Delta's regional partners thrive
By NANCY FONTI
Atlanta Journal-Constitution Staff Writer
Delta Air Lines hopes its smallest planes will help carry it through hard times.
In the post-Sept. 11 environment, Delta has parked some big jets. But its regional partners are expanding as fast as ever.
Atlantic Southeast Airlines, Delta's primary partner in Atlanta, added nearly 22 percent more seat capacity in the first five months of the year than it had in the same period of 2001, while Delta as a whole shrank about 9 percent.
The partners' smaller planes better match reduced demand on some routes. They also are cheaper to operate than big jets because they use less fuel, and flight crew wages are lower. Operating costs for an MD-88 are about 225 percent higher than for a regional jet, Delta executives say.
Delta uses regional partners to pick up routes that don't justify big-jet service.
For instance: After Sept. 11, Delta's Salt Lake City-Omaha, Neb., load factor fell to 41 percent in Boeing 727s with about 150 seats and three pilots.
Delta replaced the big jets with 50-seat planes operated by Utah-based partner SkyWest. Load factor rose to 77 percent -- which Delta says is beyond the break-even point for regional jets.
Similarly, Delta also replaced big planes with ASA regional jets on its Atlanta-Monroe, La., route.
"We obviously didn't want to give up the routes, so we subbed in regional jets," explained Fred Buttrell, president of Delta Connection Inc., the business unit overseeing Delta's regional operations.
"People in those cities still need to fly to conduct commerce and business. We also want to maintain a network presence. This is our structural DNA, and we don't like to alter it much," Buttrell said.
The strategy means Delta passengers are more likely to find themselves on smaller planes.
But regional jets have proven popular among fliers, said business travel consultant Chris McGinnis.
"People are pleased with the regional jets because they are both comfortable and fast," he said.
Delta has more flexibility to use regional partners than most big carriers. It bought both ASA and Cincinnati-based Comair in the late '90s, giving it full control of their large and growing fleets of regional jets. Together ASA and Comair fly 35 percent of the world's regional jet fleet.
The airline has long depended on its Connection partners to feed traffic from small and medium-sized communities into its massive Atlanta hub and secondary hubs in Cincinnati and Salt Lake City.
Between 14 percent and 16 percent of passengers on a typical mainline flight connect from a Connection flight. ASA and Comair account for 70 percent of Connection flying, with the remainder done by airlines under contract with Delta.
Connection flying accounts for 8 percent to 12 percent of Delta's systemwide seat capacity.
Delta's aggressive use of regional jets is a wise strategy, one analyst said.
"It helps their pricing strategy and capacity control but also their ability to rebuild their network," said New York airline consultant Bob Mann. "That's important to business travelers who they are desperately trying to win back."
The strategy isn't entirely new. Delta and other big carriers for several years have used the new generation of smaller jets to test new markets, fly point-to-point and keep their brand in cities where traffic is too light to justify big-jet service. The minijets can fly many more routes than the turboprops they replace.
Stimulating markets
When Delta began testing service from Atlanta to Manchester, N.H., in January 2000, it used regional planes. Six months later, the market proved viable, so the airline replaced small planes with mainline jets.
"[A large jet] requires much more revenue for the route to be profitable -- it needs more passengers," Buttrell said. "When you are stimulating market and developing market quickly and you can't get those passengers, you've generated a loss without staying power."
Pilots at big airlines have long been concerned that regional jets afford airlines a way of shifting more growth toward regional partners and their lower-paid flight crews.
As at other airlines, Delta's contract with its pilots restricts regional flying, but limits are more relaxed than those at other carriers.
Now, ASA is hiring pilots, while 805 Delta mainline pilots have temporarily lost their jobs since last fall.
"We believe that there are significant growth opportunities out there for the mainline and for the regional units," said Mike Pinho, a spokesman for Delta's Air Line Pilots Association unit. "It's up to the management team to get the pricing structure in order to grow the airline."
Buttrell, a former Air Force fighter pilot who joined the airline industry after being diagnosed with diabetes, meets with pilots to explain the business plan for Delta Connection.
"Nobody is ever excited about cutting service," Buttrell said. "Because we have a stronger regional feed, we've been able to pull down less than other carriers."
When he argues that regional jets are best suited for small routes, "I tell the pilots that you wouldn't use a C-5 for ground attack," he quipped.
Geographic changes
In addition to growing its regional operations, Delta also is rearranging them geographically.
Delta in June announced Chautauqua Airlines, a newly added contract partner, would take over intra-Florida flying from Comair.
Comair, Buttrell explained, now serves Florida with turboprop planes, which it is phasing out. Comair crews, in new regional jets, will expand flights at Dallas-Fort Worth and New York's Kennedy International Airport, as well as in Cincinnati.
Mann, the analyst, said aggressive use of regional jets isn't right for every market. Small markets of less than 400 miles are flown more efficiently by turboprop planes.
"Small jets have higher operating costs [than turboprops]. If you are the only guy with a small jet, the market will choose you, but if every airline in the market flies small jets, nobody has the marketing advantage."
Service is another pressure point. Delta bought ASA in 1999 in part because it faced customer complaints.
Buttrell said Connection now completes 97 percent of all scheduled flights, up from 94 percent in 2001. His goal is 98 percent.
"Consumers expect the service levels at the feeders to be the same as Delta's," said consultant McGinnis.
