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Interesting RJ article............

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General Lee

Well-known member
Joined
Aug 24, 2002
Posts
20,442
Finding the right fit

Smaller jets lift profits, but have airlines overindulged?


09:19 AM CDT on Saturday, June 5, 2004


By ERIC TORBENSON / The Dallas Morning News



A decade ago, the 50-seat regional jet started an industry revolution.

Faster than the noisy turboprop planes they replaced, regional jets allowed airlines to profitably serve markets they couldn't touch before.

Major airlines fly about 800 50-seat regional jets today, or about a third of all their planes. More are coming each month.

New discount carrier Independence Air has staked its identity around a fleet of 87 50-seaters, dubbing them "I-jets."

"They're great aircraft, and they're capable of handling the range of flying for most of the markets we want to serve," said Lisa Bailey, a spokeswoman for the AMR Corp.'s American Eagle unit.

But some analysts and consultants are starting to ask whether domestic carriers have indulged in too much of a good thing.

"It can be a long haul in a small tube," said Stuart Klaskin, an aviation consultant with Klaskin Kushner & Co. in Miami, a self-described "big guy."

Part of the problem is how major carriers have used the 50-seaters.

Fliers in small towns who were accustomed to traveling in turboprops welcomed the sleek-looking jets that replaced them.

But lately, major airlines have substituted 70-seat and 50-seat regional jets for larger planes serving big markets.

Some say their welcome has been worn out.

"They're like the antibiotics of the airline industry," Mr. Klaskin said. "They're good for its economic health, but they've been dangerously overprescribed. And passengers have developed an immunity to them, to some degree."


No resale value?

For the most part, regional jets have been flown by regional affiliate airlines. American Eagle, for example, provides feeder service for Fort Worth-based American Airlines Inc. Its 50-seat jets are Eagle's most profitable planes.

Independence Air, meanwhile, represents the reinvention of Atlantic Coast Airlines, which was unable to renegotiate an existing agreement to fly regional jets for United Airlines Inc. It launches June 16 from Washington Dulles International Airport.

"ACA has the right idea because they know there's no future in flying 50-seaters for United," said Michael Boyd, an aviation consultant in Evergreen, Colo.

Once the darling of fleet planners everywhere, 50-seat regional jets face an uncertain future as assets for airlines, said Mr. Boyd, who thinks major carriers have bought far too many of the planes.

"There's not going to be any aftermarket for 50-seaters in a few years," he predicted. "They're not going to be able to sell them."

In a sign of the glut of 50-seaters, Mr. Boyd said, United had no problem immediately replacing the 87 planes that will now fly the Independence livery with other aircraft from other regional carriers hungry for business.

As with any start-up airline, Independence Air faces steep odds to stay aloft for long, analysts said.


New math

Part of the challenge, analysts say, is that the math behind the regional jet business has changed.

The regional jet, built primarily by Bombardier Inc. of Canada and Embraer of Brazil, gave airlines a new way to serve "thin" markets that didn't have enough people to profitably fill standard jets with 120 or more seats.

What's different is the same issue that bedevils airlines on virtually every front: Travelers aren't willing to pay as much to fly as they did in the mid- to late 1990s, said Bob Mann, an industry consultant.

Airlines make most of their money from business travelers who may pay up to four or five times more on the same flights than vacationers who book further in advance. It's those business fares that carriers crave.

Until recently, airlines have relied on smaller regional jets to boost average fares on a flight.

For example, if a flight has 30 passengers paying higher fares, that would account for 25 percent of the seats on a 120-seat plane, but 60 percent of those on a 50-seater.

The problem is that with far fewer business fliers paying top dollar, it's harder for an airline to fill a regional jet with high-fare passengers.

Some discounters have already stepped back from relying on regional jets. Orlando-based AirTran Airways Corp. quietly ended its regional jet partnerships this year. Officials at America West Airlines have said they have too many regional jets.

At the big network carriers, many travelers are reluctant to shell out a four-figure fare for what can be a cramped flight without a first-class cabin.

