Are regional airlines headed for a tumble?

[General Lee]

Thanks.....? Who said I didn't like a good debate? I just try to show my views and try to bring in some facts that back them up. Sometimes I am wrong.


Bye Bye--General Lee

 

[ShadowFlight]

And, I believe Skyway has a seperate operating certificate compared to Midwest. Those pilots at Skyway probably won't be flying any 70 seaters or larger in the near future---but Dorniers are a distinct possibility...

General,

Skyway does operate under a different certificate from Midwest.

Peace

SF

 

[bvt1151]

Darn, I posted the last one before I even had a chance to read your post. Otherwise I would have combined the two. Cest La Vie.

Bvt1151,

With the lower fares floating around out there, it makes more sense to use larger aircraft with more seats to spread out the costs. Also, look at the ORD traffic situation. You can bet that both UAL and AA cut RJ flights instead of mainline flights when they both had to cut 7.5% of their scheduled departures at those peak times. Why? They could make more money with larger aircraft.

How much does it cost to fill those heavies? If the heavies are making $200 a ticket, yet it costs them $400 to get them to the heavy, you're not really making money. This is exactly the situation USAirways and Delta is in.

How many LCC's operate heavy aircraft? ATA, and AWA perhaps, but just because the 757 was designated a heavy due to its wake rather than its size. Now, how many LCC's have wide-bodies on order? I don't know of any. Could it be that, while the heavies may have the lowest CASM, not only the RASM is diluted by the connecting aircraft, but also the cost of filling those heavies is too expensive? Obviously RJ's are a large part of the problem, due to the route structure, not the aircraft's economics. The problem is too large aircraft that require a whole lot of small aircraft to fill. The focus on the larger aircraft confine the RJ's and other connecting aircraft into the role of connector, not transporter. Can an airline be profitable with no wide-body aircraft? I dunno, ask SWA and JBLU. If Independence focuses on moving passengers between point A and B and not on filling those A320's they'll do extremely well.

You also like to bash scope clauses. Without them, we would have many many more lower paying jobs, and no chance to eventually move up to a better working environment with better perks. But, if you want all of that to go away, just wish for Comair 100 seaters instead of Delta 100 seaters. Talk about lowering the bar-----you seem to want that too. Dalpa would have to come down on pay scales for future 100 seaters---but a lot of other things would remain in tact--leaving a chance for other pilots to eventually have those perks. But, you would rather bring the 100 seaters down to the regional level. Let's move people up.....

How many times have we read your posts calling for concessions from Comair and ASA pilots? How do you think that plays into this equation? Lowering the bar for you, means raising the bar for us. By that I mean you would have to take a pay cut to fly 100 seaters, whereas we would receive a pay raise. Besides, who says the 100-seaters can even be profitable in Delta's route structure filling heavies? A new aircraft will not fix Delta's problems, only a new route structure will.

And, I believe Skyway has a seperate operating certificate compared to Midwest. Those pilots at Skyway probably won't be flying any 70 seaters or larger in the near future---but Dorniers are a distinct possibility...

Exacly my point! Do you understand how big of a loophole you guys left into the clause?!? CHQ circumvented your clause merely by obtaining a new operating certificate to fly the EMB's. They will be flown by the same pilots with profits being paid to the same company. You got hoodwinked, and the same is happening with Skyway. Without you even realizing what happened, your scope clause has limited the highest paid regional pilots and provided growth to the lowest. Well done!

 

[MedFlyer]

Bvt1151,

With the lower fares floating around out there, it makes more sense to use larger aircraft with more seats to spread out the costs. Also, look at the ORD traffic situation. You can bet that both UAL and AA cut RJ flights instead of mainline flights when they both had to cut 7.5% of their scheduled departures at those peak times. Why? They could make more money with larger aircraft.

Bye Bye--General Lee

Actually, that's false. Most of the cuts by UA/AA were mainline flights that already had very high frequencies. For example, AA chopped an ORD-DFW flight because they already had 16 flights a day on that route. Chopping an RJ to a small town that only has a few flights a day would likely destroy the viability of that market. However, getting rid of a few frequencies in a high frequency mainline market would have little impact.

I agree that the 50 seat market has become saturated and there is a need for bigger planes. However, simply dumping bigger planes on a route won't solve all your problems. Bigger planes do have lower unit costs, but they also have lower unit revenues. If DL (or any other carrier) just dumps tons of capacity, they'll end up with even lower yields and emptier planes. Look at DL's May numbers...DL added back mainline capacity so fast that loadfactors actually fell.

 

[FN FAL]

Delta Air's Grinstein May Change Use of Small Regional Jets June 10 (Bloomberg) -- Delta Air Lines Inc. may change the way it uses small jets under Chief Executive Officer Gerald Grinstein, who in the past said he doesn't like the planes for longer flights and is reviewing all operations to stem losses.

Grinstein, 71, who took over at Atlanta-based Delta this year and said the airline may seek bankruptcy protection, expects to finish a review of operations in the third quarter. He is seeking to cut costs after $3.6 billion in losses since 2000 at Delta, the biggest user of the smaller jets.

The 50-seat jets, which have higher unit costs than larger planes, have become less economical to operate amid competition in more markets from carriers with lower costs. Delta, the third- biggest U.S. airline, is likely to follow rivals in curtailing use of the jets, JP Morgan analyst Jamie Baker said.

