The entrepreneurial spirit that inspired the father-and-son team of Raymond and David Mueller to launch Comair in 1977 is still alive at the company and driving its business plan, even though the Muellers no longer run the show.

Ray Mueller was a successful businessman who ran a trucking/distribution firm. He started Comair -- a business he knew little about at the start -- because David Mueller was a pilot who loved to fly and wanted to get into commercial aviation, and because deregulation was opening up business opportunities in the smaller markets as the major jet carriers were pulling out. They started with three Piper-Navajo aircraft serving the cities of Cincinnati, Cleveland, Detroit and Akron-Canton. Raymond Mueller served as Comair's first president and David Mueller was its executive vice president, who also flew many of the flights.

The Muellers "had ideas that they could build a business in essence based on what bigger companies left behind, almost a kind of 'table scraps' mentality," said Comair President Randy Rademacher, who joined the company in 1985 as its director of corporate finance.

After Delta Air Lines [NYSE:DAL] acquired Comair in 2000 for about $1.8 billion, some of the local decision-making authority went away. Delta runs the airline as a wholly-owned subsidiary in the Delta Connection program, and Delta has the final say on everything related to revenue management, from aircraft deliveries to fare rates. But Comair retains its entrepreneurial flair. Management remains independent and gives the owner input on important decisions, "just like we would if we were managing those things ourselves," Rademacher told C/R News. In that respect, little has changed. The drive to find and fulfill new business opportunities, and use new technologies to succeed, is still alive and well.

"The issue always was - make a market assessment, figure out where there's people that want to fly and then go and get an airplane to service that marketplace," Rademacher said. "We did a lot of research from a market perspective, put a lot of effort into what fares could we charge, how many people might fly, and where is there an opportunity. As soon as we saw one, we were always profitable enough that we could take advantage of that opportunity and go out and purchase another airplane to start serving those opportunities. To this day, we still have not run out. We still have a list of places we think we can go, and we're still bringing airplanes in to take advantage of those opportunities."

Comair started with piston airplanes, went to turboprops (it was the first airline in the United States to fly the 30-passenger Saab 340 turboprop) and then changed the face of the industry in North America in 1993 when it went exclusively to regional jets (RJs). Comair's introduction of RJs and its rapid growth helped to expand air service for communities across the nation. The company became the first regional airline to operate an all-jet fleet. Now among the top three regional airlines, along with American Eagle and ExpressJet, Comair operates a stable of 139 Bombardier CRJs, with 40, 50 and 70 seats.

The initial jet order in 1993 was for 20 CRJs, and the company had an option for 20 more. The decision raised more than a few eyebrows. "Quite frankly, people thought we were nuts," said Comair spokesman Nick Miller. "They didn't think it would work. [But] I think it's pretty clear where history falls on the decision."

Comair's focus was never on adopting new technology for technology's sake. "The focus was, 'What does it take to build the business?'" Rademacher said. "I don't think the focus was technology. I think the focus was, 'How do we make the [company] bigger? How do we get it to go further? How do we expand the business? And as [the Muellers] saw opportunities to use technology to do it, they took them."

When Rademacher joined Comair, the airline was flying mostly 15-passenger Embraer Bandeirantes, the predecessor of the Brasilia. The company had about 500 employees, compared with more than 5,000 today. Comair had just become a Delta Connection carrier in late 1984. The marketing agreement with Delta improved Comair's opportunities by allowing the airline operate flights under the DL code and coordinate schedules for more efficient connections.

In 1986, Delta purchased about 20 percent of Comair's common stock, along with a piece of its other regional partners at the time, Atlantic Southeast Airlines and SkyWest. Comair soon started Comair Jet Express, an on-demand air charter service.

In November 1987, Comair joined Delta in developing the Orlando hub in Florida. With two hubs at Cincinnati/Northern Kentucky International Airport and Orlando International Airport, Comair grew the number of connections it could offer to other Comair flights as well as Delta flights.

By the end of 1988, steady earnings growth allowed Comair to acquire the modern Embraer Brasilia, a 30-seat, high-speed aircraft. In 1989, the airline established the Comair Aviation Academy near Orlando, Fla., the only flight training school owned by an airline.

