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Regional consolidation is coming

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FDJ2

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[FONT=Tahoma, Verdana, Lucida]The Boyd Group Advantage[/FONT]

Aviation Perspectives & Insights
Available Nowhere Else
[FONT=Tahoma, Verdan, Lucida]Hot Flash[/FONT][FONT=Tahoma, Verdan, Lucida] - October 10, 2005[/FONT]
[FONT=Tahoma, Verdan, Lucida]Mesaba, Comair - Just The Start
Of A Major SJP Consolidation
[/FONT]
[FONT=Tahoma, Verdan, Lucida]Okay, where are those learned university professors now? [/FONT]
[FONT=Tahoma, Verdan, Lucida]We're referring, of course, to the academics and the other battery-powered analysts who so confidently predicted just weeks ago that regional airlines would certainly fill in the gaps when those dumb legacy carriers met their timely and well-deserved ends. After all, they contended, regional airlines remained profitable while the big guys were filing chapter 11 in droves.[/FONT]

http://www.aviationplanning.com/images/hf1017.JPG[FONT=Tahoma, Verdan, Lucida]Now that Mesaba has done a one and a half gainer into chapter 11, you can plan on these same empty suits suddently "predicting" more problems for these "regional airlines."[/FONT]

[FONT=Tahoma, Verdan, Lucida]What they'll miss, however, are the fundamental differences between bankruptcies at mega carriers and those at small jet providers.[/FONT]
[FONT=Tahoma, Verdan, Lucida]The legacies in chapter 11 such as Delta and Northwest are re-jiggering theit cost structures to accomodate $2 per gallon jet-A. The "regionals" that may go into bankruptcy will do so mainly because market need is evaporating. They are vendors of a product that is in declining demand. That's a problem that bankruptcy can't fix.[/FONT]

[FONT=Tahoma, Verdan, Lucida]For SJPs, in bankruptcy or out, the fact is that they and many of the aircraft they operate are becoming econmically obsolete. To be sure, going forward, there'll be a need for these entities, but a much reduced one.[/FONT]

[FONT=Tahoma, Verdan, Lucida]The Economics Are No Longer Positive.[/FONT][FONT=Tahoma, Verdan, Lucida] While other consultants were out touting "regional" airlines and "regional" jets, our forecasts predicted this situation over four years ago. Our analyses of fleet trends and airline strategies pointed clearly to a coming glut of both RJs and the entities that operated them. [/FONT]

[FONT=Tahoma, Verdan, Lucida]The Comair pilots strike was a watershed event that illumated the fundamental changes that had taken place in what was (and is) still mis-labled as the "regional airline industry." These entities were no longer small. They were no longer "regional." They were no longer second-string, either in terms of quality of operation, nor in overall employee compensation. They were graduating into the big leagues. But that also brought big league expense levels.[/FONT]

[FONT=Tahoma, Verdan, Lucida]Employee demographics changed, too. In what some might refer to as "the good old days" of independent regional airlines, these entities were mostly places where pilots built time flying Beech 99s, Cessnal 402s, Shorts 360s and such, while they eagerly blanketed major carriers with resumes.[/FONT]

[FONT=Tahoma, Verdan, Lucida]Enter code-sharing, regional jets, and, in many cases, wage rates that no longer required food stamps to assure daily nutrition, and "regional airlines" became less of a transition job and more of a main career.[/FONT]

[FONT=Tahoma, Verdan, Lucida]And while this was laudable in some ways, it also exposed the Achilles heal of that segment of the air transportation industry: its value was fundamentally based on its ability to sell lift cheaply. That, in turn, was largely based on low labor costs. The advent of sophisticated, expensive new jet aircraft raised the cost bar, and pointed to labor unions at "regional airlines" demanding closer parity to employees at larger carriers.[/FONT]

[FONT=Tahoma, Verdan, Lucida]Poof! A lot of the raison d'etre for having these carriers operate under contract started to erode. Toss in the thin economics of RJs, and high fuel, and the spread between what these entities could deliver in terms of feed traffic on one hand, and the costs of doing it on the other, got real thin, real fast.[/FONT]http://www.aviationplanning.com/images/sjppredict.JPG

[FONT=Tahoma, Verdan, Lucida]Our forecast clients - including aircraft and engine manufacturers - were made well aware of these trends and the data that supported them. Most other consultants ran with the pack, "forecasting" growth and prosperity for both "regional airlines" and regional jets.[/FONT]

[FONT=Tahoma, Verdan, Lucida]The SJP Future: Bleak. And It's Going To Get Worse. The folks who attend our annual Aviation Forecast Conferences were apprised of the trend. This year's Conference, being held this week in Savannah, reviews other emerging trends in the industry. [/FONT]

[FONT=Tahoma, Verdan, Lucida]As one example, we'll be reviewing the data and trends that point to the fundamental long-term strengths of "legacy" carriers, and the high potential for very tough times ahead for the LCC segment of the industry. We'll be reviewing issues of mergers and airline consolidations - and why such events won't reduce "over capacity." We'll be looking at the tougher times that airports will be facing in retaining air service, and how airport costs will be increasingly pivotal.[/FONT]

[FONT=Tahoma, Verdan, Lucida]The attendees will be hearing a lot of heresies - heresies just like they heard four years ago in regard to a coming glut of RJ. Heresies that other consultants will be "predicting" in the years ahead. [/FONT]

[FONT=Tahoma, Verdan, Lucida]After they're too obvious to miss.[/FONT]
 
uh-oh

anybody have the number to that truck driving school

oh well I can always go back to the farm and milk cows
 
Dumbluck said:
anybody have the number to that truck driving school

I'd say be a garbage man....the bastard just picked up my trash....didn't get out of the truck or nothing....just lined it up right, pushed the buttion and like magic, the trash was emptied and the can but back on the friggen curb......they even have air conditioning and radios.......bastards...
 
I am pretty sure trashmen earn a respectable living too. The same cannot be said for all of us.
 
As usual, Boyd demonstrates a firm grasp of the obvious. He pats himself on the back for telling us what everyone has known now for several years: supply is outpacing demand for 50 seat RJ's.

He uses the shotgun approach to forecasting trends. He simply makes dozens of vague predictions, then latches on to the one or two that turn out right and acts like he's the only person to ever think of it.
 
SJP=Shiny Jet Phenomena.............why is it that there are so few Majors that contract out RJ service are profitable? Isn't the definintion of insanity doing the same thing over and over again expecting different results. There are I think 3 Major carriers that are expanding that have Contract RJ's..CAL Frontier, jetBlue (on oder) and a 190 isn't an RJ either, and America west. Why else does J.O. want out the 50 seaters so bad. Just my 2 cents.:confused:
 
You'd think a hotshot consulting group would know that it's Achilles' HEEL, not "heal". Maybe my next career can be copy editing. Are they unionized? :)
 
Nindiri said:
As usual, Boyd demonstrates a firm grasp of the obvious. He pats himself on the back for telling us what everyone has known now for several years: supply is outpacing demand for 50 seat RJ's.

Actually, Boyd has been predicting an RJ glut for sometime now. Many on this forum have been in denial with regards to the high costs of RJs, their poor economics and the urban myth that RJs are profitable.

The 70 seat CRJ is not far behind the 50 seater.
 
FDJ2 said:
Many on this forum have been in denial with regards to the high costs of RJs, their poor economics and the urban myth that RJs are profitable.

The 70 seat CRJ is not far behind the 50 seater.

Are you delusional? Who exactly has been saying that? Please show a SINGLE statement which supports your claim.
 

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