Mr. Boyd half-jokingly says flying in a regional jet for three hours is a "recipe for DVT" – deep vein thrombosis, in which blood clots form due to tight conditions. Few trips on regional jets are very long, but the average flight time has been increasing.

Also, without the higher fares, smaller jets can't overcome the higher costs borne from having fewer seats than mainline jets.

The fare meltdown especially hurts the economics of high-cost 50-seaters.

Independence Air faces the daunting prospect of flying at a cost of 16 cents per seat mile, while earning only about 10 cents, analysts say. A seat mile, a standard industry measure, represents one seat flown one mile.


Key market

Independence Air is expected to burn through cash for quite some time. The upstart carrier's salvation may come when the first of its 27 Airbus A319s arrive this fall. Those planes will have lower per-seat costs because they'll have 130 seats instead of 50.

The carrier intends to fly them initially to the West Coast. As more of the Airbus jets arrive, Independence will consider Houston and Dallas/Fort Worth as destinations, said Rick DeLisi, an airline spokesman.

"We definitely expect that Texas and the upper Midwest are possibilities for us," he said.

Although regional jets may have lost some allure with high-dollar fliers, they're still the best solution for serving smaller cities.

Airlines continue to receive new jets every month. Most large hubs wouldn't work without the stream of passengers from regional jets.

Research from Citigroup's Smith Barney unit shows that regional jets will account for nearly three-quarters of the fleets of both Continental Airlines Inc. and Delta Air Lines Inc. by 2005 and 59 percent of United's.

At struggling US Airways Corp., regional jets are seen as the centerpiece of a turnaround effort, as the carrier struggles to fight off low-fare competitors such as Dallas-based Southwest Airlines Co.

Delta depends on regional jets more than any other traditional carrier. It reconfigured nearly all its hub airports, including its 180-flight-per-day hub at Dallas/Fort Worth International Airport.

The small jets have replaced most of Delta's large planes serving D/FW. By offering more flights a day on regional jets, Delta aims to attract high-dollar business travelers.

Delta executives say they're encouraged by the changes at D/FW, but they're not finished tinkering.

Some expect Delta to dump the hub as it rethinks its business plan in an attempt to avoid bankruptcy.

"We've improved our financial performance compared to what it was before, but we still have some work to do at D/FW," said Peggy Estes, a Delta spokeswoman.

American Eagle has been expanding its schedule, mostly using regional jets, by at least 20 percent annually. Its fleet of 158 regional jets continues to grow as AMR tries to catch up to Delta and others in deploying the planes.

American officials concede they trail competitors in using regional jets to boost their hubs, accounting for just 34 percent of AMR's total aircraft fleet this year, according to Smith Barney.

Eagle uses regional jets for other types of routes, including its shuttle service from New York's LaGuardia Airport to Boston and to Washington, D.C. Eagle executives say they like the results.

It remains unclear whether AMR will follow the lead of Continental and Northwest Airlines Inc., both of which have sold their respective regional carriers and banked hundreds of millions from the sales.

"I don't know why they don't spin off Eagle," Mr. Boyd said.

AMR chairman and chief executive Gerard Arpey said in an April interview that the company continues to weigh the merits of a possible spin-off but that it also sees benefits to keeping Eagle under its wing.


Positive attitude

At Independence Air, the carrier is determined to make it with 50-seaters, Mr. DeLisi said.

The airline won't fly any of its small jets more than two hours, and most of its flights will average just over an hour from its Dulles hub.

Independence will emphasize frequent flights on its routes to allow business fliers to get to a city and come back home the same day. The airline is installing brand-new interiors with leather seats.

"We did a lot of research asking customers about the plane, and though some did share that they didn't like it as well as others, we saw some surprisingly positive impressions of the plane in a lot of our markets," Mr. DeLisi said.

"Our feeling is that as long as the interior of the plane is comfortable and the service is excellent, we're going to do well."


Bye Bye-General Lee
 
"I don't know why they don't spin off Eagle," Mr. Boyd said.

