Will Delta Sell AirElite?
Not many people outside of the airline market know this, but Delta Airline owns and operates a lucrative division of private jets. Delta AirElite, as it is recognized, is the single bright spot in an otherwise dark company atmosphere for this U.S. legacy carrier. Some are speculating that Delta should sell its AirElite company to raise funds and turn around the carrier, but I have another far more radical take on factors that I think really should be considered as an alternative.
Established in 1984, Delta AirElite has been steadily expanding and producing cash for Delta. Although the airline portion of the firm is quickly and continually hemorrhaging cash, AirElite continues to make income and grow. Indeed, with a fleet of sought right after company jets in its portfolio including the Challenger 300, Gulfstream IV-SP, and Learjet 31A, AirElite is an desirable firm for any potential suitor.
Actually, if Delta had been to sell AirElite it would only slow the bleeding for Delta, not stop it. With debt totals exceeding $20 billion, a sale of AirElite would most likely only fetch the carrier a handful of hundred million dollars, if that. Last year, Delta sold off its Delta Connection carrier, Atlantic Southeast Airlines (ASA), for $425 million money to Skywest Airlines. The sale was perceived by market analysts as a desperate one as ASA was valued to be worth among $700-800 million dollars. The sale took location just ahead of the airline filed for bankruptcy in September 2005, and had no impact in stemming the filing.
So, what really should Delta do? In my opinion, get out of the airline enterprise altogether. Thats appropriate, instead of laying off thousands of added workers and requiring steep give backs in employee wages, Delta may possibly take into account selling all of its assets off piece by piece to the competition. This would specifically make sense as Deltas restructuring is dependent on steady fuel prices and, at this point, airlines can anticipate to pay even much more for fuel in 2006 than they did final year. Kiss that recovery program goodbye!
Once the airline enterprise is sold, AirElite ought to be all that is left of Delta. The new business can thrive as the organization aviation market place is booming. The writing is on the wall for the airlines as further consolidation, retrenchment, and large time price pressure will remain. Indeed, when Virgin America gets official government approval to fly, its fleet of 105 modern day Airbus jets will have significantly more appeal to passengers than Deltas aging fleet. 1 much more reason for Delta to get out of the commercial airline company now.
Is my recommendation radical? Yes, it is. Delta, even so, is in as well much of a hole to ever recover. Far better to comprehend that now when their assets have some worth than to wait until what they have slips away forever. By that time, even AirElite might get dragged down and suffer.
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