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Comair Holdings, Inc. Business Information, Profile, and History

P.O. Box 75021
Cincinnati, Ohio 45275

Company Perspectives:

Comair will be the leader in the regional airline industry. We will be the airline of choice for our customers, people and shareholders.

History of Comair Holdings, Inc.

Wholly owned by Delta Air Lines, Inc. since January 2000, Comair Holdings, Inc. is the parent firm of subsidiary Comair, Inc., a regional airline catering to business travelers from its hubs in Cincinnati and Orlando. These are also Delta hubs, so Comair is able to connect Delta passengers to its destinations: 89 cities in 32 states, Toronto and Montreal, Canada, and Nassau in the Bahamas. Comair also participates in the Delta frequent flyer program. Comair has about 100 aircraft in its fleet, 75 percent of which are regional jets; Comair is in the process of converting to an all-jet fleet. Comair Holdings also operates a flight training service, a charter service, and a small package delivery service.

Early Years

Comair was established in Cincinnati in April 1977 by the father and son team of Raymond and David Mueller. A couple of years earlier, David Mueller had been working as a corporate pilot for a Cincinnati bank, when he first observed the inadequacy of flight service in the area. He and his father decided to found a company that would provide higher frequency flights between cities lacking efficient, reliable air service. Raymond Mueller was the company's first president and David Mueller, aged 25, was the executive vice-president.

From their base at the Greater Cincinnati International Airport, David Mueller also served as pilot, reservationist, and baggage clerk at the fledgling company. With a fleet of three Piper-Navajo aircraft, the company's first scheduled flights offered transportation between Cincinnati, Cleveland, Detroit, and Akron-Canton, all within a 500-mile radius. As the company grew, larger nine-passenger Piper-Chieftain aircraft were added to the fleet.

The company had been in business for only two years when tragedy struck. In 1979 a Comair plane crashed at the Greater Cincinnati International Airport, killing eight people. The settlements and fines cost Comair approximately $500,000. Moreover, the company garnered considerable negative national publicity, as increasing numbers of Americans began to question the safety of the smaller planes used by regional airlines. In 1980 the company reported an earnings loss and faced what the younger Mueller would later refer to as 'the company's darkest moment.'

Describing the company's plans to overcome the setback, in a March 1984 interview in the Cincinnati Post, Mueller asserted that he and his father 'decided to bet the family jewels' on their ability to turn Comair around, noting that they eventually were just 'plain lucky.' Specifically, Comair focused on keeping costs low, increasing the frequency of flights to selected cities, and providing comfortable seating in planes carrying 50 or fewer travelers. The strategy paid off. Comair not only overcame the crash, but also secured a solid place among regional air carriers in the Midwest. The company also benefited from the deregulation of the airline industry in the early 1980s. As the major airlines dropped unprofitable routes in the face of intensified competition, Comair and other regional fliers were quick to fill the gap in service.

In 1981 Comair began a major enhancement program, adding more modern turboprop aircraft and doubling the size of its fleet with the addition of ten Brazilian-made Embraer Bandeirante twin-engine airplanes. The following year, Comair added SB3-30s to its fleet; with a capacity of 30 passengers, these were the first Comair aircraft to feature flight attendants, lavatories, and in-flight food and beverage service. With plans for a $1 million expansion of its home base, Comair was taken public in 1981, trading on the NASDAQ National Market System for the first time in July of that year. The IPO raised $5.5 million.

With continued investments in new aircraft, Comair was able to increase the frequency of its flights. While most regional airlines were focusing on hooking up passengers with major airline flights, 70 percent of Comair's passengers (the vast majority of which were businesspeople) were reaching their final destination on Comair. Although this meant that the smaller Comair was competing directly with industry giants, Comair had the advantage of offering more frequent flights.

