Originally Posted by
flycrj200
Skywatch
You make a good point, but you are forgetting the fact that any profit Comair makes ($109 Million last year) goes to the bottom line of Delta. That in itself makes Comair a more profitable option than contract carriers even though the cost per block hour is a little higher at Comair. Please check your facts before you call someone else’s facts inaccurate.
My facts are spot on. Your premise is fatally flawed.
the only reason Comair shows a "profit" is because all of the arrangements for regional lift, both wholly owned and not wholly owned, are what is called cost plus - As long as performance targets are hit, Comair will make cost plus 2% or 4% or 10% or whatever...as long as targets are hit, Comair (and any other regional) cannot lose money - they will always show a "profit" on their books. The difference is, Delta may not be able to cover the "cost +" with the revenue from the tickets. So Delta's goal is to find the CHEAPEST guy to do the flying.
If the deal is cost + 10%, for example, and it costs Comair $1000 to fly the flight, then Delta pays them $1100. If Delta can only make $900 on the tickets though, in the end Delta lost $200 operating the flight - but Comair will show a "profit" of $100. Net loss to the Delta Corporate familiy - $100 (Comair +100, Delta loss -200).
Now take the same scenario but lets assume it is Compass and they can fly the flight for $800. Delta will pay them the same cost + 10%, or $880 to fly the flight. If Delta collects the same $900 for tickets, then Delta makes $20 on the flight and Compass collects $80 of "profit". Net gain to the Delta Corporate family - $20 (Delta +$20)
There is nothing inaccurate about my facts - this is the way it works, so like any business owner Delta really does not care if it is done in house or outsourced, as long as it is profitable.
Does that make sense? That is why the real goal is to find whoever can do it the cheapest.