Once again Michael Boyd opens his mouth to prove that he's an idiot!

Currently Eagle is the only thing in the AMR portfolio that's generating a profit for the corporation. For the first quarter of 2004 Eagle had an operating income of $58 million on $420 million in revenue with better then a 10% operating margin. And this "genius" can't figure out why Eagle isn't up on the auction block!

:rolleyes:
 
what about making the rj better? Add better seats move the cargo compartment back about 1 or 1/2 foot back to give pax more room? That airplane is very uncomfortable on long flights of hour and half. Haven't even taken a flight of 3 hours or more can't image...What about entertainment systems (like jet blue)?
 
Faster than the noisy turboprop planes they replaced, regional jets allowed airlines to profitably serve markets they couldn't touch before.

Obviously this guy hasn't ridden in an ERJ :eek:

It has to be the only commercial airliner where the crew wear David Clark headsets.


Typhoonpilot
 
typhoonpilot said:
Faster than the noisy turboprop planes they replaced, regional jets allowed airlines to profitably serve markets they couldn't touch before.

Obviously this guy hasn't ridden in an ERJ :eek:

It has to be the only commercial airliner where the crew wear David Clark headsets.


Typhoonpilot
No kidding, Dash and ATR guys can wear Telex 750's, and ERJ guys wear DC's....go figure
 
Smokin' something

I find a 2-3 hr ride in a CRJ-200 more comfortable than same in a 757.

2 seats per row, not 3. More leg room. Quieter cabin. Cheerful (not bitchy nor disgruntled) crew.

I'm sure revenue pax notice the same thing.
 
>That airplane is very uncomfortable on long flights of hour and half. Haven't even taken a flight of 3 hours or more...


The percentage of RJ flights over 2.5 hours is pretty low, compared to total flights. I can't imagine anything being comfortable for a ride that long. My friends who ride Delta often b!tch about MD-88s more than anything. ATL=PHX for example - 4.5 hours with absolutely no entertainment.

The only thing that makes coach in a 777 survivable is having 8 channels of movies. Coach sucks no matter what you're riding in.
 
rumorhasit said:
what about making the rj better? Add better seats move the cargo compartment back about 1 or 1/2 foot back to give pax more room? That airplane is very uncomfortable on long flights of hour and half. Haven't even taken a flight of 3 hours or more can't image...What about entertainment systems (like jet blue)?
They need to pull two rows of seats out.
 
Research from Citigroup's Smith Barney unit shows that regional jets will account for nearly three-quarters of the fleets of both Continental Airlines Inc. and Delta Air Lines Inc. by 2005 and 59 percent of United's.

Hmmm, Continentals' most recent annual report shows 355 mainline aircraft, and 224 regional jets. Firm orders include 63 more mainline aircraft and 50 more RJs. I know CAL is retiring the MD-80s, and a hundful of older 737-300s. But unless my math is wrong, they are nowhere near close to having RJs make up even half of their fleet, much less three quarters. Makes me wonder how accurate the rest of the article is. Or any aviation article for that matter.
 
Ganja,


You obviously haven't flown on a Song 757. It is ten times more comfortable than an RJ, the crews are cheery, and you get Dish Network TV that is live--with games that you can play against other people in your same row.(Trivia now, but other games later) You should try it sometime, the people I say goodbye to after each flight absolutely love it.

Bye Bye--General Lee
 
I thought Song was a refreshing change of pace myself. The TV system is actually better than JetBlue's by a big margin. Good job Song - I think everyone should check it out...
 
Fancy 75's with tv and new paint may be comfy for pax, but that still doesnt pay the bills for Big D. It may be a long ride to my overnights this month (RDU, MSP, BNA) out of Dallas, but we never had less than 39 people on those flights. Looks like we made money to me. I heard no complaints from the deplaning (or boarding for that matter) pax. In fact, many of the pax were glad they didnt have to deal with a stop in ATL or CVG.