Middle to Late 1980s: Broadening Customer Base Through Delta Connection

Nevertheless, Comair recognized the value of linking its service to that of the major airlines and in December 1981 began its relationship with Delta Air Lines, becoming part of the Deltamatic computerized reservation system. Within three years, Delta and Comair had entered into a marketing agreement under which Comair became an official Delta Connection carrier. Comair's Cincinnati departures were thereafter coordinated to help customers catch Delta flights at other airports in 15 cities located in seven states. With the expansion of Delta Air Lines' Cincinnati operations and the growth of the Greater Cincinnati area, the two companies oversaw more than 100 daily departures from the Cincinnati Airport in 1984.

Comair's fleet at this time consisted of approximately 21 jet-prop aircraft, having been augmented by the September 1984 addition of a Saab-Fairchild 340 airliner, the first airplane designed specifically for regional service. Designed through a joint venture between manufacturers Fairchild Industries and Saab-Scania AB, this craft could travel at faster speeds and offered increased passenger comfort, and Comair soon ordered 12 more of the same model. Such growth prompted the company to expand its facilities at the Cincinnati Airport with the construction of a $1.8 million corporate office building as well as a new hangar.

Remarking on the success of Comair's relationship with Delta in a December 1984 Cincinnati Enquirer article, Charles Curran, Comair's senior vice-president for marketing, noted that since becoming the Delta Connection, Comair had tripled its business. The following year found Comair reporting considerable increases in all areas used by the industry to measure an airline's vitality.

Indeed, in a 12-month period beginning in August 1984, the company increased the number of passengers it flew from the Cincinnati Airport by 200 percent, making Comair the airport's busiest airline, with more daily departures (93) than any other airline. Moreover, the company ranked second only to Delta at the airport for the number of passengers carried. During this time, the company served 23 markets from Cincinnati and flew as far north as Toronto, as far east as Richmond, Virginia, and as far south as Chattanooga, Tennessee. Comair ranked seventh in size among national regional carriers.

Because the airline now carried a wider variety of passengers seeking connections with Delta flights, rather than Cincinnati-based business travelers only, it began to broaden its scope in the mid-1980s. Tapping Delta's diverse customer base, Comair eventually expanded its services to include limited weekend flights, as well as flights to tourist destinations and smaller cities of as few as 150,000 people.

A series of unfortunate events, however, contributed to Comair's first quarterly loss as a public company in March 1986. One factor in this loss was a tornado that hit two Comair hangars on March 10, severely damaging four planes and the airline's offices. Although the loss was insured, business for March was disrupted while repairs were made; March was usually the company's busiest month of the quarter. In addition, in December 1985, the Federal Aviation Administration (FAA) grounded all ten of Comair's Saab-Fairchild 340s, citing problems with their twin turboprop engines that could cause the planes to catch fire in icy weather. In order for the 340s to resume flying, they had to be fitted with a system for continuous engine ignition, and this was not completed at Comair until January 5. A final factor in the company's depressed earnings, one that industry analysts regarded as perhaps the most crucial, was that Comair had operated with excess seating capacity over the year. Preparing for a proposed expansion of Delta's flight service from Cincinnati, Comair had purchased several new planes and was having a hard time filling seats as it waited for Delta to complete the expansion project.

Delta's expanded hub did materialize the following year, and the two companies soon were overseeing more than 125 Cincinnati departures daily. Moreover, the company's fortunes brightened in the second period of 1986, when the company was able to battle fierce fare competitions by reducing unit costs per available seat-mile to less than 17 cents for the first time in history. Despite the early quarterly loss, Comair showed a profit for the 1986 fiscal year. Charles Curran reminded the public, in a September 1986 Cincinnati Post article, that Comair had 'never had an unprofitable year since its inception on April 1, 1977.'

