So much for code shares

[big dog1]

US Airways Places Record Regional Jet Order With Bombardier and
Embraer
Monday May 12, 9:00 am ET
Agreement Comprises Both 50-Seat and 70-seat Aircraft


ARLINGTON, Va., May 12 /PRNewswire-FirstCall/ -- US Airways has set
into motion another key element of its business recovery plan today
with an agreement to purchase a total of at least 170 Canadair and
Embraer regional jets from Bombardier Aerospace of Canada and
Embraer of Brazil, respectively. The first aircraft delivery is
scheduled for October 2003.
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The order equally splits between the world's two leading regional
jet manufacturers a combination of 170 firm orders and 380 options
to purchase aircraft. The estimated value of the firm order, based
upon list price, is approximately $4.3 billion. Financing terms were
not disclosed.

"These new regional jets will enable US Airways to generate
additional revenue by growing our route network and competing more
vigorously in short- to-medium-length haul markets," said US Airways
President and Chief Executive Officer David N. Siegel. "The RJs also
will enable us to increase hub feed by adding new markets that were
too distant for turboprop aircraft, and replace current turboprop
flying, which will please many customers who prefer jet aircraft.
Regional jets will allow us to replace and complement larger jet
aircraft on routes with poor to marginal performance, which then can
be re- deployed to operate in more profitable destinations, such as
the Caribbean and on other routes where we currently do not fly."

"Both manufacturers were extremely aggressive in vying for our
business. I believe that this agreement is going to benefit US
Airways and its employees, and brings the greatest value to our
company," said Siegel. "As a result of this great deal, we were able
to split the order equally between Bombardier and Embraer."

Under the Bombardier agreement, US Airways has firm orders for 60
CRJ Series 200, 50-seat single-class aircraft; and 25 CRJ Series
700, 75-seat dual-class aircraft. The 50-seat order for the CRJ
Series 200 aircraft is scheduled to be delivered beginning in
October 2003 to US Airways Express wholly owned subsidiary PSA
Airlines. All firm order CRJ aircraft will be delivered by April
2005.

US Airways also has placed firm orders for 85 Embraer 170, 70-seat,
dual class aircraft, with the first delivery scheduled for November
2003 to MidAtlantic Airways, a regional jet division of US Airways,
Inc. US Airways has the option to convert the Embraer 170s to
Embraer 175s with 76 seats. All Embraer 170 deliveries are to be
received by September 2006.

Siegel said that these smaller jet aircraft are extremely well
suited to serve the US Airways network and will fill in nicely with
schedules at key times at the airline's hubs in Charlotte, N.C.,
Philadelphia and Pittsburgh, as well as its major East Coast
operations at Boston, New York LaGuardia and Reagan Washington
National.

"We are extremely pleased that US Airways has selected the
Bombardier CRJ family of regional jets as part of its profit
strategy," said Pierre Beaudoin, president and chief operating
officer, Bombardier Aerospace. "US Airways will realize the
operating benefits of high performance, low operating costs and
family commonality. In addition, US Airways customers will also
enjoy more convenient, comfortable service."

"To be a part of US Airways' remarkable growth plan and to have them
as the launch customer in North America for the Embraer 170 is
exciting for all of us at Embraer," said Mauicio Botelho, president
and chief executive officer of Embraer. "US Airways is redefining
the American commercial airline market, and we are very proud to be
supplying the Embraer 170, an aircraft that is redefining what
people expect from a commercial airliner."

The CRJ Series 700 aircraft and the Embraer 170s will offer both
First and Coach-Class service. Every seat is either an aisle or
window seat. These regional jets also provide comfortable leg space
with plenty of overhead and under-the-seat baggage storage room and
stand-up headroom. They have a cruising speed of around 500 miles
per hour and can cruise at altitudes above 30,000 feet. GE engines
will power each of these regional jets.

US Airways is the nation's seventh-largest airline, serving nearly
200 communities in the U.S., Canada, Mexico, the Caribbean and
Europe. US Airways, US Airways Shuttle, and the US Airways Express
partner carriers operate over 3,300 flights per day, with US Airways
Express wholly owned subsidiaries and affiliate carriers operating
more than 60 percent of those flights. For additional information on
fares and schedules, visit US Airways online at usairways.com.

Bombardier Aerospace, a unit of Bombardier Inc., is a world leader
in the design and manufacture of innovative aviation products and
provides services for the regional, business and amphibious aircraft
markets. It also offers Bombardier Flexjet* and Bombardier Skyjet*
business aircraft programs, technical services, and aircraft
maintenance and pilot training for business, regional airline and
military customers.

