Regional Airlines Step In As Major Carriers Continue Slump

Regional airlines "are making huge contributions" to a business recovery in the commercial air industry. That word from Skip Barnette, president of Atlantic Southeast Airlines, a subsidiary of Delta Air Lines. He was speaking at the Phoenix conference of the Regional Airline Association. ASA operates more than 800 flights a day, many of which feed the hubs of major carriers from smaller cities around the country. While the majors are still worried about staving off bankruptcy and laying off workers, regional airlines represented at last week's RAA convention were bullish on growth.

Rapid growth in regional jets was topic one in Phoenix. Just a week before the convention started, US Airways stunned the industry by announcing a huge new order of 170 regional jets, worth more than $4 billion. USAirways just emerged from bankruptcy protection last month.

US Air has ordered 85 Embraer-170 regional jets and will option 50 more 170s. The carrier also ordered options on 140 ERJ-145s made by Embraer, the Brazilian aerospace company. USAirways also agreed to buy 60 Bombardier CRJ-200s, which seat 50, and 25 CRJ-700s, which seat 75 (ANN: May 14 2003 - "US Airways to Buy RJs").

In addition, US Air took options on about 100 more regional jets. Those options can be exercised across a mix of CRJ-200s and CRJ-700s according to future needs. If all options were exercised, the Embraer and Bombardier orders would be worth more than $13 billion.

The Future

Consultants attending the RAA show in Phoenix predicted regional carriers would grow quickly to assume a position in the travel marketplace once firmly held by the likes of United and American. Consultant Michael Boyd said the domestic air system is operating on revenue that is $18 billion to $20 billion less than it was designed for - "an airline industry that was designed for a marketplace that no longer exists," he said during a panel discussion. He predicted that, along with regional carriers, other airlines such as JetBlue and Southwest, would continue making money underselling the majors along their most profitable routes.

While that may drive down the cost of an airline ticket, it could also leave a lot of US markets underserved, said Boyd. Regional jets, he predicted, will soon become the backbone of the domestic aviation industry. "That's where the growth is going to be - supplying small-jet lift to airline systems who find it more efficient to do it with someone else flying the airplane rather than doing it themselves."

FMI: www.raa.org