At Comair, sentiment yields to dollars
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Analysis: 'In a commodity business, the low-cost producer wins'
By James Pilcher
The Cincinnati Enquirer
Comair is making money, yet asking for concessions from its pilots and flight attendants, more than two years after a pilots' strike almost killed the Erlanger-based airline.
What is this latest development doing to the internal fabric of one of the Tristate's home-grown business successes of the last 25 years?
More important, what does it say about the changing nature of the airline industry nationally?
The answers are interconnected, and all point to one thing: Comair now is just another airline, as painful as that is for long-time local executives and employees to accept.
Still a major player in the national aviation scene, Comair no longer is the golden star for either parent company Delta Air Lines or of the regional industry nationwide.
The reason? It no longer holds a near-monopoly on regional jets, which revolutionized the industry but now are commonplace throughout the country.
In fact, Comair is only one of a host of options for its owner, Delta Air Lines, which is looking to cut costs at every turn.
That imperative is at the center of the situation at hand.
Comair has gone to its flight crews, asking that their current contracts be renegotiated so it can lower costs. The company says Delta is dangling as many as 83 new planes - some from other carriers - and a lot of new routes over the next three-plus years to Comair if it can cut labor costs.
Yet Comair is turning a profit, a rarity in the airline industry nowadays. It earned more than $30 million in the second quarter, according to statistics released by the federal government.
Adding to the complexity: Both the pilots and flight attendants at Comair are the highest-paid in the regional industry, and neither workgroup is going to give up much without a fight.
That's doubly true for the pilots, many of whom vividly remember their 89-day strike in 2001 that almost killed the company.
Different environment
One Wall Street airline analyst goes so far as to say he thinks what is happening at Comair shows that Delta made a mistake in buying the company for $1.91 billion in early 2000.
Robert Ashcroft of UBS Investment Research says it would be much easier for Delta to squeeze a contracted carrier for lower costs than its own kin.
Ashcroft, who specializes in regional carriers, says the regional sector as a whole "is a divide-and-conquer industry now."
He says regional carriers merely contract with the big airlines to just do the flying, while the mainline airlines call all the shots.
The entire industry is cutting costs at every turn in a mad scramble to recover from the ever-lingering effects of the Sept. 11 terror attacks.
The larger companies, including Delta, are whipsawing, pitting one regional carrier against the other over the cost of what has become a common commodity: regional jet seats. (There are more than 1,200 regional jets in operation in the U.S. alone.)
"And in a commodity business, the low-cost producer wins," Ashcroft says. "The mainline carriers are pitting them against each other to get the lowest price.
"So when a mainline like Delta looks to award new jets and new flying, the only thing they care about is who has the lowest price. And our data shows that Comair pilots are among the best-paid in the industry, which is a handicap for Comair."
Different company
It wasn't like this even as recently as five years ago. Comair was the first airline to fly regional jets in the U.S. when it introduced them 10 years ago.
Comair earned profit margins unheard of in the airline industry and was on its way to becoming a $1 billion company in terms of revenue when Delta bought it. Many local workers and officials prided themselves on having started in the Tristate, and the Erlanger campus has always been like one big family.
Many workers have been there since the beginning, in 1977, and most know the other on a first-name basis.
But now, company executives have had to supplicate themselves to the pilots for one of the first times in company history, possibly reopening wounds that are just barely healed after the pilot strike.
In addition, the Delta officials who run the airline's regional network now make those decisions from Atlanta, as compared with three years ago, when Delta Connection Inc. shared offices with Comair locally.
That means there's not a lot of sentimental value attached to Comair starting the regional jet revolution 10 years ago.
Others struggling, too
Comair is not the only carrier in this situation. Northwest Airlines is squeezing Minneapolis-based Mesaba Airlines, which last month announced layoffs at its maintenance center at the airport here and is asking for major cuts from its pilots. United Airlines, still in bankruptcy, is reworking its deals with its contracted regional carriers.
Comair has always prided itself on being different from the rest, even being an innovator in that it was the first major regional airline to take a major strike.
Now, however, the situation is nearly as touchy as that tense spring for the company, its workers and its unions, who all now must decide whether to keep the status quo or change once again.
Only this time, change would mean just keeping up with the pack.
