More regional consolidation at Delta, Cincinnati at risk
Worries over the fate of Comair came to fruition yesterday after Delta said it plans to park half the 97 regional jets now in operation at the hub. It is also cutting the number of employees at the diminishing Cincinnati hub. Not surprisingly, since this is only the latest iteration of what used to euphemistically be called “right sizing”, 53 50-seat jets will be spun out of the fleet leaving only 16. In addition, the Cincinnati operation will include 15 70-seat and 13 90-seat CRJs with the consequent furloughs.
The news came despite Delta’s assurances to the city that it will retain 160 to 180 departures daily. The aircraft are already out of the fleet or are being sent back to lessors further diluting the price of used 50-seaters. Many have already been grounded since costs outweigh revenues for their services.
The news broke after Comair President John Bendoraitis sent an employee memo outlining the cuts including the reduction to 44 aircraft by the end of 2012. He indicated that Comair costs were 20% higher than its peers on a cost-per-hour basis. The regional has long been for sale but faces major stumbling blocks. Its cost structure has kept other regionals from acquiring the airline as Mesaba and Compass were acquired by Pinnacle and TransStates, respectively, earlier this summer. He said the fleet reduction would save the carrier USD100 million over four years.
Other regional holding companies have not only baulked at the high cost structure but its notoriously hostile labour relations which will likely only worsen as the carrier enters into contract negotiations with its 1000 pilots, 700 flight attendants and 400 mechanics. With the changes in Delta’s regional airline relationships it must be assumed that the company is looking for dramatic changes to help drive costs down to the level of its peers.
The latest victim of legacy consolidation and hub rationalisation, Cincinnati could soon be joined by Cleveland as United and Continental rationalise their systems after the merger, according to information released as part of a law suit designed to derail the merger. News reports that the merged entity plans to reduce the hub to 20 mainline and 13 regional carrier flights daily, drew immediate damage control from Continental which issued a statement in support of retaining the Cleveland hub.
Continental CEO Jeff Smisek indicated that the hub reduction is only one scenario being studied, another leaving the hub as it is or growing it. He reaffirmed Continental’s commitment to Cleveland and denounced legal manoeuvres by a plaintiffs’ lawyer aimed at distorting the facts.
“Continental is firmly committed to Cleveland and will remain so after its merger with United,” said Smisek, who will head the new United Airlines after the merger with Continental. He referred to reports insinuating that Continental would drastically reduce its service to Cleveland as a result of the merger.
The reports were based on one of many simulations analysed before the merger was announced, and modelled the most severe recession or disaster scenario. The simulation was promoted by the plaintiffs’ attorney in the trial of a lawsuit filed in California challenging the merger.
“Other simulations showed Cleveland maintaining its size and others showed it growing,” Smisek said. “This was never a plan for Cleveland or any of our hubs.”
“We are meeting with Mayor Jackson and business leaders on an on-going basis to ensure Cleveland maintains excellent air service after the merger. We consider Cleveland an important hub and one of our hometowns and resent this attempt to cause concern among our customers and employees,” Smisek said.
He reiterated that he expects the merger will have minimal impact on front-line employees, “including our co-workers in Cleveland.”