I dealt with a commute in the back of a 73 or A319 for 2 1/2 yrs to SYR (out of DFW). Most of the time I was seated in the middle seat (sometimes at the bulkhead which everyone knows doesnt recline). No entertainment and NO meals either. At least on the RJ I know i get a window or isle, and I wont be surrounded by some "Big Bubbas" on both sides to fight over the armrest with and get stuck in some "whats your job like" type conversation.

Just my thoughts,

ASAFO
 
.......This whole issue has been beaten to death on these boards.


As long as RJ's make money, and PAX won't pay more then $179 for a ticket, then RJ's will be the order of the day......whether they like it or not. As for making RJ's "more comfortable," there's absolutely no incentive to do this. If you remove seats, you remove poetential revenue. ASA/CMR are already restricted from their true potential by scope, if you take seats out, it's that much more money down the drain. Didn't American try this whole comfort gig (by removing seats), and failed miserably......people will NOT pay more for a plane with two more inches of leg room.

If anyone is interested, check out www.embraer.com and the link to the "rule of 70-110," it's a pretty interesting market study done by Embraer.
 
RJs have their purpose, and this is changing. When the LCCs compete directly with them---the Major partners lose because of the lower fares. (you can't make money with 50 seats and $50 fares etc....) But, the LCCs will not fly to every city--and those city pairs without LCC competition can make more money because they can keep the higher fares. A friend of mine had to fly for business from EWR to STL via CVG on Comair last week, and the next day fly back to DCA via CVG on Comair again. The bill was $1400. He called me first to ask if he should pay that much(via his company)---and I said "Heck yeah----that will help the bottom line...." He did it.

There also seems to be another emerging market for RJs-----allnighters. Yes, allnighters. COEX is starting ONT to IAH on E145s leaving ONT at 12:50am and arriving IAH at 6AM. Allowing the planes to fly more can help pay off the daily lease rates--rather than leaving them at the gate overnight. There are probably plenty of cities that can support extra allnighters to get businessmen on their way. I do allnighters all of the time, and I think those RJ pilots want to join in! You get direct routings routinely.


ASAFOE120,

All of my flights have been full also lately--on Song and Mainline---and we have had to increase the size of aircraft (from a 757 to a 767-300 etc) to add room for extra passengers a lot lately too. You would think a full 767-300 could make money, right? The CASM is lower, no doubt.

Bye Bye--General Lee
 
"I don't know why AMR doesn't spin off Eagle"

Neither do I. They had something profitable...
and killed it. 2nd quarter of 2002 was profitable
for TWA LLC. In July 02 they announced the first
of a series of drastic cuts in the STL system,
violating what AMR had assured the FTC in order
to be allowed to purchas TWA. Instead of
incorporating profiles that were working to make
TWA more efficient than AA, they goose-stepped
right over the top of it.

IMHO, AMR never should have merged the two
operations. They should have (after sucessfully
renegotiating the leases on the TW Aircraft) left it
alone as a LCC. Really, the other "suitor" should
have been allowed to buy TW.

But as I am frequently reminded, I don't see the
big picture...
which (unlike Don Carty) is why noone has
ever given me $82M to not let the door hit me
in the a$$ on the way out.
 
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It's funny how the General posts every RJ bashing article he can find, avoiding the equal number of articles predicting their growth. I guess he only finds the negative ones "interesting" (interesting = fits mainline pilots agenda). Hey General, too bad your audience here is a bunch of RJ drivers instead of Delta execs.
 
Otto,


I titled the thread and "interesting" RJ article, which some people on this board may find "interesting." This article was critical of certain airlines, and people looking for jobs on this board may find that useful. I really didn't even have an opinion on it--especially in the first thread. As far as the Delta execs "knowing" about the RJ and it's fit into the Delta family---the main RJ proponent---"RJ" Fred Reid, is GONE. So is Leo----who pushed for Frequency over comfort. Our new leader--Gerry Grinstein--just stated at a SLC "town hall" meeting that our loyal passengers shouldn't fly on an RJ for more than two hours at a time and that we have too many of them. I personally believe that there are certain markets that are great for RJs--like explorer markets to test whether or not a mainline sized aircraft should eventually be put on there, and markets that have NO LCC COMPETITION and can bring in enough feed, but can't be justified with a mainline aircraft. There are plenty of those, and the RJs are a lot better than props too. Have a great day.

