Wednesday, December 10, 2003

Comair, supplier changed way we fly

By James Pilcher
The Cincinnati Enquirer

[IMAGE] The 1,000th Bombardier CRJ 700 - and 156th delivered to Comair - arrives in Northern Kentucky on Monday.
(Tony Jones photo)
DORVAL, Quebec - When Bombardier and Comair introduced the nation to the regional jet 10 years ago, the hope was to make 400 of the planes, with the Erlanger-based regional carrier taking about 40 of them.

Monday, however, the Montreal-based aircraft maker delivered its 1,000th regional jet, with the customer that started it all getting the honor of taking its 156th jet home.

"This is an airplane that people thought would not have a market and instead created a market," said Pierre Beaudoin, president and chief operating officer of Bombardier Aerospace. "Like the Douglas DC-3 and the Boeing 707, this has changed the way people fly."

The company's Canadair Regional Jet is now the eighth most successful airliner in industry history, and soon will pass the 707 and Boeing's 757. And all 1,000 CRJs are powered with some variant of Evendale-based GE Aircraft Engines' CF-34 model.

One of the main reasons for the success of the plane has been its ability to allow airlines better control over supply and demand and frequency with lower costs. In addition, it has allowed big airlines to keep a presence in smaller markets and feed hubs such as Delta's at the Cincinnati/Northern Kentucky International Airport. And those carriers can develop new routes at minimal risk.

But while the past 10 years have been overwhelmingly successful for both Bombardier and Comair, the future is murky.

Monday's delivery of the 70-seater was Comair's last of the year, even though it came with lights, a smoke machine and a Frank Sinatra impersonator singing "Come Fly With Me."

Next year, the wholly owned Delta subsidiary is expecting to receive only eight more jets, a far cry from years past.

And low-cost carriers such as JetBlue and Southwest have expressed interest in bigger regional jets that carry as many as 100 passengers, a development that one analyst says is good for the plane program but bad for airlines such as Comair.

"The larger RJs represent the future of the business," said Robert Ashcroft, regional airline analyst for UBS Investment Research. "In the hands of the low-cost airlines, the 100-seat regional jet represents a potential grave threat to the current 50-seat carriers in the latter part of this decade."

Also, Delta Connection, the branch of Delta that runs the airline's regional network, is asking its airlines to submit bids for more flying, a competitive process that is forcing Comair to ask its pilots and flight attendants for pay concessions. That's because Delta continues to lose money - more than $2 billion since the Sept. 11 terror attacks - and even though Comair is profitable based on its expenses versus what Delta pays the company to fly the planes.

The pilots have instead proposed that Comair merge with fellow Delta regional subsidiary Atlantic Southeast Airlines, a move requested Monday, a week before the bids for the new flying are due.

Fred Buttrell, Delta Connection's president and chief executive officer, would not comment specifically on the pilots' proposal, saying that "Delta will award the flying to the airline with the most quality and the most cost-effectiveness."

Buttrell also said that while Comair and ASA "have had a great ride," future regional jet growth will be slower, perhaps through consolidation of the industry as well as alliances and partnerships. That's compared with the old way when airlines such as Comair ordered batches of planes at a time.

From the manufacturing side, Bombardier has struggled financially despite the success of the regional jet, recently selling off its military and recreational vehicle divisions to raise cash.

But Beaudoin says that is just an economic cycle playing itself out, and that the industry will rebound.

Bombardier has 2,600 jets on order, including 300 firm orders. Each 70-seater lists for about $30 million, with 50-seaters going for about $25 million.

"Airlines are still going to need regional jets to feed their hubs and fly increasingly point to point," he said. "Obviously there are some challenges, but it will come back around."


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