Comair Pilots,
You have a difficult and painful decision before you and I recognize this process is not easy. The frustration is evident in the discussions I’ve had with many of you in meetings, in the operation and in the e-mails I have received. ALPA officials have started their road shows to go through specifics of the company’s final contract proposal. Please make every effort to become informed on the issues facing our company. During my various discussions, I continue to receive specific questions that I want to address.
You have a difficult and painful decision before you and I recognize this process is not easy. The frustration is evident in the discussions I’ve had with many of you in meetings, in the operation and in the e-mails I have received. ALPA officials have started their road shows to go through specifics of the company’s final contract proposal. Please make every effort to become informed on the issues facing our company. During my various discussions, I continue to receive specific questions that I want to address.
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What Happens If Pilots Vote Yes?
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The pilot vote is so important that if the group votes “yes” it will allow Comair to turn the corner. Delta recognizes that in our restructuring, a pilot yes vote is a key step to help us achieve our objective of being a commercial solution. We would see our fleet stabilize, as Delta would be motivated to keep it intact because options naturally go to a wholly owned subsidiary if costs are equal or better than other carriers. A yes vote would also position us well for growth and give us a fighting chance to win the third-party business we are pursuing. Any chance of growth or new business assumes we can hit our controllable costs.
We should be clear that we are going to lose some aircraft in restructuring, and we’ve already seen some planes leave the fleet. However, we can hold our exposure to the range of what we have announced from the beginning of our restructuring plan. The bottom line is that we will have a future that allows us to achieve our long-term vision of flying larger gauge aircraft, diversifying who we fly for and exploring Q400 or third-generation turboprops with greater fuel efficiencies.
We should be clear that we are going to lose some aircraft in restructuring, and we’ve already seen some planes leave the fleet. However, we can hold our exposure to the range of what we have announced from the beginning of our restructuring plan. The bottom line is that we will have a future that allows us to achieve our long-term vision of flying larger gauge aircraft, diversifying who we fly for and exploring Q400 or third-generation turboprops with greater fuel efficiencies.
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What Happens If Pilots Vote No?
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I’m more focused on a “yes” vote because it would mean Comair would be a going concern, and for those who remain in the Comair family, we’d have an opportunity to rebuild our airline. As for a “no” vote, the honest answer is we don’t know, but I can say that we will almost certainly lose a much larger number of aircraft. Additionally, my assumption is our remaining base of flying would be put out to bid in the marketplace. We have seen this happen at Pinnacle, ExpressJet and also contributed to the pressures that resulted in Atlantic Coast Airlines taking the risky and ultimately fatal step of becoming Independence Air. All of you have been around the industry and can recognize it will be harder to hold on to a lower base of flying with the level of seniority we have among our team versus replacement economics.
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Why do pilots have to go through this process of changing the contract and will it even matter?
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Aside from the fact that fuel remains at record costs and we’re operating in a Chapter 11 environment where we have less control, the flying we do for Delta is currently at a significant loss.
In the context of bankruptcy, we have to put forth a plan to go from losses to profitability if Comair and Delta want to emerge from bankruptcy.
When you apply ticket revenues generated from our flying over the cost of our operation, it generated more than $100 million of Delta’s losses in 2005. A lot of people point to the Department of Transportation’s (DOT) Form 41 reports as showing that Comair makes an operating profit. It’s important to note that the
In the context of bankruptcy, we have to put forth a plan to go from losses to profitability if Comair and Delta want to emerge from bankruptcy.
When you apply ticket revenues generated from our flying over the cost of our operation, it generated more than $100 million of Delta’s losses in 2005. A lot of people point to the Department of Transportation’s (DOT) Form 41 reports as showing that Comair makes an operating profit. It’s important to note that the
[FONT=TimesNewRoman,Italic]operating [/FONT]income reported by the DOT does not factor in interest expense related to the aircraft and isn’t a true indication of our profit or loss. For example, in 2005, the DOT shows a Comair operating profit, but after applying the interest expense related to aircraft, we actually had a loss for the year. I have presented a lot of financial information in employee meetings illustrating this point.