In May 1986, Comair issued 1.85 million new shares of common stock to Delta, generating $16.9 million for Comair. Delta thus emerged with a 20 percent interest in the regional airline and a new seat on Comair's board of directors. Commenting on the transaction in the Cincinnati Post, a Delta official stated that the company had made the investment 'to solidify and enhance the Delta Connection program in which the two companies have successfully engaged the past two years.' Comair used the increase in capital to replace its lost hangars and office and to continue upgrading its fleet of 37 aircraft. By July 1987, Comair was flying to 29 cities and had plans to add other locations at a rate of four or five per year.

Also in 1987, Comair began flying to Florida at the request of Delta, which had recently become the official airline for Walt Disney World in Orlando and needed the regional carrier to feed its airliners bound for larger cities. Comair joined with Delta to open hubs in Orlando and Ft. Lauderdale, and its success was immediate; the Florida market was profitable by the fifth month of operation. The number of daily Florida flights steadily increased until the figure rivaled that reported at the home base of Cincinnati.

Not surprisingly, David Mueller, who had replaced his father as president, announced at the company's September 1988 annual shareholder meeting that Comair would be looking for 'any and all aviation related business in which we can be successful.' Preparing for acquisitions, Comair, Inc. was soon reorganized into a subsidiary of a new Kentucky parent firm, Comair Holdings, Inc. The regional airline, along with CVG Aviation, a jet charter service concern that provided services for noncommercial planes at the Cincinnati Airport, were both now subsidiaries of the new Comair Holdings. Eventual acquisitions included a flight training company, an investment company, and an aircraft leasing company.

1990s: Transitioning to an All-Jet Fleet

Comair's flight service was expanded to include routes between Cincinnati and Chicago's Midway Airport as well as routes between Florida and the Bahamas. In addition, as Delta announced plans in 1990 for a $319 million expansion, Comair officials expected to almost double the company's operations over the next few years. Comair placed orders for more than 100 planes, 60 of which were Brazilian planes that would enable Comair to more than double its flying radius from its current hubs. Comair also set its sights on moving from its one-gate operation to a separate facility with a minimum of 25 to 30 gates.

In October 1990, David A. Siebenburgen succeeded David Mueller as president of Comair Holdings Inc. Siebenburgen remained in his previous capacity as chief operating officer as well, while Mueller retained his roles as chairman and chief executive officer. Over the next two years, Comair focused on adding flights both in frequency and to new locations. By 1991, Comair's aircraft fleet had grown to 75, including five new 340s for the Cincinnati market and 20 Embraer Brasilias for the Florida market. Naturally, the company's workforce grew in accordance, surpassing 2,000 by the spring of 1990. In 1991 Comair made the important decision of transitioning its fleet from turboprops to jets. That year, it placed an order for 50 regional jets from Canada's Bombardier Inc. In the spring of 1992, Comair began seasonal flights to vacation sites such as Myrtle Beach.

In April 1992, American Airlines announced rate changes that would affect the entire airline industry. While American simplified and lowered their fares, other major airlines moved to match these rates, hoping that increased passenger volume would offset losses from lower fares. Some industry analysts warned that the regional airlines affiliated with major airlines would suffer from the fare war, but Comair was nevertheless able to utilize cost containment strategies to come out ahead. In addition, one company official stated in a May 1992 Cincinnati Business Courier that 'a major financial blow to Delta would not necessarily have an equal impact on Comair. Unlike other regional carriers that are totally dependent on a major airline, Comair connects only 45 to 50 percent of its business with Delta. And the break-even load factor--the percentage of seats that must be sold for a flight to break even--is 39 percent for Comair vs. about 70 percent for major carriers.' Indeed, in the early 1990s, while the major airlines reported a collective loss of $10 billion, Comair was one of the few airlines to remain profitable. Comair's combination of good planning for future growth and a tight rein on costs had once again seen it through a rough time.

