Comair to Reduce Operational and Employment Costs In Support of Delta Air Lines’ Transformation Plan
Plan to achieve competitive costs necessary part of Chapter 11 restructuring
CINCINNATI, Oct. 13, 2005 – Delta Air Lines’ regional airline subsidiary Comair today announced plans to reduce costs by up to $70 million annually as the company makes changes to its business in support of Delta’s ongoing transformation. The plan combines savings to be achieved through the Chapter 11 process with changes to Comair’s fleet, network and employment costs to align the company’s cost structure with the reduced revenues that will be realized in a restructured environment.
“Delta’s efforts to achieve an additional $3 billion in annual financial benefits by 2007 include amending Comair’s Delta Connection agreement to reduce the amount of compensation provided for regional airline feed,” said Fred Buttrell, Comair president. “As a result, Comair must adjust its costs to match the cost pressures of a restructured airline industry and to create a commercial solution that will ensure Comair emerges from the restructuring process ready to compete and thrive for the long term.”
Reducing fleet ownership and supplier costs
Comair will use benefits available through the Chapter 11 process to eliminate non-competitive aircraft leases and mortgages to reduce ownership costs and allow the airline to have a more competitive platform. As part of this, Delta plans to remove up to 30 aircraft from Comair’s schedule, with 11 aircraft leaving the schedule by December. The initial reductions are associated with Delta’s recently announced right-sizing of the Cincinnati hub and predominantly affect 50-seat aircraft, although long-term cost reduction initiatives are targeted for 40- and 70-seat aircraft. Even with these changes, all destinations in the Delta network will continue to be served by Delta or the Delta Connection carriers with the December schedule.
In addition to fleet costs, Comair also will continue to improve supply chain practices and streamline other processes to lower what it pays for goods and services. This includes seeking more favorable terms for equipment, supplies, facilities and non-employee overhead costs.
Adjusting employment costs to be competitive in the regional industry
As a result of a smaller operation and fleet, Comair will reduce up to 1,000 positions throughout the company, including the reduction of approximately 350 positions recently announced as part of the right-sizing of service to and from Cincinnati.
At the same time, Comair will adjust compensation and benefits to be more competitive with other regional airlines. Specifically, Comair plans to implement across-the-board pay reductions for officers and directors in the first pay period of November and for non-union employees during the first pay period in December. These reductions, which are designed to achieve at least $5.2 million in annual savings, include:
President – 15% reduction (for 25% total in 2005)
Officers – 10% reduction (for 20% total in 2005 on top of a pay freeze over the last five years)
Directors – 9%, (in addition to a pay freeze over the last five years)
Supervisory/Administrative – 7% for salaried; 4% for hourly (in addition to the pay freeze in two of the last three years)
Customer Service agents – 4% and a revised pay scale structure
Comair also is scheduled to begin discussions with union representatives for pilots, flight attendants and mechanics to reduce the employment costs of these groups by $17.3 million, $8.9 million and $1 million, respectively. As part of working agreement amendments signed earlier this year, pilots are under a pay freeze that was effective in June, and a new-hire scale is in effect for flight attendants.
“We are extremely sensitive to the impact these changes have on our employees, but this is a Comair solution to a very tough problem that threatens the future of our company,” Buttrell said. “We are looking at ways to minimize this impact on our people and to help ease this transition. Our goal is to handle as much of the transition as possible through voluntary means.
“These changes, while difficult, are necessary in the current industry environment and are required if we are to emerge from our restructuring ready to compete and win,” he continued.
As a result of its restructuring, Comair plans to emerge from the Chapter 11 process positioned to compete for more 70-seat flying and to reduce its dependence on flying in the 50-seat market.
“We believe that 70-seat flying and, potentially, larger gauge equipment will be in higher demand as the industry continues to restructure,” Buttrell said. “During and after restructuring, Comair’s ability to succeed will center on our ability to deliver customer service excellence and to build a cost-competitive platform that makes Comair competitive on all fleet types.”
Based at Cincinnati/Northern Kentucky International Airport, Comair has been a Delta Connection carrier since 1984. The airline operates 1,155 flights a day to 110 destinations in the United States, Canada and the Bahamas.
Statements in this news release that are not historical facts, including statements regarding our estimates, expectations, beliefs, intentions, projections or strategies for the future, may be “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the estimates, expectations, beliefs, intentions, projections and strategies reflected in or suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to, the actions and decisions of our creditors and other third parties with interests in our Chapter 11 proceedings; our ability to obtain and maintain any necessary financing for operations and other purposes, whether debtor-in-possession financing or other financing; our ability to continue as a going concern; our ability to obtain court approval with respect to motions in the Chapter 11 proceedings prosecuted from time to time; our ability to develop, prosecute, confirm and consummate one or more Plans of Reorganization with respect to the Chapter 11 proceedings and to consummate all of the transactions contemplated by one or more such Plans of Reorganization or upon which consummation of such plans may be conditioned; risks associated with third parties seeking and obtaining court approval to terminate or shorten the exclusivity period for Delta to propose and confirm one or more Plans of Reorganization, to appoint a Chapter 11 trustee or to convert the cases to Chapter 7 cases; our ability to obtain and maintain normal terms with vendors and service providers; our ability to maintain contracts that are critical to our operations; the potential adverse impact of the Chapter 11 proceedings on our liquidity or results of operations; our ability to maintain adequate liquidity to fund and execute our business plan during the Chapter 11 proceedings and in the context of a Plan of Reorganization and thereafter; the effect of a significant reserve or holdback under our credit card processing agreements; our ability to comply with financial covenants in our financing agreements; our debt and pension plan funding obligations; the cost of aircraft fuel; pilot early retirements; interruptions or disruptions in service at one of our hub airports; our increasing dependence on technology in our operations; labor issues; restructurings by competitors; the effects of terrorist attacks; and competitive conditions in the airline industry. Additional information concerning risks and uncertainties that could cause differences between actual results and forward-looking statements is contained in Delta’s Securities and Exchange Commission filings, including its Form 10-Q, filed with the Commission on August 15, 2005. The risks and uncertainties and the terms of any reorganization plan ultimately confirmed can affect the value of our various pre-petition liabilities, common stock and/or other securities. No assurance can be given as to what values, if any, will be ascribed in the bankruptcy proceedings to each of these constituencies. A plan of reorganization could result in holders of our liabilities and/or securities receiving no value for their interests. Because of such possibilities, the value of these liabilities and/or securities is highly speculative. Accordingly, we urge that caution be exercised with respect to existing and future investments in any of these liabilities and/or securities. Caution should be taken not to place undue reliance on Delta’s forward-looking statements, which represent Delta’s views only as of October 13, 2005, and which Delta has no current intention to update.
- Contact Information
- Chris Kelly
- Senior Manager - Media Relations
- Delta Air Lines
- Contact via E-mail
This news content was configured by WebWire editorial staff. Linking is permitted.
News Release Distribution and Press Release Distribution Services Provided by WebWire.