Delta’s financial woes may force AirElite sale

 - September 26, 2006, 11:06 AM

Delta AirElite, the Cincinnati-based executive charter and management company that is a wholly owned subsidiary of Delta Air Lines, had a record year, according to president and CEO Michael Green, but faces the prospect of being sold by the airline. The parent company has been operating under Chapter 11 bankruptcy protection since September 14 and has reportedly lost $11 billion over the last four years.

Although he would not disclose financial figures, Green said Delta AirElite’s revenue flight hours increased 38 percent last year and 160 percent over the last three years. He attributed much of the growth to the company’s introduction of its Fleet Membership jet card program in February 2003. The charter operator, which was established in 1984 as Comair Jet Express and acquired by Delta when it bought Comair Holdings in January 2000, also increased its charter/management fleet to 19 jets (four of which it owns and two it leases from Bombardier), from 17 at the beginning of last year.

This good news for Delta AirElite is tempered by the fact that parent company Delta Air Lines is restructuring its business to get its costs in line as it operates under bankruptcy protection and might decide–or be forced–to divest itself of non-core subsidiaries, which include Delta AirElite. Before filing for bankruptcy, in fact, the airline had begun to sell off assets, such as feeder carrier Atlantic Southeast Airlines, which it sold to Skywest.

“The Comair Aviation Academy in Florida and Delta AirElite are on Delta’s strategic review list,” Green explained. “I think we will know Delta’s decision fairly quickly, probably within a few months.” He said he believes Delta AirElite will end up being sold, probably before year-end.

How a sale might affect Delta AirElite operations is unclear. Though its headquarters are in the same building as Comair at Cincinnati/Northern Kentucky International Airport, the executive charter subsidiary, which includes the only FBO on the airport, operates relatively autonomously within Delta.

Delta AirElite also benefits from its association with the airline. It enjoys cost savings from Delta’s buying power and the ability to position crews on Delta flights. It also profits from both Delta’s and Comair’s experience in maintenance, operations and human resources. Indeed, although Delta AirElite is audited by ARG/US and Wyvern, Green said the biennial audits by Delta are the hardest. On the marketing side, buyers of the company’s jet cards and charter services obtain Delta Medallion Miles.

Conversely, Delta AirElite must go to the parent for capital. With the airline losing money and now in bankruptcy, the charter operator’s ability to expand has been hindered.     

Whether or not Delta AirElite is sold, Green said he is optimistic about the charter operator’s future growth.