On Friday, Delta announced that it would shut down its regional subsidiary Comair. This has been expected for some time so the announcement wasn’t exactly breaking news. What was more interesting was how carefully Delta crafted its press release on this matter.
Just because it wasn’t a surprise doesn’t mean it’s not sad to see Comair go away. The airline was one of the earliest Delta Connection carriers and has been affiliated with Delta for almost three decades. The airline’s heyday was in the early 1990s. It was the first US airline to begin the RJ revolution when it started flying the 50 seat CRJ in 1993. The next year, it opened a state of the art regional concourse at its home-base in Cincinnati. Things were going very well. In fact, the airline had done so well in the 1990s that Delta purchased it in 2000 for over $2 billion.
But things went downhill quickly. The airline suffered through a nasty pilot strike in 2001 that shut it down. It was then that airlines realized diversifying operations across multiple carriers in a hub was so important to keep things moving. The strike was over low pay, but there’s a problem with that. When the airline isn’t a brand at all (read: any regional airline), the branded partner can just replace it with lower wage options. And that’s why Comair with more than 100 jets flying became Comair with a plan for fewer than 30 until the shutdown happened.
Comair’s costs were too high compared to other regional partners and that doomed the airline. As an Oliver Wyman report noted using 2010 numbers, the gap was huge. Comair could fly a CRJ-700 for 11.3 cents per available seat mile (ASM). ASA could do it for 6.8 cents on a similar average stage length.
Comair had already lost all of its 50 seat jet flying and was holding on to 28 airplanes with 70 to 76 seats. Having so few airplanes meant that costs would go even higher. The end was clearly coming. The recent Delta pilot contract sealed the deal. With Delta needing to drop more than 200 of the 50-seaters, the airline has a problem. It has to find a way to convince SkyWest to shed a lot of those 50-seaters despite there being a contract in place for them.
I have to assume that Comair’s 28 bigger jets can be dangled in front of SkyWest as a carrot for playing nice on the 50-seaters. Delta also needs to get Pinnacle to reduce the number of 50-seaters but since that airline is in bankruptcy and receiving financing from Delta directly, it will be easier to fix (or possibly just kill as well). With all this happening, there just wasn’t a place for Comair.
The Future of the Hub
But with the airline so closely tied to Cincinnati, there was a lot of concern that this shutdown also meant further cuts for Cincinnati. Delta was very careful to say that’s not the case. Sort of. The airline said “No reductions in the number of Delta flights are planned at Cincinnati as a result of this decision.” Note those last six words.
It’s very true that the decision to shut down Comair won’t impact Cincinnati. But the new pilot contract which greatly reduces the number of 50-seaters will hurt Cincinnati. I look at a market like Cincinnati to Greenville/Spartanburg. There’s one flight a day on a CRJ right now. The chance of that going to a bigger airplane is not good. And the chance that Delta will want to allocate one of its very few 50-seat jets to that route is also slim.
There will be changes in Cincinnati, but it won’t be because Comair shut down. It will be because the airline is remaking its fleet of sub-110 seat airplanes and will have to make some real changes in its network.
Delta does note that Cincinnati is currently profitable and will “continue to be an important market.” It doesn’t say anything about continuing to be a hub, but of course, it will remain an important market at the very least, but I do wonder what Cincinnati will look like in 2015 when the fleet transition is done.
What does get lost in all of this shuffling is that a lot of good people lost their jobs with Comair’s shutdown. May they all find new work soon.
