ASA sale doesnt put Comair in clear
08-17-2005, 12:02 AM
#1
Fun Officer
Thread Starter
Joined APC: Feb 2005
Position: Dallas, Texas
Posts: 515
ASA sale doesnt put Comair in clear
Tuesday, August 16, 2005
ASA sale doesn't put Comair in the clear
Analysis
By James Pilcher
Enquirer staff writer
Monday's news of Delta Air Lines' sale of its Atlanta-based regional subsidiary Atlantic Southeast Airlines rattled the airline industry, even though Delta officials said last December that they would be willing to part with it, sister regional carrier Comair, or both.
Yet analysts said there would be few ripples from Monday's deal - specifically, either the sale of Erlanger-based Comair or changes at Delta's hub at the Cincinnati/Northern Kentucky International Airport.
"If they close the hub, they're doomed," said Michael Boyd, president of the Denver-area based aviation consulting firm The Boyd Group. "They need Cincinnati to balance their route system.
"And as for Comair, Delta probably would love to sell it, but I'd be surprised if someone would buy it" because of its operating costs, Boyd said.
Experts say that the overall health of the hub will rely on whether parent Delta remains out of Chapter 11 bankruptcy. That's still unknown, given Delta's weakened financial state even after the infusion of $425 million in cash from Atlantic Southeast's sale to St. George, Utah-based SkyWest.
"This is probably only one part of a series of things they're going to do, and they still have a lot of work to do to stay out," said Ray Neidl, an airline industry analyst at Calyon Securities in New York City.
Delta operates its second-largest hub locally, where it combines with Comair to employ about 8,000.
Since December, when Delta chief executive officer Gerald Grinstein said publicly that the company would be willing to part with its subsidiaries, industry speculation has swirled around a possible sale of one or both of its regional subsidiaries. Delta bought Comair for $2.3 billion in early 2000; it bought ASA for $1 billion in 1999.
This spring, a SkyWest official was quoted as saying the company was in talks with Delta about buying both Delta's regional subsidiaries.
Neither SkyWest nor Delta officials would comment Monday when asked if talks were continuing about a possible Comair sale.
Comair officials also would not comment, referring questions to Delta.
Neidl agreed with Boyd that Delta probably is still interested in selling Comair, but that it was easier to sell ASA.
Comair "is a more expensive airline to operate and ASA had more value since it operates in the main port in Atlanta, which is more important to Delta than Cincinnati," he said. "That isn't to say that they couldn't sell Comair."
Both Boyd and Neidl pointed out that Comair's costs remain among the highest in the regional industry - even though its pilots agreed earlier this year to a four-year pay freeze, and its flight attendants agreed to a lower pay scale for new workers.
As for the potential impacts on the local hub, Delta said that ASA would operate as normally as a SkyWest subsidiary - including the 70 daily flights it operates here.
Local airport executive director Robert Holscher would not comment on the sale or on any potential threat to the Cincinnati hub.
But Neidl agreed that Delta would probably close its hub in Salt Lake City before closing the local one, since it's larger and more valuable. "Cincinnati is a critical part of Delta's system," Boyd said. "Salt Lake is not."
ASA sale doesn't put Comair in the clear
Analysis
By James Pilcher
Enquirer staff writer
Monday's news of Delta Air Lines' sale of its Atlanta-based regional subsidiary Atlantic Southeast Airlines rattled the airline industry, even though Delta officials said last December that they would be willing to part with it, sister regional carrier Comair, or both.
Yet analysts said there would be few ripples from Monday's deal - specifically, either the sale of Erlanger-based Comair or changes at Delta's hub at the Cincinnati/Northern Kentucky International Airport.
"If they close the hub, they're doomed," said Michael Boyd, president of the Denver-area based aviation consulting firm The Boyd Group. "They need Cincinnati to balance their route system.
"And as for Comair, Delta probably would love to sell it, but I'd be surprised if someone would buy it" because of its operating costs, Boyd said.
Experts say that the overall health of the hub will rely on whether parent Delta remains out of Chapter 11 bankruptcy. That's still unknown, given Delta's weakened financial state even after the infusion of $425 million in cash from Atlantic Southeast's sale to St. George, Utah-based SkyWest.
"This is probably only one part of a series of things they're going to do, and they still have a lot of work to do to stay out," said Ray Neidl, an airline industry analyst at Calyon Securities in New York City.
Delta operates its second-largest hub locally, where it combines with Comair to employ about 8,000.
Since December, when Delta chief executive officer Gerald Grinstein said publicly that the company would be willing to part with its subsidiaries, industry speculation has swirled around a possible sale of one or both of its regional subsidiaries. Delta bought Comair for $2.3 billion in early 2000; it bought ASA for $1 billion in 1999.
This spring, a SkyWest official was quoted as saying the company was in talks with Delta about buying both Delta's regional subsidiaries.
Neither SkyWest nor Delta officials would comment Monday when asked if talks were continuing about a possible Comair sale.
Comair officials also would not comment, referring questions to Delta.
Neidl agreed with Boyd that Delta probably is still interested in selling Comair, but that it was easier to sell ASA.
Comair "is a more expensive airline to operate and ASA had more value since it operates in the main port in Atlanta, which is more important to Delta than Cincinnati," he said. "That isn't to say that they couldn't sell Comair."
Both Boyd and Neidl pointed out that Comair's costs remain among the highest in the regional industry - even though its pilots agreed earlier this year to a four-year pay freeze, and its flight attendants agreed to a lower pay scale for new workers.
As for the potential impacts on the local hub, Delta said that ASA would operate as normally as a SkyWest subsidiary - including the 70 daily flights it operates here.
Local airport executive director Robert Holscher would not comment on the sale or on any potential threat to the Cincinnati hub.
But Neidl agreed that Delta would probably close its hub in Salt Lake City before closing the local one, since it's larger and more valuable. "Cincinnati is a critical part of Delta's system," Boyd said. "Salt Lake is not."
Thread
Thread Starter
Forum
Replies
Last Post
