Number "Depends" On Fleet Cuts

By Aero-News Senior Correspondent Kevin R.C. "Hognose" O'Brien

Comair, in an attempt to reduce costs mandated by debt-soaked and bankrupt parent Delta, is going to cut up to 650 jobs and 30 Regional Jets by December, 2005.

This is in addition to 350 layoffs announced last month, which were primarily at Comair's Cincinnati (Covington, KY) hub. Delta says that Delta and/or Comair would still operate to all current destinations till the end of the year, but made no commitment for the new year. While all destinations may still be serviced, both lines will cut the number of flights sharply.

The pay cuts for those not laid off will begin when the layoffs take effect, in December, although senior executives will find their pay packets thinner already in November.

Comair is not only cutting personnel, but also its fleet. The current fleet contains 174 jets; Comair will dispose of at least 11, and possibly as many as 30. The more planes can be gotten rid of, the fewer jobs will need to be eliminated; the fewer planes disposed of, the more Comair will have to cut people to get to the $70 million in cuts Delta's initial reorganization plan demands. The plan wants $3 billion in cuts Delta-wide; $70 million is just Comair's share.

Comair's intention is to dispose of 50-seat aircraft and retain 70-seat aircraft. "We believe that 70-seat flying and, potentially, larger gauge equipment will be in higher demand," Comair President Fred Buttrell said. (Buttrell, a Delta executive, took over Comair after the Christmas 2004 fiasco, where Comair's two-decade-old scheduling system failed and grounded the airline for days).

As a proportion, Comair is cutting up to 14-percent of its workforce (22-percent if the cuts announced last month are included), if all cuts are completed; and from 6.3-percent to 17.2-percent of its aircraft. Industry analysts did not consider the line lavishly overstaffed or overequipped, but note that while it was profitable before Delta bought and began managing it in 2000, it hasn't been since.

The company is hoping that some voluntary departures, too, will allow end strength reduction by attrition, rather than by layoff. "Our goal is to handle as much of the transition as possible through voluntary means," Buttrell said. This is not only for humane reasons: layoffs are more costly.

Comair has tentatively divided it's cut requirements into $30 million from unionized workers, which will require negotiations with the unions; and $40 million from non-union workers (salaried managers and exempt personnel) and airplane disposals.

Senior management is also chipping in. The President is taking a 15-percent and corporate officers a 10-percent reduction, on top of 10-percent they have already taken earlier in 2005, for a total of 25-percent and 20-percent. Directors, whose pay was previously frozen, find the freeze ends with a cut, in their case by 9-percent.

Of the $30 million in union-worker payroll reductions, Comair pilots are being asked to take the biggest hit, $17.3 million. The pilots have already been under a pay freeze since June. Flight attendants, who have already been split into two pay scales based on date of hire, are being asked to give up $8.9 million, and mechanics $1 million. This are relatively proportional hits, as Comair employs relatively few mechanics, preferring to outsource mechanical work to repair stations.

The unions have no official statement for the press or public until they have spoken to the company.

Comair's planes and crews are provided to Delta on a lease basis and Delta sells the tickets as "Delta Connection" flights. The much lower pay scale for Comair employees has made operating Comair flights much more economical than Delta's own.

Low-cost and regional airlines seemed immune to the mismanagement and fiscal woes that have driven many of the majors onto the rocks of bankruptcy. But Comair joins Mesaba (a regional feeder for bankrupt Northwest) in the sort of doom spiral that has characterized their respective parent airlines, and low-cost Independence Air this month is cutting 600 of 3400 workers, and 120 of 350 daily departures (including all of its flights to West Coast destinations), in an attempt to stave off bankruptcy.

All airlines have been squeezed by price wars and unanticipated Jet A fuel costs. The most fiscally unsound airlines, such as Delta (which has been technically insolvent for years), became so indebted that they were unable to hedge against the possibility of rising fuel costs. Delta, for example, owes a staggering $26 billion, and doesn't have much in the way of tangible assets; everything's leased.

The coming negotiations with Comair's unions will certainly be tense, but the unions are in a weak position; if they don't cooperate, they understand, cuts could total 100-percent.

FMI: www.comair.com