Sunday, May 13, 2001

Delta examines painful options

Experts think Comair unlikely to be abandoned

By James Pilcher
The Cincinnati Enquirer

        As pilots prepared last week to vote on a mediator's contract proposal, Comair and its parent, Delta Air Lines, repeatedly warned that the Erlanger-based regional carrier's future was in danger if the proposal was rejected.

  As laid out by experts, options available to Comair and Delta include:
  • Pay the pilots what they want, and restart as soon as possible.
  • Continue to shrink Comair, cutting planes out of its fleet, and hope the pilots will eventually capitulate.
  • Bring in other airlines to replace Comair, which provides a vital feed into Delta's mainline network from smaller cities.
        So what are the options for Comair, the Tristate's only locally based passenger carrier, and Delta after the proposal's resounding defeat? Company officials aren't yet saying.

        Comair officials would not take questions Saturday, but the company said it would “consider more steps to further reduce its operation and preserve capital in order to shore up the airline for a more prolonged strike.”

        But last week, Delta president and chief operating officer Fred Reid said the company was exploring “all its options” to restore regional service to Cincinnati, up to

        and including the elimination of Comair.

        Experts say Delta's threats to close Comair are probably rhetoric, but add that what the company will probably do next will be painful nonetheless - especially since it could take awhile before negotiations restart.

        “Delta is unlikely to abandon Comair,” said Sam Buttrick, airline analyst for the Wall Street firm UBS Warburg. “However, Comair will be substantially reduced in size, especially if the strike continues a lot longer. We would expect that somehow the Delta network would expand into important Comair markets.”

        As laid out by Mr. Buttrick and other experts, options available to Comair and Delta include:

        • Pay the pilots what they want, and restart as soon as possible.

        • Continue to shrink Comair, cutting planes out of its fleet, and hope the pilots capitulate.

        Comair has already announced layoffs of 2,000 employees — including 1,500 local workers — that go into effect today. Comair has cut 200 jobs from its corps of 1,350 pilots. It's also shaved 17 planes out of its fleet, which now stands at 102 planes.

        • Bring in other airlines to replace Comair, which provides a vital feed into Delta's mainline network from smaller cities such as Grand Rapids, Mich.; and Charlottesville, Va.

        Delta made a first move in this direction last week, by announcing service between Cincinnati and Burlington, Vt. — a city previously on the list of markets that Comair wanted to expand to. That new service will be offered by AC Jet, a unit of Dulles, Va.-based Atlantic Coast Airlines, the nation's ninth-largest regional. AC Jet has a marketing agreement with Delta under Delta Connection.

        In addition, Delta owns Atlanta-based Atlantic Southeast Airlines, the nation's fourth-largest regional carrier, behind Comair.

        Delta also owns 27 percent of Utah-based SkyWest, another member of the Delta Connection network and the nation's sixth-largest regional.

        • Serve the cities that previously had only Comair service with Delta mainline flights. However, Delta probably won't do so since it's unlikely there would be enough demand to make a 200-seat flight profitable, said Mr. Buttrick.

        Comair flies 50-passenger jets so it can more easily serve cities that can't fill larger jets — the smaller jets also mean a regional carrier can offer more frequent service than Delta or other mainline carriers. • Start training replacement, non-union pilots who would be asked to cross the picket line.

        • Lease Comair's planes, routes and facilities to a third party, which could use its own pilots.

        • Sell Comair to a third party. which could choose to settle with the pilots, bring in their own pilots or sell off Comair's assets.

        The experts say the most viable option is keeping Comair while continuing to downsize and looking for ways to replace the function previously served by the grounded airline.

        “It might take awhile, but that's probably what is going to happen,” said Ray Neidl, airline analyst for the Wall Street firm AMR Amro. “Delta can't be too blatant about it, but they've got to protect their flank somehow.”

        Giving in to the pilots is out, since most experts concur with Comair and Delta's previous statements that they cannot remain economically viable under the pilots' demands.

        Continuing to downsize is an option, but again, the company's long-term growth would suffer, Mr. Buttrick said.

        And while replacing Comair with another carrier would appear attractive on the surface, that too presents challenges.

        Pilots at ASA and AC Jet are represented by the same union that represents Comair.

        Local union officials have said those outside pilots would be within their legal rights to refuse to fly a route formerly served by Comair.

        Delta Connection president David Siebenburgen said the company has had discussions with “other parties” about the concept of “struck work,” but would not say whether the unions had been contacted directly to see whether they would fly the routes.

        In making the announcement of the vote, Comair union chairman J.C. Lawson III said he had been in contact with union leaders at AC Jet and ASA on Saturday.

        “And we have been in constant communication with the airlines, and we have determined that our routes are struck work,” said Mr. Lawson, who would not say whether those unions had promised not to fly Comair routes.

        Whether Delta would have the legal right to fire any ASA pilot who doesn't fly a Comair route is in question, as well.

        Mr. Siebenburgen said “struck work” is nothing more than a union term and would be entirely based upon ALPA solidarity.

        That leaves SkyWest, which is non-union, as a possible option.

        Still, the taint of crossing a picket line could be a powerful union tool that no pilot - especially one that aspires to a job at a major airline - would want to confront.

        “It's not like ALPA uses a laser beam with this,” said Kit Darby, a United Airlines pilot, ALPA member and founder and president of Air Inc., an airline pilot placement service. “The union uses the broad brush, and if you get labeled a strike-breaker, forget about a job ever again at a mainline, because they keep track.”


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