Mainline buying regionals
12-06-2014 | 08:50 AM
#31
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From: window seat
ALPA could have, and should have, insisted on mergers with ASA and Comair, but they chose otherwise. That decision was the first in a long line of bad ones by all parties involved, and is in many ways one of the reasons the race for the bottom continues. Imagine how different things might have been had the idea of true brand scope been embraced in 1999-2000, versus where we are today.
And now you know...the rest of the story.
And now you know...the rest of the story.
ALPA did make a push for merger…CMR/ASA-ALPA that is. They drastically overplayed their hand, and forced DL-ALPA to maneuver to stop the land grab. Yeah they thought they successfully deflected reality by acting like a judicial activist wanna be during confirmation hearings with hollow platitudes, non answers and scripted talking points about the sancity of "the process" then pleading the fifth when caught and then hoping no one can do anything about it because they have the votes. But the whole thing was a massive land grab attempt and everyone, on all sides, openly knew it.
And there must have been a very good reason why the CMR BOD jumped at the 30% premium despite all those lofty scenarios of potential global domination of "could have bought Spirit" or "almost bought TWA for the reservations system" etc. If there really was a long term likelyhood of anything remotely close to the size and scope (pun) of any of that succeeding, their BOD would laughed at a quick 30% return if they were really sitting on a long term gold mine like many (excluding them, apparently) thought they were.
CMR was a semi-innovative and very well run regional and I was sad to see it go, but things change in the industry when you reach critical mass like that. They could have stayed around if they played their cards differently, but it is what it is. Plenty of smaller airlines get delusions of grandeur falsely interpolating growth rates and lofty ambitions infinitely into the future. Just look at the hyperbole of today's LCC's. Many think they will all morph into unchallenged domestic powerhouses "just like Ryan Air, weeeeeee!' and of course, all the regionals with "large RJ's" on order.
Same Napoleons, different day.
12-06-2014 | 05:14 PM
#33
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From: window seat
In terms of seat miles, its falling. In terms of flights its plummeting.
The key is seeing if we can keep up or even accelerate the progress.
12-06-2014 | 06:00 PM
#34
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One final thought, maybe if mainline management knows they cannot take advantage of regionals like the have in the past and ALPA National would ensure agreements are honored then more flying might return to mainline or return sooner rather then later. Think about it.
12-06-2014 | 07:59 PM
#35
Da Hudge
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From: Poodle Whisperer
Agreed! For what its worth all flying should be at mainline and never should have left. But also if any mainline buys anymore regionals the trend needs to be improved as well. If mainline cannot accept staple after a buyout neither should regionals be presented with a take it or else contract. ALPA National should pay more attention to prevent what has happened in the past to regionals during a mainline buyout.
One final thought, maybe if mainline management knows they cannot take advantage of regionals like the have in the past and ALPA National would ensure agreements are honored then more flying might return to mainline or return sooner rather then later. Think about it.
One final thought, maybe if mainline management knows they cannot take advantage of regionals like the have in the past and ALPA National would ensure agreements are honored then more flying might return to mainline or return sooner rather then later. Think about it.
12-07-2014 | 08:20 AM
#36
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From: window seat
The big prize was taking the runway, reaching V1 and going for it. At that point it wouldn't matter what they'd get, as they felt at that point a staple was the absolute floor, DOH the ceiling, and they would likely get something in between. IOW why agree to a staple, even if you would accept one, if you thought you could get more from an arbitrator?
I bet someone still has the PID meeting (pre-RJDC movement by the same top brass) handout laying around somewhere that has a Q&A section. I'm slightly paraphrasing (its VERY close though):
Q: What if ALPA says no.
A: ALPA can't say no.
Q: So then what will the merger look like? DOH, relative, staple, etc?
A: While no one can be certain what an arbitrator will do, typically in a merger a staple is the floor and DOH is the maximum and often they settle for something in between.
While some senior ASA/CMR guys were definately salivating and doing some mental fantasy bidding scenarios over DOH, the guys turning the wheels knew it was possible but unlikely. Their real goal was to just get to arbitration. They would have accepted a staple with protections, but they absolutely had to attempt to "go for it" first. That's what completely poisioned the well. In their arrogance and greed they drastically overplayed their hand.
12-07-2014 | 01:17 PM
#37
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From: 737 FO
It was more than a DOH land grab though. While they certainlly would have tried for that, most knew, including the RJDC architects, that they wouldn't likely get it.
