Moderators: jsumali2, richierich, ua900, PanAm_DC10, hOMSaR

 
User avatar
william
Topic Author
Posts: 3350
Joined: Thu Jun 10, 1999 1:31 pm

Regionals next business model

Thu Feb 27, 2020 5:24 am

So what is the next business model to feed mainlines? The Regionals got fat when the majors where paying them a flat fee to fly routes. Then the majors wised up and the race to the bottom began with who can operate someone else's owned aircraft the cheapest and we are seeing the fallout from that. So what is next?
 
User avatar
TWA772LR
Posts: 7356
Joined: Thu Nov 17, 2011 6:12 am

Re: Regionals next business model

Thu Feb 27, 2020 5:27 am

I’d love to see the mainlines adapt a P2P model for their regionals. Like DEN-STL-MEM-IAH or things like that.

Or regionals become (gasp!) airlines for their respective regions under their own brand. To bad the Recession made Expressjet cease their branded ops.
When wasn't America great?


The thoughts and opinions shared under this username are mine and are not influenced by my employer.
 
jetmatt777
Posts: 4340
Joined: Sun Jun 26, 2005 2:16 am

Re: Regionals next business model

Thu Feb 27, 2020 5:31 am

TWA772LR wrote:
I’d love to see the mainlines adapt a P2P model for their regionals. Like DEN-STL-MEM-IAH or things like that.

Or regionals become (gasp!) airlines for their respective regions under their own brand. To bad the Recession made Expressjet cease their branded ops.


Milk runs defeat the purpose. OO operates a few for UA (EAS markets) out of DEN and ORD but they are even consolidating those into nonstops.

Running their own operation is too risky. The majors are fine putting their code on whatever the regional will fly. OO operates some at risk flying under UA's code. If the major is willing to put their brand on it, why not do it? Why compete with the companies that are keeping your lights on?
 
User avatar
TWA772LR
Posts: 7356
Joined: Thu Nov 17, 2011 6:12 am

Re: Regionals next business model

Thu Feb 27, 2020 5:37 am

jetmatt777 wrote:
TWA772LR wrote:
I’d love to see the mainlines adapt a P2P model for their regionals. Like DEN-STL-MEM-IAH or things like that.

Or regionals become (gasp!) airlines for their respective regions under their own brand. To bad the Recession made Expressjet cease their branded ops.


Milk runs defeat the purpose. OO operates a few for UA (EAS markets) out of DEN and ORD but they are even consolidating those into nonstops.

Running their own operation is too risky. The majors are fine putting their code on whatever the regional will fly. OO operates some at risk flying under UA's code. If the major is willing to put their brand on it, why not do it? Why compete with the companies that are keeping your lights on?

I was thinking more of medium cities to medium cities like my example above. It would help legacies keep WN at bay as well as flying low capacity aircraft between cities that still have sizeable business demand without direct competition. Of course if the market would support it then they would be doing it, but this is just something I would like to see happen.
When wasn't America great?


The thoughts and opinions shared under this username are mine and are not influenced by my employer.
 
32andBelow
Posts: 5036
Joined: Mon Sep 03, 2012 2:54 am

Re: Regionals next business model

Thu Feb 27, 2020 5:57 am

The next model is majors running large RJs themselves to keep up with pilot shortage.
 
ewt340
Posts: 1290
Joined: Tue Jul 10, 2012 7:22 pm

Re: Regionals next business model

Thu Feb 27, 2020 6:29 am

Well, they either go bust or adapt to LCC's P2P model.

Instead of feeding these hubs owned by mainline. They might as well corner the market themself.

They could copy Ryanair business model of creating routes that could only be served by LCC. I think this would be one of their best bet yet cause the mainline wouldn't be able to compete unless they operate the flight illegally (by lowering the ticket soo much to the point where it doesn't cover the costs to operate the flights, which is illegal, similar to the bombardier case).

Then after that they could grow their market shares. Other than that, I don't see much future for them cause they would either be killed off by other LCC or by their own mainline partners.
 
bluecrew
Posts: 42
Joined: Sun Apr 20, 2014 3:13 am

Re: Regionals next business model

Thu Feb 27, 2020 7:51 am

TWA772LR wrote:
I was thinking more of medium cities to medium cities like my example above. It would help legacies keep WN at bay as well as flying low capacity aircraft between cities that still have sizeable business demand without direct competition. Of course if the market would support it then they would be doing it, but this is just something I would like to see happen.