In the spring of 1993, Comair announced the acquisition of its first 50-passenger Canadair jet from Bombardier. Known as the world's quietest jet airplane, the Canadair had a top cruising speed of 530 miles per hour, and its range was 1,500 miles--three times the range of Comair's then-current fleet and well beyond the typical two-hour flight limit of most regional airlines with turboprops. The jets also provided Comair with a competitive advantage in that most consumers preferred them to noisy, bumpy turboprops. With these more powerful airplanes, Comair planned to enter markets in 36 new cities through 1995.

On September 3, 1994, Comair began leasing and operating from a new $50 million terminal built by the Greater Cincinnati International Airport. With 53 gates, the 170,000-square-foot facility enabled Comair to double its passenger capacity. Amenities in the terminal included automated teller machines, a combination newsstand and gift shop, and a food court, with McDonald's, PizzaHut Express, and other fast-food restaurants commonly found in larger airline terminals, but not as prevalent in a regional airline terminal. Another unique item was the 'Kid's Corner,' a space filled with large, bright plastic toys and a play yard for children.

Commuter airlines began a shaky few months in October 1994, when an American Eagle plane crashed in Indiana. As Federal regulators investigated the matter, suggesting that commuter airline restrictions and safety regulations were perhaps inadequate, the public lost some confidence in their commuter flights. In addition, Comair felt specific pressure from new cost-cutting measures implemented by the major airlines and new low-fare competition. As a result, Comair's stock fell to $17 a share in December of that year, down from a high of $34.50 in late 1993.

Referring to the volatility of Comair's stock price, in an August 1994 article in the Cincinnati Enquirer, CEO Mueller suggested to shareholders that Comair was being unfairly associated with other commuter air linkups. 'While the carrier continues to make money, investors lump Comair together with other regional airlines--even those that haven't performed as well,' he noted.

Comair sustained the bad publicity generated by the American Eagle crash; in 1994 the company reported record revenues of $297 million, posted record profits of $28.5 million, and carried a record 2.7 million passengers over the course of the year. Moreover, Comair's expansion continued. In January 1995, the company reached an agreement with Canada's Bombardier Inc. to acquire five more Canadair Jet aircraft, with conditional orders and available options to purchase 35 more. Once a formal purchase agreement was completed, delivery was expected to continue through fiscal 1999. Fulfillment of the order would give Comair 70 Canadair jets, which would help the company continue to enhance its Cincinnati and Orlando hubs.

Comair suffered a couple more setbacks as it moved into the late 1990s. In 1996 the company announced plans to acquire Spirit Airlines Inc., a discount carrier based in Detroit, but the deal fell through. The following January Comair suffered the second fatal crash in its history when Flight 3272 crashed near Detroit in icy conditions, killing all 29 people on board. The National Transportation Safety Board's investigation concluded that a thin layer of ice had built up on the turboprop's wings, causing the pilot to lose control. The board also faulted the crew for flying in bad weather conditions and criticized Comair for its guidelines for flying in icy conditions and the FAA for failing to set minimum speeds for flying safely in such circumstances.

For the fiscal year ending in March 1997, Comair Holdings continued to post record results. Revenues reached $563.8 million, more than double the level of 1993, when the airline was just beginning to switch its fleet to jets. Net income for 1997 was $75.4 million, translating into a net profit margin of 13.4 percent and making Comair one of the most profitable airlines in the industry. It was generally acknowledged that the impetus for this growth and continued stellar financial performance was the company's gamble on jets. Comair was outperforming its regional airline rivals because its jets, which numbered more than 50 by 1997, enabled the airline to start new routes, cater to business travelers, and command higher prices. While other regional carriers were scrambling to catch up by purchasing their own regional jets, Comair had by 1997 vaulted into the number two spot among the regionals, trailing only AMR Corporation's Simmons Airlines (later merged into AMR's American Eagle). In October 1998 Comair placed a follow-up order with Bombardier for 50 more Canadair regional jets, a deal worth more than $1 billion. With this order, which included 20 70-seat jets in addition to 30 50-seaters, Comair hoped to create an all-jet fleet by the early 21st century. The 70-seat jets, which were not slated to be ready until late 2001, were to be used on the airline's most heavily traveled routes.

