Bombshell: Comair to cease operations

The RJ era was fueled by the network carriers' perceived need to serve every city that its competitors served and serve them 5 or more times per day to multiple hubs. Before deregulation, small cities usually were served by one or two cities on mainline equipment to a hub in the region near each small cities with tickets interlined between carriers to create a true nationwide system, even if your trip from one side of the country to another might be on several "competing" airlines - all w/ fares and schedules governed by the Civil Aeronautics Board.
Post deregulation with the virtual end of domestic interlining, six or more "nationwide" network carriers could not possibly serve every small city with their own aircraft, let alone with frequencies that could compete with the single network carrier that was the strongest in each city by virtue of hub strength in each region of the country.

With relatively cheap jet fuel, a plentiful supply of much lower cost new hire employees to the airline industry that were willing to work at regional carriers, and manufacturers such as Bombardier and Embraer that were anxious to break into the airliner market, the economics were right for the growth of regional carriers.

Changes in the network carrier segment helped bring an end to the need for the 50 seat industry. BKs of the decades of the 2000s reduced mainline employee labor costs. Consolidation has reduced the number of hubs - and thus the number of flights that need to be operated from each city in order for each network airline (now just 4) to be able to serve "all" of the country. And fuel is multiples higher than it was just a few decades ago.

Regional carrier employees have become more senior - and thus, their expectations for higher salaries have created an environment where new regional airlines win contracts largely by using less senior workforces.

Comair's pilot strike was a major attempt by regional carrier labor to gain network carrier salaries and DL was determined to ensure it never happened - or the regional carrier model would never work.
Of course, OH was under pressure to deliver the lowest prices to DL and that would have been the case whether OH was wholly owned (which it was in 2004 going into DL's BK) or if it had been independent and bidding on contracts.

Delta has always been a big proponent of the regional industry because DL's network - far more than AA and UA - was built around connecting small and medium cities to the world. Pre-NW merger, DL served more small cities including via RJs than any other airline in the US; NW's network model in the midwest was very similar and DL only increased its size in small and medium size cities. because of the ATL, DTW, and MSP hubs, DL is the largest airline in scores of small and medium sized cities. While AA and UA's domestic network is much more heavily concentrated in the largest markets, DL has built a network that connects more of the US to more of the world via its network than any other airline. WN has carried the AA/UA model further by serving even fewer cities and has decided they will not use aircraft smaller than the 737-700 which means they will never serve hundreds of cities throughout the US.

DL bought ASA and Comair to control quality and decisions, although history will probably show they could have met those objectives w/o owning them and w/o losing the billions of dollars they invested in them.
ASA was sold when it became apparent DL could never recover its investment and it was no longer necessary to own your regional carrier; regional carrier-mainline contracts have all been rewritten to eliminate the need for ownership. American Eagle and Comair have never found buyers.

There hasn't been any doubt that airline mgmt teams at DL, UA, and US have all played one regional carrier against the other for years in order to obtain the lowest price - at somewhat acceptable levels of service.

DL is in the best position to start the process of transferring capacity back to mainline because of its size and multiple hubs on the east coast, where the hundreds of small cities in the US are mostly located and where the majority of regional carrier capacity flies.
With 10-15 departures from most small and medium sized cities just to ATL, DTW, and MSP, DL can begin the process of reducing frequencies and serving markets with larger RJs and small mainline aircraft.
DL's current pilot ovestaffing allows them to staff many of the 717s without hiring many new pilots.

After 35 years of deregulation, DL appears to be leading the effort to return mainline aircraft to small and medium sized cities that have been served by RJs for decades.

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Kev,

on a related topic, do you have a list of cities from which DL carries US mail? Are some of the small cities that are regaining mainline service after years of RJ only service some of the same cities from which DL is now carrying US mail? Does DL put mail on any regional carriers? And finally, do the cities that have mainline below wing staffing carry the mail more than other cities with contract ramp?
 
According to the company website, there are about 50 total cities. These are the ones I can come up with. It may or may not be completely accurate. JAX and GSO (both outsourced) are supposed to be next.

