UAUA Ual Corp. (MM)

Delta Air Lines Inc. (DAL) plans to cut by more than half the size of its remaining commuter unit over the next two years, the latest in a series of sweeping changes across the regional airline industry.

The world's largest airline by revenue will drop smaller planes from the Comair unit in a bid to restore profitability.

Delta plans to replace the flying with its own larger aircraft rather than outsource more services to other regional airlines.

Last month the airline sold its Mesaba and Compass regional units but failed to find a buyer for Cincinnati-based Comair, which flies 97 smaller jets under the Delta Connection brand.

Comair will retire all of its 50-seat aircraft by the end of 2012, leaving it with a fleet of 44 larger Bombardier CRJ jets, the company said in an internal memo Wednesday. It will shrink its staff of 2,500 by an unspecified amount and seek other savings to close a claimed 20% cost gap with industry peers.

U.S. network airlines have outsourced large parts of their domestic networks to an array of regional airlines over the past 20 years in a bid to cut costs, although the amount is capped by "scope" clauses in their pilots' collective bargaining agreements. Scope clauses are provisions in the pilot labor contracts that limit the number and/or seating capacity of regional jets that can be operated by an airline.

Pilots at Continental Airlines Inc. (CAL) and UAL Corp.'s (UAUA) United Airlines said last week that they want to end outsourcing of flying to regional partners following their planned merger.

Rising fuel costs have made 50-seat jets less economical, while the emergence of new aircraft in the 70- to 130-seat range have made airlines look to loosen the restrictions of existing scope clauses.

-By Doug Cameron, Dow Jones Newswires; 312-750-4135; doug.cameron@dowjones.com

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