The big prize was taking the runway, reaching V1 and going for it. At that point it wouldn't matter what they'd get, as they felt at that point a staple was the absolute floor, DOH the ceiling, and they would likely get something in between. IOW why agree to a staple, even if you would accept one, if you thought you could get more from an arbitrator?
I bet someone still has the PID meeting (pre-RJDC movement by the same top brass) handout laying around somewhere that has a Q&A section. I'm slightly paraphrasing (its VERY close though):
Q: What if ALPA says no.
A: ALPA can't say no.
Q: So then what will the merger look like? DOH, relative, staple, etc?
A: While no one can be certain what an arbitrator will do, typically in a merger a staple is the floor and DOH is the maximum and often they settle for something in between.
While some senior ASA/CMR guys were definately salivating and doing some mental fantasy bidding scenarios over DOH, the guys turning the wheels knew it was possible but unlikely. Their real goal was to just get to arbitration. They would have accepted a staple with protections, but they absolutely had to attempt to "go for it" first. That's what completely poisioned the well. In their arrogance and greed they drastically overplayed their hand.
The big prize was taking the runway, reaching V1 and going for it. At that point it wouldn't matter what they'd get, as they felt at that point a staple was the absolute floor, DOH the ceiling, and they would likely get something in between. IOW why agree to a staple, even if you would accept one, if you thought you could get more from an arbitrator?
I bet someone still has the PID meeting (pre-RJDC movement by the same top brass) handout laying around somewhere that has a Q&A section. I'm slightly paraphrasing (its VERY close though):
Q: What if ALPA says no.
A: ALPA can't say no.
Q: So then what will the merger look like? DOH, relative, staple, etc?
A: While no one can be certain what an arbitrator will do, typically in a merger a staple is the floor and DOH is the maximum and often they settle for something in between.
While some senior ASA/CMR guys were definately salivating and doing some mental fantasy bidding scenarios over DOH, the guys turning the wheels knew it was possible but unlikely. Their real goal was to just get to arbitration. They would have accepted a staple with protections, but they absolutely had to attempt to "go for it" first. That's what completely poisioned the well. In their arrogance and greed they drastically overplayed their hand.
Make no mistake: ALPA did NOT want a merger of any regional list into mainline. They fought the very concept kicking and screaming, and this was the genesis of the RJDC, which is still something that most pilots--and almost all Delta pilots--don't understand. This was a DFR issue, plain and simple, and ALPA got very creative in their arguments against it.
Just for the record, it happened to be Comair and ASA because they were the first large RJ operators to be purchased by a company with the same union on property. Had it been USAir buying Mesa or United buying ACA, chances are it would have all played out the same way.
Had this issue been properly addressed in the early 2000's, the landscape would be drastically different: pay across the board would be higher, RJ's would still exist, but mainline pilots would be flying them, there would have been a faster reduction of the 50 seat fleet, and there would be far more E-170/190 variants flying.
12-07-2014 | 01:39 PM
#38
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As someone that was around in that timeframe, just like you, a BETTER way to say it would have been;
"Had the issue been properly addressed in the early/mid 1990's"
As in, get the "tiny jets" that mainline was too good fly on mainline property. As opposed to what happened .
Then, your following statement would apply;
"Had the issue been properly addressed in the early/mid 1990's"
As in, get the "tiny jets" that mainline was too good fly on mainline property. As opposed to what happened .
Then, your following statement would apply;
the landscape would be drastically different: pay across the board would be higher, RJ's would still exist, but mainline pilots would be flying them, there would have been a faster reduction of the 50 seat fleet, and there would be far more E-170/190 variants flying.
12-07-2014 | 01:58 PM
#40
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Joined: Feb 2008
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Actually, this isn't quite true. I was at Comair when we were bought, so I will indulge you in a little history here. Prior to capacity purchase agreements wherein the mainline buys all the seats on all the jets at a regional, there were true codeshare agreements. When I got hired at Comair in 1996, the company had its own marketing department, its own ticketing, reservation, sales, ground personnel, accounting, etc. In fact, its marketing and PR departments were the envy of the industry--we used to run 1/4 page to 1/2 page ads in the USA Today several times a week.