SEA
PDX
SMF
SFO
LAX
SAN
HNL
SLC
PHX
MSP
DTW
DFW
ATL
BDL
BOS
JFK
PHL
MCO
MIA
SJU
ONT
SNA
LAS
DEN
SAT
MCI
STL
MKE
ORD
MEM
IND
CMH
CVG
CLT
TPA
EWR
BWI
IAD
FLL

Bolded cities have mainline ramp staff. Some of these have cargo staffed as well. I'm not sure which ones have M/L employees handling mail or not. Mail has traditionally gone on M/L flights only, but other than space (or weight & balance) requirements, there's no reason one couldn't put it on a DCI flight.
 
thank you, sir! :)

I would hope that mail handling will be one more reason to bring the ramp back to medium sizes... many of those cities you list are mainline-employee staffed.

There are a number of cities in the midwest where DL is strong but which aren't on your list - and a number are mainline staffed.

Are DTW and MSP sorting mail as ATL was doing before the new automated sort system came online or are those "spokes" in an ATL based mail system?
 
if you any way of finding out, I'd be interested in knowing. :)

It would be great to think that DTW and/or MSP could duplicate the mail sorting system that ATL has... but carrying mail does require a fairly high level of mainline aircraft. Of course mail doesn't care about the fastest connection or making a trip through ATL... but perhaps the USPS does look at fastest elapsed flying times... not sure....

Throwing in a hundred million dollars of mail revenue on top of a hub that is already going to operate can make the hub all the more profitable.
 
presumably the incentive to put in the automated sorting system is to reduce the amount of time necessary on the ground at the connecting point and thus creating faster elapsed times. Presumably airline schedules will continue to change and the post office could re-award specific markets based on flight schedules - if the fastest arrival is used - and that certainly sounds like a reasonable goal, all other things being equal to the post office.

Passenger carriers have the advantage of running a mostly daylight operation compared to the package carriers. Given that UPS intends to give Fedex a run for its money on postal contracts, DL's investment might help to reduce the size of the contract that is up for grabs between UPS and Fedex, even considering the size limitations of packages which passenger airlines can carry.

Will be interesting to watch... but I'm sure DL wouldn't mind picking up a couple hundred million dollars worth of extra revenue.... and postal revenue would certainly help pay for some of the cost of conversion from smaller to larger regional jets plus the 717s.
 
presumably the incentive to put in the automated sorting system is to reduce the amount of time necessary on the ground at the connecting point and thus creating faster elapsed times. Presumably airline schedules will continue to change and the post office could re-award specific markets based on flight schedules - if the fastest arrival is used - and that certainly sounds like a reasonable goal, all other things being equal to the post office.

Earliest arrival time was the former benchmark, even if it meant changing planes, as opposed to just staying on a through flight.

The stated goal of the new ATL facility is to both increase throughout, but also to cut up to 2 hrs. off of transit time, enabling many more connecting options.

BTW, Neel Shah is stepping down as head of cargo...

Kev, at this point do you know of any cities slated to lose DL service altogether with Comair ceasing operation?

None, as far as I know... I honestly can't think of any city that is only served by OH...
 
BTW, Neel Shah is stepping down as head of cargo...


wow.... know where he is going? I always thought he was one of the good guys.

at this point do you know of any cities slated to lose DL service altogether with Comair ceasing operation?

this is from DL's press release yesterday....

"The discontinuation of Comair's operations will not result in any significant changes to Delta's network, which has enough flexibility to accommodate these changes. Currently, Comair accounts for approximately one percent of Delta's network capacity. There will be no disruption to customers and no significant adjustments to Delta's flight schedule or locations served."

presumably the greatest changes will be because the reduced number of 50 seaters will mean some cities will be too small to support service on larger RJs, although DL still is several years away from reducing the 50 seat fleet level low enough to cause cities to be dropped - and there still should be 125 aircraft probably into 2020.

According to flightstats, OH has slightly more flights from DTW, its largest city, than from CVG.
 
Maybe it would be profitable with weekend warriors instead of full-timers and DL's other costs, but mail can be a lot more expensive to manage than you think, especially all the scanning required between tendering and delivery to USPS at the destination.

AA had some automation in place at the hubs, but figured it was driving about 200 FTE's systemwide to handle the mail (approx $15-18M in wages & benefits). That doesn't include the ground equipment or the facilities. When the USPS pulled AA's contract briefly in the early 2000's, the finance guys said the margins were too thin to justify keeping the contract.
 