As Delta restructures its business in Chapter 11, it has to get revenue that is greater than costs on its flying if it wants to emerge from bankruptcy. As it stands today, Comair’s flying is not viable and that is the primary threat we face. I outlined at the beginning of bankruptcy that we have to cut our controllable costs by $42 million a year. This equates to $17.3 million within the pilot group. Delta – one way or another – is going to achieve these cost savings, either through the rejection of aircraft or replacing our flying with lower cost regional carriers. To some, $42 million doesn’t sound like a lot considering Delta’s reorganization. However, it becomes a $210 million albatross over five years. We can address these issues together as a unified organization or we can go through door number two, which is seeing the rejection of more of our fleet and the loss of more flying.
Certainly, there are people who get angry about this scenario given how hard we all work to keep the operation going everyday. But it is the reality we face today, and unfortunately, it is why we have to seek changes to your contract.
As Delta restructures its business in Chapter 11, it has to get revenue that is greater than costs on its flying if it wants to emerge from bankruptcy. As it stands today, Comair’s flying is not viable and that is the primary threat we face. I outlined at the beginning of bankruptcy that we have to cut our controllable costs by $42 million a year. This equates to $17.3 million within the pilot group. Delta – one way or another – is going to achieve these cost savings, either through the rejection of aircraft or replacing our flying with lower cost regional carriers. To some, $42 million doesn’t sound like a lot considering Delta’s reorganization. However, it becomes a $210 million albatross over five years. We can address these issues together as a unified organization or we can go through door number two, which is seeing the rejection of more of our fleet and the loss of more flying.
Certainly, there are people who get angry about this scenario given how hard we all work to keep the operation going everyday. But it is the reality we face today, and unfortunately, it is why we have to seek changes to your contract.
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Why Make Changes To The No-Furlough Clause?
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No one knows what the future holds. In the industry, carriers that wish to survive can no longer pay the cost of salaries and benefits of employees for whom there is not currently an active position.
That is why carriers such as Delta, US Airways and United eliminated their no-furlough clause and Mesaba sought elimination, all in the last year. The no-furlough clause also greatly hampers our ability to attract potential future investors. Investors look at two things: first, how we are going to grow revenues over the coming years, and secondly, how we manage risk factors as it relates to downturns. More risk factors yield a lower valuation of the company. In closing, it would be very disingenuous for me to try to “sell” pilots on the company’s contract proposal. Given the context of the alternatives, I ask that you become informed on the issues facing our company. Since the Chapter 11 filing, the choices and changes for Comair people and their families have not been good. While it may be difficult to see through what we’re dealing with today, I sincerely care about each and every Comair employee. I hate that we find ourselves with limited options before us. However, we have to make the difficult decisions to address the longterm implications that our actions – or inaction – can have on our franchise and our personal and professional lives.
Thank you for your time and attention to this message as well as your engagement in the process as a whole. Additionally, the leadership team appreciates your dedication to serving our customers and running a quality operation while we deal with some very tough issues.
FRED BUTTRELL
That is why carriers such as Delta, US Airways and United eliminated their no-furlough clause and Mesaba sought elimination, all in the last year. The no-furlough clause also greatly hampers our ability to attract potential future investors. Investors look at two things: first, how we are going to grow revenues over the coming years, and secondly, how we manage risk factors as it relates to downturns. More risk factors yield a lower valuation of the company. In closing, it would be very disingenuous for me to try to “sell” pilots on the company’s contract proposal. Given the context of the alternatives, I ask that you become informed on the issues facing our company. Since the Chapter 11 filing, the choices and changes for Comair people and their families have not been good. While it may be difficult to see through what we’re dealing with today, I sincerely care about each and every Comair employee. I hate that we find ourselves with limited options before us. However, we have to make the difficult decisions to address the longterm implications that our actions – or inaction – can have on our franchise and our personal and professional lives.
Thank you for your time and attention to this message as well as your engagement in the process as a whole. Additionally, the leadership team appreciates your dedication to serving our customers and running a quality operation while we deal with some very tough issues.
FRED BUTTRELL
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