CINCINNATI, Oct. 13, 2005 (PRIMEZONE) -- 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.
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