Bye Bye--General Lee


PS---Please find me a current RJ article that praises them.
 
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Dash 8 Q400

Not to change the subject but, General said, "They're better than props..."

I still believe that in MANY short-haul markets from Atlanta, Cincinnati, LaGuardia etc. the Dash 8 Q-400 would be a far superior airplane. On trips of less than 500 miles there is virtually no difference in flight time between the Q-400 and the CRJ. The cabin on the Q-400 is significantly larger and, of course, the Q-400 holds 70 passengers. The Q stands for "quiet" and Bombardier touts their noise and vibration cancellation system which makes the airplane significantly quieter than the CRJ throughout the flight envelope. The airplane burns a fraction of the fuel of a pure-jet at low altitudes which would make it far more efficient (important with todays fuel prices) on short segments...

  • From CVG: DAY, SDF, LEX, TYS, TOL, IND, CAK, and many more...
  • From ATL: TYS, CHA, CLT, HSV, PNS, and many more...
  • From LGA: RIC, MHT, BTV, ORF, PWM, and many more....
Horizon has been successfully flying the airplane for some time and is having tremendous luck with the Cat IIIA capability of the aircraft. Its technology is vastly superior to that of the CRJ.

Air travelers in the United States are some of the only in the WORLD that expect a 757 on every leg. In Europe and Asia high-speed turboprops are still a mainstay on many short-haul markets. But here in the US, where every home has an SUV, bigger is better and props are "scary". In April's "Airways" magazine, Comair CEO Randy Rodemacher said he believed that they could create a passenger friendly product with the 70 passenger Q-400.

I dont know what Delta's scope language has to say about turboprops but I believe that Comair and ASA would do wonderfully with this machine.In fact, i'd add the return of the turboprop to my (opinion) list of "things this company needs to do to survive" right along side:
  • Jetways in CVG,
  • ground air conditioning at every gate,
  • IFE and food purchase opportunities onboard,
  • no more than 2 hours on any aircraft that holds less than 50 pax.
Anyhow, just wanted to disagree with the General. I believe that there are turboprops on the market which are exceptional and Delta would be foolish to not look at this type when considering fleet replacement and expansion for Comair/ASA and the entire DCI family.

http://www.alaskaair.com/www2/company/fleet/images/Q400_photo.jpg
 
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Furloughed again,


I am glad that you want to disagree with me. My statement about props may have been ambiguous, since I was referring to smaller props--and the Dash 8-400 is a tad bit larger and more advanced. I agree that it would be nice to get some of the larger props--like the Dash 8-400---because the more seats you have--the better the CASM. Those Dash 8-400s are nice, and I see them all of the time when I pass through SEA or PDX. They are advanced and fast--two things that give them an advantage over the older ATR-72. But, in reality, the next phase that we (the Delta family) should be looking at is the 100 seater market. After our pilot pay cuts and creditor cuts---we hopefully will be able to finance some new aircraft--but I doubt the Dash 8-400 will be on the radar, unfortunately.

Bye Bye--General Lee
 
General Lee brings a different viewpoint
to a forum often preoccupied with
bashing Mesa crewmembers rather than
Lowerenstien himself or the parent
companies that contract his airlines to
take flying away from their subsidiaries.

Why do you think that one of the few
profitable airlines would "quietly end"
their RJ agreement, or that there is
no place for them in SWA's sucessful
business plan?

In many cases I think that RJ's are being
used not to generate profit but instead
to maintain market share and decrease
losses in markets that for whatever
reason the mainline employing the RJ's
are unwilling to abandon.

But as I said earlier, I don't see the big
picture...the jball's windows are too
small.
 

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