Southern Air to downsize, dumps 747-200S and reduces head count

CONNECTICUT wet lease firm Southern Air will accelerate the retirement of its 747-200s and lay off an unspecified number of employees, according to an email sent to Southern Air employees by CEO Dan McHugh and obtained by Atlanta-area Air Cargo World.

Declining demand, higher operating costs and increasing regulations were key factors at the firm that offers aircraft, crew, maintenance and insurance (ACMI), he told employees.

Mr McHugh said the company will reduce corporate debt and improve a capital structure inherited from the private equity firm Oak Hill Capital Partners when it acquired control in 2007. Oak Hill combined an existing air cargo holding, Cargo 360, into the Southern Air fold, said the report.

"Today, a significant level of our resources and infrastructure are devoted to running and maintaining the -200s. We now must realign our organisation to serve the new business model, including changes to our crew planning, and we will initiate select outsourcing of activities to better align our costs with the operating requirements," said Mr McHugh.

"As a result, we will begin reducing headcount in both line operations and headquarters staff. There will be direct staff reductions, as well as outsourcing of some activities, and we expect the majority of the changes to be in place by the end of the year."

Southern Air officials have also stopped the process of a possible relocation of the company's headquarters from Norwalk, Connecticut.

Mr McHugh outlined that these fleet adjustments highlight a new strategy, continuing its relationship with DHL Express and other companies, while searching out new partners.

"In order to make Southern Air stronger and operate more efficiently," he wrote, "we need transition from a high-maintenance, depreciated classic fleet, to a modern, efficient fleet operating in more reliable, low-cost, low-risk environments," he said.