJs are self limiting---they can only bring in a certain number of passengers each---and with the lower fares---we need more passengers to make sure we fill up our widebodies going to FLA in ATL and CVG....And, I continually point out that we fly too many RJs directly against LCCs and we will lose that fight---not only with less revenue but passenger comfort concerns. I honestly think the 757 is the perfect airplane to compete aginst LCCs between larger cities. The 199 seats on Song can create a profit even with lower fares---spreading out the costs among the 199 seats.....But don't get me wrong--we still need RJs---but not directly against the LCCs.

Bye Bye--General Lee

 

[Lear70]

Second, are the RJs flying NWA code flying with less than a 40% load factor, because according to NWA's latest SEC filing their regionals have a -17% operating margin, whereas system wide the operating margin is only about -4%.

That NWA filing with the SEC is a little strange, as our operating margin is 14%, that is, we are one of the most profitable "regionals" in the country, and are NOT losing money.

I belive our average load factor is near the 80% range; it's the small cities like I mentioned before that we're often fairly empty, especially at the oddball departure times of 0500 to 0600 in the morning - no one is going to get up at 0300 unless they absolutely have no choice.

Who knows what Northwest is basing that assumption on, especially since they don't own either carrier and shouldn't be submitting SEC filings that have anything to do with us at all, except for listing how their portion of the stock is performing which, by the way, is up, so that wouldn't be in the negative numbers either. The only thing I can figure is that maybe they're comparing their yield on their "regional" flying with the Fee Per Departure they pay us and Mesaba, but then they'd be combining the numbers of both operations which would further muddy the waters...

Weird stuff!

 

[jarhead]

I very frequently get up at 0300 in the morning to non-rev out of MSP on an 0530 flight. Only time I ever missed that flight was due to a mechanical.....not because of seat availability

 

[Heavy Set]

Why are Skywest CRJs being used between Salt Lake and San Diego? Why are RJs used between Salt Lake and DFW? What about CRJs between LAX and PHX - can those be profitable vs. Southwest 737-300s?

I agree that it makes no sense to use CRJs on LCC routes between major cities. Flying CRJs between Salt Lake and Kalispell or Salt Lake and Pasco makes a lot more sense given the lack of LCC competition and the smaller city pairs. Why can't people understand this? How is the logic NOT understood?

How about increase the capacity and lower the fares (after cutting costs) on the major city pairs? DAL pilots have apparently accepted the fact that their wages will likely be cut by at least 15-20% (must be negotiated after the DAL strategy is revealed). I say put more 757s on the line and replace any RJs on major city pairs...

 

[trip]

I belive the one SKYW CRJ between SLC-DFW is used as a bridge for crew and equipment into the DFW HUB as well as an early AM to DFW with a late PM returning. These dont really connect with any bank of flights. The SLC-SAN flight? I guess DL wanted the 733 to fly somwhere else because it is gone. What happened to the 767? I noticed another CRJ flight in may for a total of 6 flights daily SLC-SAN. 2CRJ and the rest DL. AS for the LAX-PHX I have no idea!! U schedules our A/C, we just try and leave on time.

A SKYW Pilot.

 

[jarhead]

Below is an excerpt from The Saturday edition of the Cincinnati Enquirer newspaper. It relates to converstions after the stockholders meeting in ATL, about 'spin-offs'


"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."