No...
All of these companies are so highly leveraged that the mere concept of introducing some market-disruptor P2P service is incredibly out of the realm of possibility.
Most regionals don't even own or directly lease the airplanes... they are parking wholly owned CRJ2s for loaned E175s (SKW in mind).
Where's the money? Where are the planes? The regional market is moving to mostly leases from the legacy carrier that bought the plane... they're not gonna let you fly that outside their network.
 
MIflyer12
Posts: 8518
Joined: Mon Feb 18, 2013 11:58 pm

Re: Regionals next business model

Thu Feb 27, 2020 11:14 am

bluecrew wrote:
Where's the money? Where are the planes?


And where is the branding, marketing, and distribution? The rise and fast fall of Independence Air could be instructive for a few people.

To the OP's question: regionals will continue to shrink as 50-seaters get retired, and as current scope-compliant large RJs age out. Route pairs (and airports) will lose frequencies (and service entirely) unless avg fares are high enough to support mainline service at mainline costs.
 
KlimaBXsst
Posts: 906
Joined: Wed Jan 23, 2019 4:14 pm

Re: Regionals next business model

Thu Feb 27, 2020 3:15 pm

It does seem MULTIPLE certificates under one parent shell company are on the way out.

Potential employees have by now, caught on to that potential whipsaw game.
Aesthetically the A 340 got it right!
 
Flying-Tiger
Posts: 4062
Joined: Mon Aug 23, 1999 5:35 am

Re: Regionals next business model

Thu Feb 27, 2020 3:32 pm

It´s either:
a) contract flying in one form or the other for the mainline players
b) specialized, regional (or better local) operator working in specific markets unsubsidized
c) or subsidized flying such as EAS

I don´t think that we´ll see another Independence Air anytime soon, and I think the largest non-aligned regional flybe. is on its way out in my opinion.

However, I think that there might be an opportunity developing for players in the segment "b" as lease and purchase rates have dropped to such a level that overall economics (financial and operational costs) might be in the LCC territory without the number of people needed to break even. This could be an opportunity to develop niche routes on one´s own account, or to develop a business model of developing routes and handing them over to a major and/or contract flying later on.
Flown: A319/320/321,A332/3,A343/346, A359, A380,AT4,AT7,B712, B732/3/4/5/7/8/9,B742/4,B752/3, B762/763,B772/77W,CR2/7/9/K,ER3/4,E70/75/90/95, F50/70/100,M11,L15,SF3,S20, AR8/1, 142/143,... 330.860 miles and counting.
 
heretothere
Posts: 110
Joined: Mon Feb 19, 2018 10:50 pm

Re: Regionals next business model

Thu Feb 27, 2020 3:44 pm

The future of independent regional flying is in part 135 public charters a la JSX and Contour. CPA flying will continue to shift towards 65+ seats, leaving a nice hole for these operators to fill.
 
KlimaBXsst
Posts: 906
Joined: Wed Jan 23, 2019 4:14 pm

Re: Regionals next business model

Thu Feb 27, 2020 3:51 pm

The new airline Breeze,

Fusing regional and mainline flying with their E2’s and A220’s under one certificate much like JetBlue’s approach is another potentiality.
Aesthetically the A 340 got it right!
 
DiamondFlyer
Posts: 3416
Joined: Wed Oct 29, 2008 11:50 pm

Re: Regionals next business model

Thu Feb 27, 2020 3:53 pm

MIflyer12 wrote:
bluecrew wrote:
Where's the money? Where are the planes?


And where is the branding, marketing, and distribution? The rise and fast fall of Independence Air could be instructive for a few people.

To the OP's question: regionals will continue to shrink as 50-seaters get retired, and as current scope-compliant large RJs age out. Route pairs (and airports) will lose frequencies (and service entirely) unless avg fares are high enough to support mainline service at mainline costs.


None of those are the problem. There aren’t pilots, and without pilots the regionals (in their current form) cease to exist. A few may survive to do some 50 seat flying, but the 70-76 seat flying will end up at the mainline carrier.
From my cold, dead hands
 
User avatar
JBo
Posts: 1775
Joined: Wed Jan 05, 2005 7:23 am

Re: Regionals next business model

Thu Feb 27, 2020 3:54 pm

KlimaBXsst wrote:
It does seem MULTIPLE certificates under one parent shell company are on the way out.

Potential employees have by now, caught on to that potential whipsaw game.


That, and the mainline carriers no longer have the kinds of scope clauses/limitations that necessitated such arrangements (the biggest reason Republic had three certificates under its belt was because their contract with AA under Chautauqua prevented them from operating any aircraft over 50 seats on that certificate for ANY other carrier).
I'd take the awe of understanding over the awe of ignorance any day.
 
dstblj52
Posts: 529
Joined: Tue Nov 19, 2019 8:38 pm

Re: Regionals next business model

Thu Feb 27, 2020 3:55 pm

DiamondFlyer wrote:
MIflyer12 wrote:
bluecrew wrote:
Where's the money? Where are the planes?


