Delta Air Lines Shuts Down Comair due to Costs

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Delta Air Lines Shuts Down Comair due to Costs

Delta Air Lines, Inc. (NYSE:DAL) announced Friday that it will cease the operations of Comair, its 35-year old regional carrier by the end of September due to higher maintenance costs.

According to Delta Air Lines, Inc. (NYSE:DAL), due to higher fuel prices these days, it is more expensive to operate the smaller regional planes. Its maintenance is also more expensive because the carriers are older. During the past seven years, Comair’s fleet, flights and workforce was reduced.

Don Bornhorst, senior vice president of Delta Connection and former president of Comair, said the primary cause for the shutdown is costs. According to him, there is no problem with Comair’s quality. He said the airline is good, very innovative, and the employees are great. The main problem is costs. The company tried to restructure its costs, but its target cost structure was not feasible. Bornhosrt said,  “We just really couldn’t get the cost structure to where we wanted to get it. It ultimately was a cost issue…We just could not solve the cost issues.”

According to Bornhorst, Delta Air Lines issued 60-day termination notices to Comair employees. It will retain a small group of employees after the September 29. The group will be responsible in handling the closure details of the airline.

Originally, Comair has 1,160 flights and 7,000 employees. In 2005, the airline entered bankruptcy protection. Delta and Comair exited from the bankruptcy and reorganized. Comair has 1,700 remaining employees located in Cincinnati and Northern Kentucky. Its operation was reduced to 290 flights a day.

According to Delta Air Lines, it has 50 remaining Comair 50-seaters. It will stop flying 16 of the planes while the remaining 28 planes will be leased to other airline operators. Comair’s flights only account for 1 percent of Delta Air Lines’ network. Its shutdown will not affect the entire operation of Delta Airlines.

In 2008, Delta Air Line had approximately 500 regional planes with 50-seat capacity, and its plan is to reduce it to 125. The majority of its flights will be taken over by its 76-seater jets, and by the Boeing 717 jets with 117-seat capacity. Delta Airlines is leasing the 117-seater jets from South West Airlines (NYSE:LUV).

According to Mike Boyd, aviation analyst from Boyd Group, Delta’s decision to shutdown Comair is a wise decision. According to him, the regional airline business is no longer profitable. He said, “It’s not going to turn around. Delta is quite correctly saying ‘We’ve got to get rid of these uneconomic airlines.’ “

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In 2010, Delta Air Lines, Inc. (NYSE:DAL) sold its Compass and Mesaba regional airplanes. The company tried to sell Comair to prospective buyers, but its attempt was unsuccessful. Shares of Delta Airlines slid down to $9.33 per share during Friday midday trading.

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