By NANCY FONTI
Atlanta Journal-Constitution Staff Writer
Delta Air Lines hopes its smallest planes will help carry it through hard times.
In the post-Sept. 11 environment, Delta has parked some big jets. But its regional partners are expanding as fast as ever.
Atlantic Southeast Airlines, Delta's primary partner in Atlanta, added nearly 22 percent more seat capacity in the first five months of the year than it had in the same period of 2001, while Delta as a whole shrank about 9 percent.
The partners' smaller planes better match reduced demand on some routes. They also are cheaper to operate than big jets because they use less fuel, and flight crew wages are lower. Operating costs for an MD-88 are about 225 percent higher than for a regional jet, Delta executives say.
Delta uses regional partners to pick up routes that don't justify big-jet service.
For instance: After Sept. 11, Delta's Salt Lake City-Omaha, Neb., load factor fell to 41 percent in Boeing 727s with about 150 seats and three pilots.
Delta replaced the big jets with 50-seat planes operated by Utah-based partner SkyWest. Load factor rose to 77 percent -- which Delta says is beyond the break-even point for regional jets.
Similarly, Delta also replaced big planes with ASA regional jets on its Atlanta-Monroe, La., route.
"We obviously didn't want to give up the routes, so we subbed in regional jets," explained Fred Buttrell, president of Delta Connection Inc., the business unit overseeing Delta's regional operations.
"People in those cities still need to fly to conduct commerce and business. We also want to maintain a network presence. This is our structural DNA, and we don't like to alter it much," Buttrell said.
The strategy means Delta passengers are more likely to find themselves on smaller planes.
But regional jets have proven popular among fliers, said business travel consultant Chris McGinnis.
"People are pleased with the regional jets because they are both comfortable and fast," he said.
Delta has more flexibility to use regional partners than most big carriers. It bought both ASA and Cincinnati-based Comair in the late '90s, giving it full control of their large and growing fleets of regional jets. Together ASA and Comair fly 35 percent of the world's regional jet fleet.
The airline has long depended on its Connection partners to feed traffic from small and medium-sized communities into its massive Atlanta hub and secondary hubs in Cincinnati and Salt Lake City.
Between 14 percent and 16 percent of passengers on a typical mainline flight connect from a Connection flight. ASA and Comair account for 70 percent of Connection flying, with the remainder done by airlines under contract with Delta.
Connection flying accounts for 8 percent to 12 percent of Delta's systemwide seat capacity.
Delta's aggressive use of regional jets is a wise strategy, one analyst said.
"It helps their pricing strategy and capacity control but also their ability to rebuild their network," said New York airline consultant Bob Mann. "That's important to business travelers who they are desperately trying to win back."
The strategy isn't entirely new. Delta and other big carriers for several years have used the new generation of smaller jets to test new markets, fly point-to-point and keep their brand in cities where traffic is too light to justify big-jet service. The minijets can fly many more routes than the turboprops they replace.
Stimulating markets
When Delta began testing service from Atlanta to Manchester, N.H., in January 2000, it used regional planes. Six months later, the market proved viable, so the airline replaced small planes with mainline jets.
"[A large jet] requires much more revenue for the route to be profitable -- it needs more passengers," Buttrell said. "When you are stimulating market and developing market quickly and you can't get those passengers, you've generated a loss without staying power."
Pilots at big airlines have long been concerned that regional jets afford airlines a way of shifting more growth toward regional partners and their lower-paid flight crews.
As at other airlines, Delta's contract with its pilots restricts regional flying, but limits are more relaxed than those at other carriers.
Now, ASA is hiring pilots, while 805 Delta mainline pilots have temporarily lost their jobs since last fall.
"We believe that there are significant growth opportunities out there for the mainline and for the regional units," said Mike Pinho, a spokesman for Delta's Air Line Pilots Association unit. "It's up to the management team to get the pricing structure in order to grow the airline."
Buttrell, a former Air Force fighter pilot who joined the airline industry after being diagnosed with diabetes, meets with pilots to explain the business plan for Delta Connection.
"Nobody is ever excited about cutting service," Buttrell said. "Because we have a stronger regional feed, we've been able to pull down less than other carriers."
When he argues that regional jets are best suited for small routes, "I tell the pilots that you wouldn't use a C-5 for ground attack," he quipped.
Geographic changes
In addition to growing its regional operations, Delta also is rearranging them geographically.
Delta in June announced Chautauqua Airlines, a newly added contract partner, would take over intra-Florida flying from Comair.
Comair, Buttrell explained, now serves Florida with turboprop planes, which it is phasing out. Comair crews, in new regional jets, will expand flights at Dallas-Fort Worth and New York's Kennedy International Airport, as well as in Cincinnati.
Mann, the analyst, said aggressive use of regional jets isn't right for every market. Small markets of less than 400 miles are flown more efficiently by turboprop planes.
"Small jets have higher operating costs [than turboprops]. If you are the only guy with a small jet, the market will choose you, but if every airline in the market flies small jets, nobody has the marketing advantage."
Service is another pressure point. Delta bought ASA in 1999 in part because it faced customer complaints.
Buttrell said Connection now completes 97 percent of all scheduled flights, up from 94 percent in 2001. His goal is 98 percent.
"Consumers expect the service levels at the feeders to be the same as Delta's," said consultant McGinnis.