And where is the branding, marketing, and distribution? The rise and fast fall of Independence Air could be instructive for a few people.

To the OP's question: regionals will continue to shrink as 50-seaters get retired, and as current scope-compliant large RJs age out. Route pairs (and airports) will lose frequencies (and service entirely) unless avg fares are high enough to support mainline service at mainline costs.


None of those are the problem. There aren’t pilots, and without pilots the regionals (in their current form) cease to exist. A few may survive to do some 50 seat flying, but the 70-76 seat flying will end up at the mainline carrier.

The 76 seat flying is the only really profitable stuff for both the regional and the mainline they will ground 50 seaters before 76 seaters most likely
 
KlimaBXsst
Posts: 906
Joined: Wed Jan 23, 2019 4:14 pm

Re: Regionals next business model

Thu Feb 27, 2020 3:59 pm

It does seem a healthy regional industry NOT TIED in to the INTERNATIONAL grid could help us weather the storms of virulent cold and flu seasons much better.

These types of networks are few and far between though.
Aesthetically the A 340 got it right!
 
MIflyer12
Posts: 8518
Joined: Mon Feb 18, 2013 11:58 pm

Re: Regionals next business model

Thu Feb 27, 2020 4:04 pm

DiamondFlyer wrote:
MIflyer12 wrote:
bluecrew wrote:
Where's the money? Where are the planes?


And where is the branding, marketing, and distribution? The rise and fast fall of Independence Air could be instructive for a few people.

To the OP's question: regionals will continue to shrink as 50-seaters get retired, and as current scope-compliant large RJs age out. Route pairs (and airports) will lose frequencies (and service entirely) unless avg fares are high enough to support mainline service at mainline costs.


None of those are the problem. There aren’t pilots, and without pilots the regionals (in their current form) cease to exist. A few may survive to do some 50 seat flying, but the 70-76 seat flying will end up at the mainline carrier.


You speak as if pilot availability is independent of money. Let me introduce you to the concept of 'the market-clearing wage.' With enough money over enough time, there will be pilots. I'm not sure at those wages there is the same demand (by carriers, by passengers) at mainline, hence my prediction that some flying will go away. Significantly higher wages dampen demand. Moving to bigger aircraft improves labor hour productivity; it improves labor $ productivity only if seat count rises faster than wages to fly the bigger aircraft.
 
catiii
Posts: 3641
Joined: Mon Mar 31, 2008 1:18 am

Re: Regionals next business model

Thu Feb 27, 2020 4:51 pm

MIflyer12 wrote:
The rise and fast fall of Independence Air could be instructive for a few people.



Independence was 15 years ago, in a vastly different market landscape. Oh, and they operated 319s.
 
User avatar
FLALEFTY
Posts: 817
Joined: Tue Jan 31, 2006 11:33 am

Re: Regionals next business model

Thu Feb 27, 2020 4:58 pm

I remember some years ago that Air Tran experimented with having a regional partner feed their Atlanta hub. However, they found that their B717's had better overall efficiency than their partner's CRJ2's, even when factoring in the higher trip costs and the need to fill twice as many seats.

With the A220 getting established at Delta, once they reach critical mass with this fleet and work through the usual teething problems of introducing a new type, things could get interesting. I'm wondering if they will be using them to take over E175 flying done by their current regional partners, especially in their "hub raider missions"?

Also, if DL succeeds in this strategy, I'm wondering if AA and UA might follow suit? AA has been flying E190's mainline, so converting that fleet to the E190E2 models might be an attractive option. United has massive, aging fleets of 737-700's and A319's that they will soon need to replace, too.
 
alasizon
Posts: 2629
Joined: Sat Apr 28, 2007 8:57 pm

Re: Regionals next business model

Thu Feb 27, 2020 6:42 pm

FLALEFTY wrote:
Also, if DL succeeds in this strategy, I'm wondering if AA and UA might follow suit? AA has been flying E190's mainline, so converting that fleet to the E190E2 models might be an attractive option. United has massive, aging fleets of 737-700's and A319's that they will soon need to replace, too.


AA is retiring the 190 and is currently content with the gap between the 175/CR9 and the 319.

As far as the next regional model, I see no reason why the current CPAs don't carry on for a while (I'd guess another 10-17 years before there is any sort of major disruption). No matter what, pilots are needed for the aircraft (regardless of where they are flown) and the strong regionals will continue to be able to attract pilots.