In 1993, the year Comair acquired the first CRJs, the company had grown to serve more than 68 locations in 23 states and three countries. In 1994, Comair opened a 53-gate Concourse C at Cincinnati, the largest ever designed exclusively for a regional airline, featuring many of the same amenities as a major airline hub facility.

By the time Comair celebrated 20 years in business in 1997, it served 79 cities in the United States, Canada and the Bahamas. The airline also had record passenger boardings in 1997 of more than 5.4 million. The year 1998 brought another expansion of the facilities at Cincinnati, including the first expansion of Concourse C.

In 1999, David Mueller, then Comair's chairman and CEO, was named Airline Executive of the Year by Regional Airline World magazine, and David Siebenburgen, then president and chief operating officer, won the Regional Airline Executive of the Year Award from C/R News.

By 2000, Comair had been rated for two consecutive years by The Wall Street Journal as a top performer for shareholder return. Comair's stock has had eight 3-for-2 stock splits since going public. Delta bought the company in January of that year, and Comair later took delivery of its 100th regional jet. The airline posted record passenger boardings, carrying more than 8 million people, and it moved into new headquarters in the South Airfield section of Cincinnati. For about a year after the Delta acquisition, David Mueller continued on with Delta as a Comair consultant. Today, he is a horse farmer in northern Kentucky, and still flies. His father, Raymond Mueller, is retired and living in Florida.

Comair's independence allows its management to retain a large degree of local control. It makes all of its own hiring, firing and human resources decisions, and it handles its operations from its systems operations control center (SOCC), a centralized command center that coordinates the operations of the fleet and feeds it into a single decision-making manager (see C/R News, Oct. 28, 2002).

The biggest change is that Delta now has decision-making control over revenue management, including aircraft deliveries, markets served, fares charged and whether the focus is on O&D or connection traffic.

Shortly after Delta's acquisition, the airline faced two critical events. In 2001, a devastating 89-day strike cost the airline millions of dollars, part of its fleet and about half of its personnel. Shortly after it was resolved, the entire industry was rattled by the Sept. 11 terrorist attacks.

The airline is now back at full capacity -- it flew 8.7 million passengers in 2002 -- and the focus is back on business.

The future, Rademacher believes, remains in smaller airplanes. "As traffic numbers have come down ... you have to use is smaller equipment. That's been to our benefit. That's why the regional carriers as a whole have been able to hold together decent financial numbers in light of what's going on with the industry as a whole."

Until traffic makes its way back to 2000 levels, expect the large carriers to focus on utilizing the regional-sized equipment to tap the marketplace, Rademacher predicted. As traffic comes back, "you'll see opportunities for larger airplanes to replace the smaller ones in some of the higher-volume markets, and those smaller jets will then go back to where they were a couple of years ago, building even smaller markets back up to a level where the larger airplanes can take over."

Comair's current business plan is to add 17 more CRJs to its fleet by the end of this year, for 156 total, if the economy doesn't sour, if there is no unexpected event that harms the travel industry, and if financing for airplane purchases is available.

Comair also is keeping a close eye on the growth in the low-cost carrier networks. While they don't compete head-on with regional operations, the regionals know they take connecting traffic out of the system if passengers are willing to drive to a low-fare-targeted departure city.

These are worries that Raymond and David Mueller could have only imagined.

>>Contact: Nick Miller, Comair, nmiller@comair.com, (859) 767-2550<<

Comair

• 77 Comair Blvd.
• Erlanger, KY 41018
• 859-767-2550
• Web site: http://www.comair.com
• President - Randy Rademacher
• Senior VP, Customers - Don Bornhorst,
• Senior VP, Aircraft Operations - Mike Stuart
• Senior VP, Human Resources - Linda Noble
• VP, Finance and CFO - Brian McDonald,
• Fleet: 139 CRJs, 40, 50 and 70 seats

2002 Statistics

• RPMs (000) - 3,751,241
• ASMs (000) - 5,656,098
• LF - 66.3%
• Passengers - 8,731,943