Thursday, November 15, 2001

Delta upbeat about Comair

CEO bullish on carrier

By James Pilcher
The Cincinnati Enquirer

        NEW YORK — Like every other aviation executive in the world, Delta Air Lines chairman and chief executive officer Leo Mullin is juggling a lot of issues in the wake of the Sept. 11 attacks and Monday's crash of an American Airlines jet here.

        But Mr. Mullin, who heads the nation's third-largest carrier, has taken on an additional burden — unofficial spokesman for the entire airline industry.

        He sat down Wednesday with the Enquirer to discuss this role and other issues facing Delta, which operates its second-largest hub at the Cincinnati/Northern Kentucky International Airport, and the entire industry.

        Question: You have talked frequently over the past two weeks over the possibility of future mergers and acquisitions in the industry and the need for federal regulators to allow this to happen. Does Delta have a target airline in mind, and why is consolidation an option?

        Answer: No, we don't have another airline in mind. I am only making a general point.

        Having been in the banking industry, I have been involved in many transactions that were either mergers or acquisitions that improved the economic fortunes of the companies involved.

        Sometimes there is some immediate turmoil, but on the whole, it would improve the fortunes of the company. And also having been through this with Conrail (which was divided up by a government panel), I want to ensure that we have the ability to have the market decide this on its own.

        This industry is tremendously competitive, and if consolidation ever took place, or was allowed to take place, it would take the hub-and-spoke carriers down to about three to four, and they themselves would be very competitive. On top of that, there is an extraordinarily vital discount market out there with Southwest and Jet Blue, and they also would provide competition.

        Q: What about Comair, your Erlanger-based regional subsidiary? Any lessons learned from this spring's strike, and will the company continue to expand as mainline flying recedes?

        A: That whole strike was an extremely unfortunate circumstance, and I feel that it did not have to happen, and let's just leave it at that. I do have regret about it, but it's in the past.

        But there are big plans for Comair, including a continued, tremendous stream of regional jets (RJs) for all our Delta Connection carriers. We have far greater need for RJs than mainline jets and there will continue to be growth on RJs.

        Q: What about fares? When can consumers look for fares to rise again?

        A: This is something that is driven by the market, and I can't really speculate on it. But right now, we're down in traffic 25 percent compared to last year and down 35 percent in revenue. And we don't see those traffic num bers coming up until July 2002. But when that will actually happen, who knows?

        What this means is that there will continue to be weakness in passenger demand and that's favorable to all kinds of fare experimentation. But I can't sit here and forecast what fares are going to be.

        Q: You've been out in front of a lot of issues facing the industry as a whole following the Sept. 11 attacks, whether it be lobbying Congress for the $15 billion aid package, or addressing security issues or talking about potential future mergers. Are you comfortable in this role and do you feel you've done a good job?

        A: Part of it happened from just being there, I presume, and I would rather someone else talk to my effectiveness.

        But yes, I am ready for the role. Look, I've got experience dealing with Congress and this is a role I've filled other times in other positions and this seemed like a natural evolution.

        Q: Does the hub-and-spoke system still work, or was the model broken by the financial impact of the attacks?

        A: This is so impeded in the fabric of aviation today, to change or cause it to be otherwise would take 20 years.

        Look at the success of the hub-and-spoke system and think about what it has meant to the consumer. Anyone can fly into Atlanta and fly just about anywhere in the world, or they could fly into Cincinnati and fly anywhere in the country and several places around the world.


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