more ACA furloughs

[surplus1]

w4mch

Well. my friend I see that JO has added fuel to the fires. There is little doubt that we "live in interesting times."

Good luck! On this one you're going to need it.

 

[dogg]

Surplus,
I was waiting for your arrival in this discussion. ComAir , ASA and CO EX were the exceptions in my mind as they appear to be successful wholly owned airlines that seem to do much point to point flying where their pax never see a DL or CO mainline jet. I am curious what the profit levels from the pre-WO days were and what the percentage of jets to turbo-props were at that time. Of course the other Question is how deep is any sort of stand alone profit that ComAir or ASA make buried in the Delta financials. I am fairly sure however that an RJ can not compete with a 737 in the same markets when you remove the difference in crew cost.....Time will tell for all and these are truly going to be interesting times. Peace

 

[surplus1]

Surplus,
I was waiting for your arrival in this discussion. ComAir , ASA and CO EX were the exceptions in my mind as they appear to be successful wholly owned airlines that seem to do much point to point flying where their pax never see a DL or CO mainline jet.

I can't speak for ASA or COEX, but Comair was successful before it became a DL subsidiary and was actually don't more point to point than it is today. That is one of the reasons it was acquired, it was getting "too big for its britches" in the eyes of DL. It also never participated in "Fee for Departure" and refused to do so.

Recently DL has chosen to put a large number of CMR flights into the ATL hub. Perhaps this is good for DL, but the on-the-ground ineffeciencies of that venue are literally destroying the performance and efficiency that had be Comair's forte. I doubt we would have done that if the real Comair still existed.

I am curious what the profit levels from the pre-WO days were and what the percentage of jets to turbo-props were at that time.

Prior to the acquisition, Comair was the 2nd most profitable airline in the world. The return on investment was in the neighborhood of a consistent 24%. Before the buyout I made more money investing in CMR stock that they paid me to fly. Today there is no CMR stock and many of us (investors) lost a great deal of money thanks to Delta. Win some lose some, I guess.

Comair's business plan called for an all-jet fleet from the day that the first RJ was acquired. The Delta purchase actually delayed that transition. However, it was not Delta's idea to go all jet, it was Comair's. I think we had about a dozen Brisilias left in FL at the time of the acquisition. They lasted until after the strike.

Of course the other Question is how deep is any sort of stand alone profit that ComAir or ASA make buried in the Delta financials.

So "deep" that it is virtually impossible to determine. Comair no longer has and stock. Delta has a "consolidated" financial statement, which includes CMR and ASA. How the numbers are juggled from time to time is up to Delta. They have the ability to make Comair (or ASA) unprofitable at will. All they have to do is switch the allocation of routes in a way that will make the subsidiary of their choosing profitable or unprofitable. If Comair was operated as a "separate entity" and if Comair management could control what Comair does, I have little doubt that it would be as profitable as it was before the purchase. These multi-tiered corporate structures are designed to obscure and they are very good at it. That's a reality of being "owned". Comair exists on paper, but Comair is really an integral part of Delta, a "shell" corporation that can be used or abused at will.

In the future, I have little doubt that you will see the same type of number crunching with respect to Song. As a wholly owned subsidiary, Delta can do whatever Delta needs to do to make Song profitable or unprofitable. I predict they will use it against the mainline pilots in ways that the latter have yet to imagine.

I am fairly sure however that an RJ can not compete with a 737 in the same markets when you remove the difference in crew cost.....Time will tell for all and these are truly going to be interesting times. Peace

I don't quite agree with that. It is true that the very high compensation package on the mainline aircraft do affect the overall profitability, but there is much more to it than pilot pay. Don't forget the overall "burden" of the entire Delta mainline infrastructure.

The RJ was not designed to compete head to head with larger narrow body aircraft in markets that can support either aircraft type. It was designed to compete on "thin routes" where traffic is insufficient to support 737/DC9 size aircraft with the frequencies that the customer desires.

Ticket pricing is another factor that affects the ability of the equipment types to "compete" with each other. As an example, lets look at a route like MCO-MSY and compare the 50-seat RJ to a SWA 737. SWA can offer low fares that appear at first glance to make the RJ uncompetitive. That however, really depends on the ability of SWA to fill the 737. A CMR can offer some of its seats at a matching fare (which on face value fools the customer) and the rest at higher fares. SWA may require a 65-75% load factor on the route just to break even and can only generate enough pax to make the trip twice a day. Comair can do the same thing with a much lower break even load factor and provide 4 to 6 flights a day. This will syphon off just enough passengers to make SWA unprofitable on that route. Every time you take 25 pax off the 737 it loses money. The same 25 pax may allow CMR to break even, especially since all of the 25 won't be flying at that super low fare. The customer will pay the extra bucks to be able to go when he/she wants to as opposed to being forced to make SWA's infrequent schedule. That is of course simplified, but the concept makes the RJ very competitive. That is exactly why you see a CMR running 6-8 flights per day on a given route. It is true that 2 MD88's could fly that route and make money, if there were no RJs. But it is also true that folks might not want to travel when those MD88's are available. They will travel if they can choose their own time. All that is part of what we call "yield management" and no major airline can survive without it today.

The carrier must be able to provide the service at the time the passenger wants to go. It is true that the CASM of the RJ is higher than the CASM of the MD88. It is also much higher than the CASM of a 767. However, flying a bunch of empty 767's will not make money. Flying a bunch of full RJs will. It is up to management to determine which market requires which aircraft.

At present, the only obstacle to management being able to do that realistically is the mainline type scope clause. This is an airtificial restraint designed to protect the higher compensation packages of mainline employees at the expense, in many cases, of the company's profitability. Any business must be able to respond to consumer demand. The more flexible its ability to respond, the more profitable it should be. When that flexibility is removed for the wrong reasons, you wind up with USAirways.

Using unreasonably low compensation packages at regional carriers to subsidize unreasonably high compensation packages at majors doesn't make good business sense and ultimately results in what we have come to call "the race to the bottom". Regardless of our opinions, we will eventually reach the bottom, but that won't make the RJs go away. It will simply drag down the top until equilibrium is achieved again.

On the other had I would argue that realistic scope clauses would provide management with the required flexibility while at the same time minimizing the need to "race to the bottom". If we pilots ever figure this out, it might well restore some stability to what we do. It sort of reminds of the fable of the goose that laid the golden eggs. In their rush to get all of the eggs, the mainline pilot groups may well have killed the goose itself. Since the mainline groups do not appear willing to modify their stance unless forced to do so by the bankruptcy of their employers, we are where we are.

Wish I was smart enough to guess where it will all end.

 

[FDJ2]

[QUOTE


Prior to the acquisition, Comair was the 2nd most profitable airline in the world. [/QUOTE]

What percentage of your passengers were DAL code or connecting onto DAL prior to your acquisition?