--------------------------------------------------------------------------------
Analysis: 'In a commodity business, the low-cost producer wins'
By James Pilcher
The Cincinnati Enquirer
Comair is making money, yet asking for concessions from its pilots and flight attendants, more than two years after a pilots' strike almost killed the Erlanger-based airline.
What is this latest development doing to the internal fabric of one of the Tristate's home-grown business successes of the last 25 years?
More important, what does it say about the changing nature of the airline industry nationally?
The answers are interconnected, and all point to one thing: Comair now is just another airline, as painful as that is for long-time local executives and employees to accept.
Still a major player in the national aviation scene, Comair no longer is the golden star for either parent company Delta Air Lines or of the regional industry nationwide.
The reason? It no longer holds a near-monopoly on regional jets, which revolutionized the industry but now are commonplace throughout the country.
In fact, Comair is only one of a host of options for its owner, Delta Air Lines, which is looking to cut costs at every turn.
That imperative is at the center of the situation at hand.
Comair has gone to its flight crews, asking that their current contracts be renegotiated so it can lower costs. The company says Delta is dangling as many as 83 new planes - some from other carriers - and a lot of new routes over the next three-plus years to Comair if it can cut labor costs.
Yet Comair is turning a profit, a rarity in the airline industry nowadays. It earned more than $30 million in the second quarter, according to statistics released by the federal government.
Adding to the complexity: Both the pilots and flight attendants at Comair are the highest-paid in the regional industry, and neither workgroup is going to give up much without a fight.
That's doubly true for the pilots, many of whom vividly remember their 89-day strike in 2001 that almost killed the company.
Different environment
One Wall Street airline analyst goes so far as to say he thinks what is happening at Comair shows that Delta made a mistake in buying the company for $1.91 billion in early 2000.
Robert Ashcroft of UBS Investment Research says it would be much easier for Delta to squeeze a contracted carrier for lower costs than its own kin.
Ashcroft, who specializes in regional carriers, says the regional sector as a whole "is a divide-and-conquer industry now."
He says regional carriers merely contract with the big airlines to just do the flying, while the mainline airlines call all the shots.
The entire industry is cutting costs at every turn in a mad scramble to recover from the ever-lingering effects of the Sept. 11 terror attacks.
The larger companies, including Delta, are whipsawing, pitting one regional carrier against the other over the cost of what has become a common commodity: regional jet seats. (There are more than 1,200 regional jets in operation in the U.S. alone.)
"And in a commodity business, the low-cost producer wins," Ashcroft says. "The mainline carriers are pitting them against each other to get the lowest price.
"So when a mainline like Delta looks to award new jets and new flying, the only thing they care about is who has the lowest price. And our data shows that Comair pilots are among the best-paid in the industry, which is a handicap for Comair."
Different company
It wasn't like this even as recently as five years ago. Comair was the first airline to fly regional jets in the U.S. when it introduced them 10 years ago.
Comair earned profit margins unheard of in the airline industry and was on its way to becoming a $1 billion company in terms of revenue when Delta bought it. Many local workers and officials prided themselves on having started in the Tristate, and the Erlanger campus has always been like one big family.
Many workers have been there since the beginning, in 1977, and most know the other on a first-name basis.
But now, company executives have had to supplicate themselves to the pilots for one of the first times in company history, possibly reopening wounds that are just barely healed after the pilot strike.
In addition, the Delta officials who run the airline's regional network now make those decisions from Atlanta, as compared with three years ago, when Delta Connection Inc. shared offices with Comair locally.
That means there's not a lot of sentimental value attached to Comair starting the regional jet revolution 10 years ago.
Others struggling, too
Comair is not the only carrier in this situation. Northwest Airlines is squeezing Minneapolis-based Mesaba Airlines, which last month announced layoffs at its maintenance center at the airport here and is asking for major cuts from its pilots. United Airlines, still in bankruptcy, is reworking its deals with its contracted regional carriers.
Comair has always prided itself on being different from the rest, even being an innovator in that it was the first major regional airline to take a major strike.
Now, however, the situation is nearly as touchy as that tense spring for the company, its workers and its unions, who all now must decide whether to keep the status quo or change once again.
Only this time, change would mean just keeping up with the pack.