``Delta is revisiting its commitment to 50-seaters and in our opinion would probably like fewer than are currently on order,'' said Baker, who met with company officials in the past month.

Delta owns or leases 264 so-called regional jets, or RJs, including 49 with 40 seats, 180 with 50 seats and 35 with 70 seats, all made by Montreal-based Bombardier Inc. The airline's jets, along with 136 flown by Delta's partners, operate as Delta Connection. Delta is receiving 23 of the 70-seat jets this year and placed an order in February for 32 of the 50-seat jets to be delivered next year.

``Our plans, currently, are unchanged as it applies to `04 and `05 growth,'' Fred Buttrell, chief executive of the Delta Connection unit, said in an interview. ``Beyond that, we will be subject to some degree to the strategic review.''

`Largest Operator'

Former Delta President Frederick Reid helped expand Delta's fleet of small jets, saying last August that the company was ``the largest operator of regional jets in the world.'' Reid resigned in March after CEO Leo Mullin quit.

Grinstein ``hinted at what would be a more comprehensive review of the RJs in the network,'' said Chris Renkel, a spokesman for the Delta Air Line Pilots Association in Atlanta. Grinstein got ``rousing applause'' from pilots at meetings in April when he criticized previous management's use of the regional jet, saying it was an inferior product on longer routes, Renkel said.

``From Jerry's perspective, you fly more than 2.5 hours on an RJ and it's a cramped ride,'' Buttrell said. About 210, or 7 percent, of Delta Connection flights exceed 2 1/2 hours, he said.

Delta may also scale back flights from its Salt Lake City hub, reducing the need to use 50-seat jets, Baker said. The Utah city is a Delta hub for funneling flights in the western U.S. The smaller Delta Connection jets provide similar service at Delta hubs in Atlanta and Dallas.

Higher Costs

``The industry is migrating toward bigger planes and fewer hubs,'' Baker said.

With business travelers reluctant to pay higher fares, the higher unit cost of flying the 50-seat jets is a less profitable proposition, said Mike Boyd, a consultant with the Evergreen, Colorado-based Boyd Group.

The cost for flying each seat a mile is between 25 cents and 30 cents on routes 200 miles or less and falls to 12 cents on routes longer 900 miles, where comfort becomes an issue, Boyd said. By comparison, East Coast rival JetBlue's unit cost was 6 cents for the first quarter.

Delta's contract with the pilots has limited the use of small jets to prevent the airline from moving pilots from higher- paying jobs at the main airline to lower-paid work at the Delta Connection carriers. For example, Delta can only fly 57 of its 70- seat jets.

Bargaining Chip

Additional restrictions on regional jets at Delta Connection may become an issue with pilots as the airline seeks concessions of $800 million, Baker said.

In 1992, 20 small jets operated in the U.S. and most carriers used turboprop planes on shorter routes, according to the Regional Air Service Initiative. Now, U.S. airlines fly 1,368 regional jets, the manufacturers' group said.

Passengers initially welcomed the new small jets because they offered more comfort, speed and perceived safety than the turboprop planes they were replacing on shorter routes. After the Sept. 11 attacks reduced demand, airlines introduced the smaller jets on longer routes, replacing larger planes.

America West Holdings Corp., parent of America West Airlines, phased out 12 regional jets last year as it cut flights at its Columbus, Ohio, airport hub. US Airways Group Inc. said in May that it would reduce flights at Pittsburgh, the base for its MidAtlantic Airways regional-jet operation.


To contact the reporter on this story: Lynne Marek in Chicago at [email protected]o contact the editor responsible for this story: Steve Geimannin Washington at [email protected]ast Updated: June 10, 2004 10:31 EDT

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[FN FAL]

So much for bypassing hubs...

Arlington, Va.-based US Airways pays six independently owned smaller airlines to fly many of its so-called express routes -- short hops on small planes that serve such smaller cities as Harrisburg, Erie and Johnstown. Those six airlines, plus four small carriers owned by US Airways, are the "spokes" that feed the Pittsburgh International hub.

The small planes, sporting US Airways' familiar navy and gray color scheme, account for 272 of the airline's daily flights. They also provide critical intrastate service.

All of that could fly away as US Airways abandons its hub model and transforms itself into a carrier that emulates low-fare leaders Southwest Airlines and JetBlue Airlines: point-to-point service on routes with high passenger volume.

"We're taking a look at the entire network," US Airways spokesman David Castelveter said.

US Airways needs only to cancel its contracts with the smaller airlines to end the relationship. The small carriers can continue flying the routes, but many wouldn't attract enough passengers without convenient connecting hub service at Pittsburgh International.

The process already has begun: US Airways no longer contracts with Colgan Air of Manassas, Va., to serve Lancaster. Colgan decided last year not to fly there on its own. On July 11, the scenario will be repeated at Arnold Palmer Regional Airport, near Latrobe in Westmoreland County. US Airways will pull the plug on its deal with Mesa Airlines of Phoenix, and Mesa won't continue the service. Other airports haven't lost all service, yet, but some destinations now are harder to reach and require two short flights, perhaps through Philadelphia International Airport. That's the case at Williamspor

The small carriers can continue flying the routes, but many wouldn't attract enough passengers without convenient connecting hub service at Pittsburgh International.