More Comair/ASA spinoff talk

[wrigley23]

http://news.enquirer.com/apps/pbcs.dll/article?AID=/20041216/BIZ01/412160347/1002/BIZ

My favorite line is this....
"We don't have to own them (Comair and Atlantic Southeast Airlines) to get the benefits from them," Grinstein told The Wings Club, an aviation group, during a question-and-answer session following prepared remarks. "We are looking very carefully at what to do next."


....so now you just want to be friends with benefits?

 

[michael707767]

....so now you just want to be friends with benefits?

I tried that with a woman I knew. Didn't work.

 

[doh]

Comair has the lowest cost structure of the 7 largest regional airlines. So much for a pay cut!

 

[jjetpilot]

Sure it doesn't work with a girl....if you TELL her @!#

lol

 

[Flying Illini]

I tried that with a woman I knew. Didn't work.

Worked for me...until she found a boyfriend who was interested in the "long term." What a tool. It's like somebody pulled the rug out from under your feet...

 

[On Your Six]

http://news.enquirer.com/apps/pbcs.dll/article?AID=/20041216/BIZ01/412160347/1002/BIZ

My favorite line is this....
"We don't have to own them (Comair and Atlantic Southeast Airlines) to get the benefits from them," Grinstein told The Wings Club, an aviation group, during a question-and-answer session following prepared remarks. "We are looking very carefully at what to do next."


....so now you just want to be friends with benefits?

Give me a break. General Lee and I have been stating this for the last 6 months (conduct the searches and check). Why is this so unbelievable? It's the same deal with Coex and it is common sense... Time to wake up and smell the coffee - the airline biz is broke and things change. Do you think Grinstein has forgotten about the problems related to the Comair strike? Nope.

From a cash standpoint, it makes a lot of sense so long as you can guarantee some of the flying over a set time horizon. Why own it when you can lease it and open up your options in the event that you have strikes or quality/performance issues. Change is in the air...

 

[MECH]

I personally think that Delta waited to long. The market for an IPO was there a couple of years ago but not now. When Continental spun off it's Express carrier they where able to sell on growth and a fixed profit margin. NW did the same thing,a couple of years later, with it's wholely owned feeder. But wall street had already started to right off the 50 seat market. It did not get the money that NW was planning on. Since then all the big investment house have been writting reports that show a glut of aircraft in the regional industry. This would be made worse by a failure of a network carrier. The big money would most likely shy a way from a regional IPO right now.

 

[FDJ2]

Since the purchase, Comair and Delta have not disclosed Comair's financial numbers separately.

But in the most recent report to the Department of Transportation, the airline reported a net profit of $32.1 million in the second quarter of 2004. Comair also had the lowest cost structure of the nation's seven largest regional carriers.

Sounds like a good sales pitch. Delta needs then $$$, and while there is no illussion that DAL could ever recoup the $$$ poured into CMR, Delta could improve it's equity position and still retain the lift by spinning off CMR and/or ASA. It's really not a matter of if, but when.

 

[wrigley23]

Give me a break. General Lee and I have been stating this for the last 6 months (conduct the searches and check). Why is this so unbelievable? It's the same deal with Coex and it is common sense... Time to wake up and smell the coffee - the airline biz is broke and things change. Do you think Grinstein has forgotten about the problems related to the Comair strike? Nope.

From a cash standpoint, it makes a lot of sense so long as you can guarantee some of the flying over a set time horizon. Why own it when you can lease it and open up your options in the event that you have strikes or quality/performance issues. Change is in the air...

EXCUSE ME! This isn't the first time someone has posted an idea (or in this case a simple newspaper link) that has already been discussed before. But since you and General have already made a decision, my apologies sir!

.....that's why the title says "More talk".

 

[P38JLightning]

high interest loan

>>>Sounds like a good sales pitch. Delta needs then $$$, and while there is no illussion that DAL could ever recoup the $$$ poured into CMR, Delta could improve it's equity position and still retain the lift by spinning off CMR and/or ASA. It's really not a matter of if, but when.<<<

you are correct that Delta would improve (temporarily) its cash equity position and still of course "retain the feed". but one look at the economics shows just how desperate a move this would be for Delta in the long run.

I'm just ballparking the numbers so all you C.P.A.'s give me a break, but if i recall correctly, 1/2 of CoEx spun off for about 300M. They are similar to us in size and lift and profitability. so that puts the whole around 600M. But that was a couple years ago, when things were more rozy for "regionals". Heck, every regional with a pulse was taking deliveries as fast as production lines would allow. CoEx had exclusivity too, with 100% jet growth guaranteed.

Now look at Comair for example. They would be hard pressed to get 600M IMHO. We have no exclusivity, have lost every RFP recently, Delta is a lot closer to Bankruptsy now than CAL was then, and there is a glut of RJ's and prostitute airlines more than willing to low ball anyone and everyone to get growth airframes.

So Delta gets 300-500M (max) and in exchange loses that 150-200M per year profit it now "pays itself". That ammounts to a 500M loan once that you have to pay back at 150-200M a year for life! Of course, Delta could always pay an independant Comair way less for its lift, but in doing so they would get even less for any IPO.

Of course they could always find a single buyer, like SKYW, but would they really vaporize 2/3 or more of their sacred cash position to take on a rabid unionized, highest paid pilot and FA airline so they could get a bunch of 20-30,000 hour RJ's at a reduced profit margin?

Hey, either could happen. Delta knows it will never see 2B it originally invested in Comair (more like 5B when you include the cost of massive RJ expansion and that near 1B ivy league labor stand off that saved them 50M)

So you may be right, they could easily sell Comair/ASA. But it would clearly be classified as burning the furniture to heat the house. And I just don't see that happening until Jerry has come back to DALPA for giveback rounds 2, 3, 4 and 5 first. Should it come to that in the first place that is.