Bombardier Inc., a diversified manufacturing and services company,
is a world-leading manufacturer of business jets, regional aircraft,
rail transportation equipment and motorized recreational products.
It also provides financial services and asset management in business
areas aligned with its core expertise. Headquartered in Montreal,
Canada, the corporation has a workforce of some 75,000 people and
manufacturing facilities in 25 countries throughout the Americas,
Europe and Asia-Pacific.

Embraer (Empresa Brasileira de Aeronautica S.A. - (NYSE: ERJ -
News); (Bovespa: EMBR3 and EMBR4)) is one of the world's leading
aerospace companies. With headquarters in Sao Jose dos Campos, state
of Sao Paulo, and offices and customer service bases in Australia,
China, France, Singapore and the United States, the Company as of
March 31, 2003, has a total workforce of 12,407 people. Embraer was
Brazil's largest exporter from 1999 to 2001, and second largest in
2002. As of March 31, 2003, Embraer's firm order backlog totaled
US$7.9 billion and the total backlog, including options, equaled
US$19.2 billion.

Trademarks of Bombardier Inc. or its subsidiaries.

 

[big dog1]

Airlines boost use of smaller regional jets
Eric Wieffering, Star Tribune

Published May 11, 2003 REG11

Northwest Airlines has spent much of the past 27 months in crisis, slashing its payroll, grounding airplanes and reducing service to some markets -- all while racking up $1.6 billion in losses.

But the worst of times for Northwest have been the best of times for Pinnacle Airlines, the small jet operator it owns and uses to ferry passengers from smaller locales such as Bangor, Maine, or Tulsa, Okla., into its Detroit, Memphis and Twin Cities hubs.

Pinnacle more than doubled its profit in 2002, to $32 million, and now flies to 69 cities, up from 57 at the end of 2001.

If financially ailing Northwest and its rivals get their way, more travelers might find themselves boarding smaller jets instead of a big DC-9 or a small Boeing 737.

With their lower costs and smaller, 36-to 90-seat jets, Eagan-based Northwest and other big carriers view regional airlines as a low-risk way to enter new cities, or as a way to avoid abandoning a market if demand weakens or competition increases. Given the dire state of the industry, Northwest, like its rivals, wants to increase its use of regional jets dramatically.

"Clearly, there's a more compelling reason than ever to use regional jets," said Douglas Abbey, president of AvStat, a Washington, D.C., firm that closely follows the small-jet market. "It's more economical to fill a smaller airplane."

But some analysts say the reliance on regional jets might be misplaced. Fares on regional jets are often higher on a per-mile basis, and by some measures, the planes are more costly to operate. In addition, passengers might be unwilling to endure the smaller cabins and tighter seating on flights lasting more than two hours.

"Regional jets are not the solution to all the problems of the airline industry," said Michael Boyd, a Colorado-based airline analyst.

To increase regional jet flying, Northwest must first win approval from its pilots, who have long worried that Northwest is trying to farm flying out to lower-paid pilots at regional airlines.


In addition, small carriers are not immune from labor strife, which ultimately can increase costs at regional carriers.

A Thirteen-week strike by Comair pilots in 2001 cost Delta Air Lines $4 million a day in lost revenue. And pilots at Minneapolis-based Mesaba Airlines, which is partly owned by Northwest, have spent the past 22 months negotiating a contract.

Opening new markets

As recently as a decade ago, travelers flying from Des Moines had little choice but to take a 100-seat Northwest DC-9 to the Twin Cities, where they could catch connecting flights to their final destinations.

The regional jet changed all that. It allowed Delta Air Lines, America West and Continental Airlines to enter Des Moines with 50-seat jets flown by pilots making one-third the pay of pilots at the big carriers. More important, it opened up a new pool of customers to flow through their own hubs.

The bet appears to be paying off. America West replaced its 50-seat regional jet with a 64-seat version this month, and it will add an 80-seat regional jet next month in Des Moines. While passenger traffic is down at most large airports, it has risen each of the past 11 months in Des Moines, said Gary Hagan, a spokesman for the airport. "A lot of our growth has come from carriers adding more and more regional jet flights," Hagan said.

Northwest, however, has been forced to switch from mostly DC-9 service to small jets operated either by Mesaba Airlines or Pinnacle, based in Memphis, whose pilots are paid about two-thirds less than their Northwest colleagues.