The arrangement at the time was that Comair owned the planes and the seats. Both Delta and Comair could book and sell said seats, and Comair got 35% of the revenue from all of Delta's sales, and 100% of their own. This was not an atypical arrangement, and it worked well. It allowed DL to make money in Florida, and the RJ allowed new markets to be developed. Often, Comair and ASA would start them up, and mainline would take over.
Everything changed with the RJ. All of a sudden, Comair became the most profitable airline in the world in terms of the profit margin. In fact, in the summer of '96, they announced plans to buy Spirit; the deal only fell apart because of the ValuJet crash and concerns about LCC's and the DC-9.
The current capacity purchase agreements and fee for departure arrangements began to become prevalent in the late 90's as regionals began buying jets. They needed the FFD's to fund the transition.
Delta bought ASA because ASA management was so cheap (miserly) and the company so poorly run that it was hampering the DL image in ATL, which helped grow AirTran. They bought Comair because the 10 year code sharing agreement had expired, and the two companies could not agree on how to operate going forward. Comair wanted to continue on the same arrangement so that they could market their own flights and possibly get bigger planes.
Delta wanted to fix its costs and have more ability to move the planes to right-size markets.
At stake was Cincinnati, which at the time was Delta's second largest hub, and there was a big gap between CVG and whoever was number 3. Delta could not afford to lose CVG, and they knew that if Comair branched out on its own, Comair could take over CVG--and probably would have. Comair was the local airline, and there was a lot of local loyalty to it. Comair, on the other hand, knew that a battle with Delta would be costly and set it back years on its growth plans.
Delta had another concern: Comair actually had the cash to buy any other regional it wanted to, and was seriously considering a move on SkyWest. Further, Comair had the cash to buy...Delta.
They agreed to let the stock do its annual 2-for-3 split, the price dropped from $40 or so a share to $12 or so, and Delta came in and offered $17, a 30% premium. The rest, as they say, is history.
ALPA could have, and should have, insisted on mergers with ASA and Comair, but they chose otherwise. That decision was the first in a long line of bad ones by all parties involved, and is in many ways one of the reasons the race for the bottom continues. Imagine how different things might have been had the idea of true brand scope been embraced in 1999-2000, versus where we are today.
And now you know...the rest of the story.
The arrangement at the time was that Comair owned the planes and the seats. Both Delta and Comair could book and sell said seats, and Comair got 35% of the revenue from all of Delta's sales, and 100% of their own. This was not an atypical arrangement, and it worked well. It allowed DL to make money in Florida, and the RJ allowed new markets to be developed. Often, Comair and ASA would start them up, and mainline would take over.
Everything changed with the RJ. All of a sudden, Comair became the most profitable airline in the world in terms of the profit margin. In fact, in the summer of '96, they announced plans to buy Spirit; the deal only fell apart because of the ValuJet crash and concerns about LCC's and the DC-9.
The current capacity purchase agreements and fee for departure arrangements began to become prevalent in the late 90's as regionals began buying jets. They needed the FFD's to fund the transition.
Delta bought ASA because ASA management was so cheap (miserly) and the company so poorly run that it was hampering the DL image in ATL, which helped grow AirTran. They bought Comair because the 10 year code sharing agreement had expired, and the two companies could not agree on how to operate going forward. Comair wanted to continue on the same arrangement so that they could market their own flights and possibly get bigger planes.
Delta wanted to fix its costs and have more ability to move the planes to right-size markets.
At stake was Cincinnati, which at the time was Delta's second largest hub, and there was a big gap between CVG and whoever was number 3. Delta could not afford to lose CVG, and they knew that if Comair branched out on its own, Comair could take over CVG--and probably would have. Comair was the local airline, and there was a lot of local loyalty to it. Comair, on the other hand, knew that a battle with Delta would be costly and set it back years on its growth plans.
Delta had another concern: Comair actually had the cash to buy any other regional it wanted to, and was seriously considering a move on SkyWest. Further, Comair had the cash to buy...Delta.
They agreed to let the stock do its annual 2-for-3 split, the price dropped from $40 or so a share to $12 or so, and Delta came in and offered $17, a 30% premium. The rest, as they say, is history.
ALPA could have, and should have, insisted on mergers with ASA and Comair, but they chose otherwise. That decision was the first in a long line of bad ones by all parties involved, and is in many ways one of the reasons the race for the bottom continues. Imagine how different things might have been had the idea of true brand scope been embraced in 1999-2000, versus where we are today.
And now you know...the rest of the story.
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