Supposedly the point of the automation is to reduce the amount of personnel necessary as well as to increase the accuracy of knowing where mail is at any given moment.
I'm not sure how procedures work, but it sounds like the sorting processes are all done in a sort facility rather than planeside or on the ramp- and likely the need for multiple scans is reduced since the sorting system has to to do it anyway, reducing the time it takes to process the mail and increasing the speed with which mail can get to its destination. I am quite sure that when Fedex and UPS handle mail, they don't scan individual pieces planeside.

DL knows by now what it takes to win contracts with the USPS because Fedex and UPS have long had outstanding tracking capabilities and the USPS expected the airlines to deliver that type of service - and passenger airlines were largely not equipped to provide it.

BTW, it is now possible for a DL passenger to know where their bag is via the same type of tracking processes that Fedex and UPS made famous.

If AA was paying $15-18M for 200 employees, they were using topped out FT employees even in 2000.

I'm not sure what kind of mail volume by revenue AA was carrying at that time, but if DL is carrying $100M of revenue and the labor costs are predominantly focused on employees at ATL - where presumably the majority of sorting is focused, then even $20M in labor costs for a $100M contract is probably not unexpected. (DL says they are carrying about $100M in mail now.) If routine ramp staffing is not sufficient to handle mail, then there is no way with an operation the size of DL's that mail can be handled profitably. Thus, if DL is handling mail, the assumption is that it can largely be handled within the resources they largely have except for the specific mail group.... and I am sure it is not staffed with hundreds of FT employees.

A big chunk of what made mail unattractive for passenger airlines before was the penalties they faced for non-performance. If you can't deliver what they expect, it will never be worth bidding on that work; the post office will make certain you can't financially benefit by providing unacceptable service.
 
Maybe it would be profitable with weekend warriors instead of full-timers and DL's other costs, but mail can be a lot more expensive to manage than you think, especially all the scanning required between tendering and delivery to USPS at the destination.

AA had some automation in place at the hubs, but figured it was driving about 200 FTE's systemwide to handle the mail (approx $15-18M in wages & benefits). That doesn't include the ground equipment or the facilities. When the USPS pulled AA's contract briefly in the early 2000's, the finance guys said the margins were too thin to justify keeping the contract.


That sounds ~ comparable to what NW was doing system wide, numbers-wise. I did a bit of back of the envelope math, and using 200 FTEs- using TOS x 1.5 to factor in total compensation- and came up with just under 12m annually. In the line stations, adding headcount strictly for mail was incremental at best. In the city I started in, they budgeted for 1.5 people per day, and we were told by mgmt. that the revenue from the mail carried more than covered that. I should also note that the people throwing the mail also performed other work in the course of the day, as most of the outbound volume was staged for launch flights, with a much slower stream thereafter.


I'm not sure how procedures work, but it sounds like the sorting processes are all done in a sort facility rather than planeside or on the ramp- and likely the need for multiple scans is reduced since the sorting system has to to do it anyway, reducing the time it takes to process the mail and increasing the speed with which mail can get to its destination. I am quite sure that when Fedex and UPS handle mail, they don't scan individual pieces planeside.

The procedure works (worked) like this:

Outbound from a line station:

Mail is divvied up by carrier (not by flight) at the AMF
Airline workers sort it by flight and get it staged and ready to go.
It gets loaded on a flight.

We did not scan individual pieces; the USPS did in order to drive outbound manifests, and to account for it again on the way in.

At the hubs, it was dropped at a central point, and redistributed to it's respective connecting flight.

For inbound mail at a line station, all carriers dropped it on a "monster belt" at the AMF. It made for some long lines, especially when DL- or DGS anyway- would scan.every.f'ing. piece. of mail, regardless of volume.

At my next station, there was no AMF facility. The only difference was the USPS dropped it all by truck, and the carriers sorted it out at a loading dock instead of at the facility itself.
 
thanks, Kev.
It would appear that a hub focused operation is intended to reduce complexity and allow machines to do much of the sorting work. Mail runners probably constitute the majority of the manpower that is necessary.

The primary point is still that mainline aircraft have greater ability to carry mail than do RJs so perhaps part of DL's intention to go after mail is also part of its desire to serve many small and medium sized cities that other passenger airlines serve almost exclusively with RJs - other than WN, which I think (not sure) doesn't carry US mail.

Running a highly reliable airline :) is also necessary if you want to carry the mail and not be fined... DL is running a consistently reliable airline which makes mail a possibility where it wasn't before.
 
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