A Northwest spokeswoman said the carrier also uses small jets to open new markets. It began service to Providence, R.I., and Jacksonville, Fla., with them, only to eventually upgrade to the larger Airbus 319 flown by its own, higher-paid pilots.

Small jets "are a tool that operates in certain markets when nothing else will," said Tom Wychor, chairman of the Mesaba branch of the Air Line Pilots Association.

Northwest declined to make executives available to discuss its regional jet strategy or its importance to the company's bottom line. In September, however, vice president of marketing Jim Cron told Crain's Detroit Business that regional jet service would account for $1 billion of Northwest's total revenue in 2002, and that it would increase by $130 million annually until 2005.

Regional airlines have been around since the industry was deregulated in 1978, but it was the introduction of small, fast jets in the late 1980s that spurred the industry's growth.

Delta was the first major carrier to make a big bet on regional jets. It bought 20 percent of Comair, a Cincinnati operator of Piper turboprops, in 1984. Four years later Comair bought the first 30-seat Turbo-prop manufactured by Embraer, a Brazilian company. By the time Delta acquired Comair in 2000, for $1.8 billion, sleepy Cincinnati had been transformed into a vital hub. The rest of the industry took notice.

Different views

Regional airlines carried almost 47 million passengers the first six months of 2002, an increase of 15 percent from the same period a year earlier. One of every seven travelers flew on a regional carrier in 2002, up from one of eight in 2001, according to the Regional Airline Association, the industry's Washington, D.C.-based trade group.

Passengers have differing views of the small jets. If they represent new service, or if the jets are replacing turboprops, passengers love them, said Joe Brancatelli, a nationally syndicated business travel writer who lives in New York. But if the small jets are replacing larger planes, or being used on very long trips, travelers are likely to grumble.

Brancatelli knows -- he recently completed a 1,000-mile trip from New York to Florida on a 50-seat jet. Delta used to use a 737 on the route. "I'd rather fly a 30-year-old Northwest DC-9 than one of those small jets."

Today, regional carriers fall into three groups: independently owned and operated airlines such as Mesa Airlines, based in Phoenix; publicly traded carriers like Mesaba that are largely controlled by their major airline partners; and companies such as Pinnacle, Comair and American Eagle, which are wholly owned by their big-plane brethren.

But all the regionals, even those independently owned, are at the financial mercy of larger partners that buy their planes, market their flights and pay a set fee to the regionals no matter how full -- or empty -- their planes are.

Northwest, for example, buys most of the planes for Mesaba and Pinnacle, paints them in its own colors, and leases them to its regional partners. Other carriers do the same for their owned and non-owned regional affiliates. Like Northwest, they also handle reservations and marketing. For most passengers, the regional carriers have no identity of their own.

And the majors aren't above playing one regional partner against another. As bargaining with unionized Mesaba pilots has dragged out for almost two years, Northwest has allocated most of its sleek new 50-seat Canadair jets, as well as new service out of the Twin Cities, to Pinnacle. "We've been told at the bargaining table that we need to agree to a 'growth contract' " in order for Mesaba to get new planes, Wychor said.

Northwest also has guaranteed Pinnacle a minimum operating margin of 12 percent. Northwest's operating margin in 2000 -- its last profitable year -- was 5.1 percent.

In the '90s, pilots at Northwest and other big airlines were alarmed both by the deepening financial ties with regional carriers and the advent of ever-larger regional jets. Fearful that they would lose some flights to lower-paid regional crews, most big carrier pilots sought and won contract language that limited the small-jet fleet operated by regional partners.

But given the industry's current woes, airline executives have argued for the flexibility that regional jets provide.

"The major airlines may have lost forever some of the high-fare-paying business travelers who made certain routes profitable," Abbey said. "Now it's a matter of finding the structure that works when the times are bad."

US Airways, which emerged from bankruptcy protection this year, is reducing the number of big jets it operates, but plans to add nearly 300 regional jets by 2006.

Pilots at American Airlines and United Airlines have already agreed to allow management to operate more regional jets and larger sizes.

Northwest wants similar concessions from its pilots. In addition to pay cuts, the airline wants to remove all limits on small jets with 50 or fewer seats, double to 72 the number of jets seating between 51 and 70 passengers, and increase the number of seats on its AVRO-85 jets from 69 to 85. Union leaders are reviewing the request.

"Pilots want Northwest to remain competitive," said Hal Myers, a Northwest pilot and spokesman for its union. "But if there's going to be significant growth in the area of small jets, we want, in some ways, to share in that growth and not be harmed by it."




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