2000 and Beyond: Operating As a Delta Subsidiary

By the end of the 1999 fiscal year, Comair was carrying more than 600,000 passengers each month and operated more than 750 daily flights. More than 6.4 million passengers flew on a Comair flight that fiscal year. Revenues reached $763.3 million, a 17 percent increase over the previous year, and net income stood at $132.9 million, a 30 percent jump. Only a few months after the announcement of this good news, Comair faced a critical deadline. In October 1999 the long-term marketing agreement between Delta and Comair was due to expire. According to Amy Higgins of the Cincinnati Enquirer, the regional carrier had three choices. It could sign a new marketing agreement, but Delta was unlikely to agree to a deal as favorable to Comair as the previous one had been in terms of the revenue split. It could choose not to renew with Delta, and either enter into an alliance with another major carrier or attempt to go it alone. But with this option, Comair faced the prospect of heightened competition and the concomitant loss of revenues, profits, and stock value.

Comair was then left with the third choice: agreeing to be acquired by Delta. With Comair's stock deflated to less than $18 a share, in part because of increasing oil prices, Comair announced on October 18 that it had agreed to be purchased by Delta for about $1.8 billion, or $23.50 a share, a 31 percent premium. The acquisition was completed in January 2000 and Comair Holdings thereby became a wholly owned subsidiary of Delta and part of a new unit called Delta Connection Inc., which was charged with overseeing all of the airline's regional carriers, including Comair and Atlantic Southeast Airlines; the latter served the Southeast and East Coast through hubs in Atlanta and Dallas/Fort Worth. Siebenburgen was appointed president and CEO of Delta Connection, and Randy D. Rademacher, who had been CFO of Comair Holdings, was named president of Comair Holdings. David Mueller agreed to serve as an advisor for a three-year period. Soon after the acquisition was completed, Air Transport World named Comair 'Regional Airline of the Year' for 1999, a fitting climax to the airline's era of quasi-independence.

Principal Subsidiaries: Comair, Inc.; Comair Services, Inc.; Comair Investment Company.

Principal Competitors: AirTran Holdings, Inc.; AMR Corporation; ASA Holdings, Inc.; Continental Airlines, Inc.; Mesa Air Group, Inc.; Mesaba Holdings, Inc.; Southwest Airlines Co.; TransWorld Airlines, Inc.; UAL Corporation; US Airways Group, Inc.


  • Key Dates:

  • 1977: The father and son team of Raymond and David Mueller founds Comair, Inc.
  • 1979: A Comair plane crashes at the Cincinnati airport, killing eight people.
  • 1981: Company goes public; begins relationship with Delta Air Lines by becoming part of the Deltamatic computerized reservation system.
  • 1984: Comair enters into a marketing agreement with Delta and becomes an official Delta Connection carrier.
  • 1986: A March tornado severely damages four Comair planes, two hangars, and the airline's offices; Delta acquires a 20 percent stake in Comair for $16.9 million.
  • 1987: Comair opens its Orlando hub.
  • 1988: Comair, Inc. is reorganized into a subsidiary of a new parent firm, Comair Holdings, Inc.
  • 1991: Comair places an order with Bombardier for its first Canadair jets.
  • 1993: Company acquires its first 50-passenger Canadair jet.
  • 1994: Comair begins operating from a 53-gate, 170,000-square-foot terminal at the Cincinnati airport, doubling its passenger capacity.
  • 1995: Comair reaches an agreement with Bombardier to expand its fleet of Canadair jets to more than 75 by the end of the decade.
  • 1997: A Comair turboprop, Flight 3272, crashes near Detroit in icy conditions, killing all 29 people on board.
  • 1998: An order is placed for 50 more Canadair regional jets, including the first 70-seaters.
  • 2000: Comair is acquired by Delta, becoming a wholly owned subsidiary.

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