Regional Airlines Gain as other carriers SagRegional airlines gain as other carriers sag
Joe Sharkey, New York Times
Published June 3, 2003TRAV02
The temperature in Phoenix was 103 degrees by lunchtime, so the prospect
of walking into an industry conference dominated by airline executives was
daunting. How much more hot air could a person take?
Thankfully, most of the hot air remained outside during the recent annual
convention of the Regional Airline Association, a trade group whose
members include most of the more than 90 regional airlines.
These airlines, ranging in size from big-fleet subsidiaries and partners
of major network lines to operators of puddle-jumping commuter and cargo
lines in rural areas, fly most of those 30-to 100-seat regional jets that
business travelers have been so much more often finding themselves aboard
lately. Some also fly those 19-to 68-seat turbo-prop aircraft that are
going out of fashion.
Regional airlines generally are considered to be the only healthy segment
of the domestic airline industry. So attention must be paid.
Regional airlines "are making huge contributions" to a business recovery
in the commercial air system, said Skip Barnette, president of Atlantic
Southeast Airlines, a subsidiary of Delta Air Lines that operates more
than 800 flights a day, many of which function as feeder lines from
smaller cities for connections through Delta's hubs in Atlanta and
elsewhere.
Savings challenges
To achieve viability in the emerging new airline landscape, Barnette said,
aircraft manufacturers and other suppliers, as well as labor unions, "must
continue to understand our need for savings, as difficult as that may be."
There were more than a few appreciative snorts in the audience when
Barnette said, "Labor contracts will be evermore challenging."
As everyone at the conference knew, the hottest button in airline pilot
labor issues right now is the growing pressure on pilots unions to accept
drastic changes in so-called scope clauses that address smaller jets and
smaller pay scales for those who fly them.
Naturally, that rapid growth in regional jets was the biggest topic of
discussion in Phoenix. A week earlier, US Airways stunned the industry
when it announced a huge new order of 170 regional jets, with a value of
more than $4 billion.
US Air said it had ordered 85 Embraer-170 regional jets and took options
on the delivery of 50 additional 170s, as well as on 140 ERJ-145s made by
Embraer, the Brazilian aerospace company. The airline also said it agreed
to buy 60 Bombardier CRJ-200s, which seat 50, and 25 CRJ-700s, which seat
75. In addition, the airline took options on about 100 more regional jets
that can be exercised across a mix of CRJ-200s and CRJ-700s according to
future fleet needs. Bombardier Inc. is based in Montreal. If all options
were exercised, the Embraer and Bombardier orders would be worth more than
$13 billion.
Many business travelers dislike regional jets, incidentally, because those
planes are cramped, have little carry-on storage and usually operate with
all-coach cabins that negate the benefits of hard-won frequent-flier
upgrade status levels.
On the convention exhibit floor last week, Joao Alfredo Paiva, an Embraer
marketing analysis manager, showed off a model of the sleek 170 and
explained that the aircraft was designed to accommodate both a first-class
and a coach cabin. In part addressing the growing concern about upgrade
availability among frequent business travelers, US Air stressed that the
Embraer 170, which can seat 76, and the 75-seat CRJ 700s would offer both
coach and first-class seating.
Changing industry
The regional-jet revolution figures in a basic question that is being
asked by those who fly a lot and think analytically about the devastated
air-transport industry. Assuming that a full-service, profitably operating
air transport system is a national necessity, what might that system look
like after the current financial shakeouts end?
Michael Boyd, an airline consultant, said the domestic air system is
operating on revenue that is $18 billion to $20 billion less than it was
designed for -- "an airline industry that was designed for a marketplace
that no longer exists," he said during a panel discussion. He offered some
predictions about how the emerging system would look.
Neither the big route networks run by major airlines nor the hub-and-spoke
systems they use to scoop up high-revenue traffic will disappear, he said.
"Low-fare cherry-pickers" -- airlines grabbing share from the majors on
select routes in big markets -- also will continue prospering.
Service to rural areas and small cities will continue to decline, he
predicted. "There isn't enough revenue out there" to continue serving many
small communities even with regional jets, Boyd said. And turbo-prop
aircraft, which now serve some small markets, are basically finished
except for a few scattered commuter routes. "Anything with a propeller is
on its way out," he said.
The future of regional airlines, he said, is clear. Adding new
bigger-capacity regional jets to their huge existing fleets of 50-seat and
smaller jets, regional airlines are emerging as the backbone of a new
model for aviation.
Rather than independent operators flying independent routes, regional
airlines increasingly are behaving as "small-jet suppliers -- part of the
airline supply chain" in alliances with the big network carriers, Boyd
said, adding: "That's where the growth is going to be -- supplying
small-jet lift to airline systems who find it more efficient to do it with
someone else flying the airplane rather than doing it themselves."
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