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COMAIR Regional Airlines - Case Study Example

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COMAIR Regional Airlines

The regional airline COMAIR, a subsidiary of Delta Air Lines, which serves routes in the United States, Canada and Europe is poised to become very competitive and profitable in 2010. COMAIR currently has 5,800 dedicated aviation professionals and services 511 daily flights to about 77 international and domestic destinations. The COMAIR is the preferred airline of choice by most business travellers and frequent travellers as it offers affordable airfares. COMAIR has gone from strength to strength by rapidly rolling out international routes and additional services for the customers.
Another important cost factor for regional airlines is the national and local taxes imposed by the US government. Most countries treat airlines like cash cows by levying national prerogatives and taxes on them that results in higher costs of doing business.
Another positive trend is that inspite of the US recession, the regional airlines do offer the safest form of transportation. Although US airlines carry 3.5 million passengers annually, the accident rate is very low compared to the accident rates of motor vehicles and maritime vessels.
Another interesting and positive development is that air travel has improved its safety record over time. New US airline jets have more safeguards and safety measures which help minimize untoward accidents on air and on the ground.
Among the interesting market players in the US airlines industry is COMAIR. For instance, COMAIR has been effective in four general areas of operations: 1) winning customers; 2) maintaining its fleet in excellent condition; 3) close relations with its pool of human resources, 4) keeping its finances viable. In general, COMAIR's is able to grow its equity over time (McCabe, 1998)
COMAIR has increased international capacity by 15 percent in 2008 to address increasing demand. (International Herald Tribune, June 4, 2008) The company has consistently upgraded its fleet on a yearly basis. As regards its salary expenses, Comair's flight attendants have approved a US$7.9 million dollars in wage cuts intended to help the company recover from its financial difficulties.
Fourth, COMAIR has been able to manage its finances well. The company has managed to keep unit revenues up and unit costs down. The airlines fly all their available seats, hence, the company managers try to increase their unit revenues on a quarterly basis. The COMAIR managers understand that most of the airline's costs are fixed. Approximately ten percent of costs go to services such as airport fees and air navigation services fees. Labor costs take up an average of 38 percent in the United States. Hence, the COMAIR managers have focused on decreasing the unit cost to bring down operations cost.
In addition, the managers continue to manage near-term liquidity pressures. Cash collateral posting requirements had a material impact on its unrestricted cash positions since 2008. Delta Air Lines, stated on Dec. 2, 2008 that its projected cash collateral posting requirement at Dec. 31, 2008 would be approximately US $1.1 billion dollars.
In response to the situation of the parent company, COMAIR is focused on improvements in free cash flow as the key to liquidity preservation. In addition, the company has scaled-back aircraft financing commitments and has ...Show more


In terms of the overall industry outlook for US airlines, Fitch Ratings stated that the magnitude of the anticipated decline in jet fuel costs for 2009 will help U.S. carriers in manage liquidity. However, persistent problems such as the expected softening in traffic, the evolving yield and unit revenue patterns limits opportunities for credit quality and ratings improvement…
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COMAIR Regional Airlines essay example
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