The problem with the regional operations is not the Mainline pilot and FA costs, it is the ground cost of gate and ramp agents plus load planners and dispatchers that drive it up quite a bit. Very few senior pilots and FAs would want to still do 5-6 legs per day and not be home each day which helps keep costs low as they transfer out to less taxed equipment types. However, the ground groups don't really have that same option and so you end up with a much higher cost on a per flight basis. The unions representing the employees on the ground are unlikely to allow the flights to continue to be ground handled by a 3rd party or wholly owned if it was to be Mainline crews flying them.

dstblj52 wrote:
The 76 seat flying is the only really profitable stuff for both the regional and the mainline they will ground 50 seaters before 76 seaters most likely

A good bit of the 50-seat flying is also profitable when you take into account that the onward flying commands a higher yield as well. For instance, a XYZ-HUB-AAA flight where the XYZ-HUB leg is flown on a 50 seater and the total fare is $475 o/w tends to command a better yield than a ZZZ-HUB-AAA flight where the ZZZ-HUB leg is flown on a 76 seater at a $235 fare. While yes, the CASM on the 50 seater is higher, the fare difference in some (not all) of the markets help make up that cost. I would estimate that about 20-40% of 50 seater markets fall under this category where the pricing power of the legacy exceeds the cost of the equipment.
Airport (noun) - A construction site which airplanes tend to frequent
 
crjflyboy
Posts: 456
Joined: Thu Jun 06, 2019 10:54 pm

Re: Regionals next business model

Fri Feb 28, 2020 2:46 am

catiii wrote:
MIflyer12 wrote:
The rise and fast fall of Independence Air could be instructive for a few people.



Independence was 15 years ago, in a vastly different market landscape. Oh, and they operated 319s.


They operated mainly CRJ aircraft ....

https://www.planespotters.net/airline/Independence-Air
 
airzona11
Posts: 1785
Joined: Wed Dec 17, 2014 5:44 am

Re: Regionals next business model

Fri Feb 28, 2020 3:31 am

heretothere wrote:
The future of independent regional flying is in part 135 public charters a la JSX and Contour. CPA flying will continue to shift towards 65+ seats, leaving a nice hole for these operators to fill.


Great summary. The majors are leaving cheap planes and a gap. The p135s exploit a growing niche and can provide a great competitive product. They aren’t chasing small markets either, rather scrapping the edges of large O/D.
 
User avatar
PacoMartin
Posts: 901
Joined: Sun May 27, 2018 8:18 pm

Re: Regionals next business model

Fri Feb 28, 2020 3:42 am

heretothere wrote:
The future of independent regional flying is in part 135 public charters a la JSX and Contour. CPA flying will continue to shift towards 65+ seats, leaving a nice hole for these operators to fill.


Part 135 is a set of rules with more stringent standards for commuter and on-demand operations. Part 135 operator rules govern commercial aircraft.

FAR (Federal Aviation Regulations) Part 135 which is titled "Operating Requirements: Commuter and On Demand Operations and Rules Governing Persons On Board Such Aircraft" applies to turbojet engine powered aircraft with 1-30 seats, non-transport category turbo-propeller powered aircraft with 10-19 seats, and transport category turbo props with 20-30 seats. Applicants for a FAR Part 135 certificate must have exclusive use of at least one aircraft.

I can see how there might be a hole opening, but Isn't this a relatively tiny niche?
Last edited by PacoMartin on Fri Feb 28, 2020 4:00 am, edited 1 time in total.
 
dstblj52
Posts: 529
Joined: Tue Nov 19, 2019 8:38 pm

Re: Regionals next business model

Fri Feb 28, 2020 3:46 am

dstblj52 wrote:
The 76 seat flying is the only really profitable stuff for both the regional and the mainline they will ground 50 seaters before 76 seaters most likely

A good bit of the 50-seat flying is also profitable when you take into account that the onward flying commands a higher yield as well. For instance, a XYZ-HUB-AAA flight where the XYZ-HUB leg is flown on a 50 seater and the total fare is $475 o/w tends to command a better yield than a ZZZ-HUB-AAA flight where the ZZZ-HUB leg is flown on a 76 seater at a $235 fare. While yes, the CASM on the 50 seater is higher, the fare difference in some (not all) of the markets help make up that cost. I would estimate that about 20-40% of 50 seater markets fall under this category where the pricing power of the legacy exceeds the cost of the equipment.[/quote]
Yes, for the major but the regionals tend to have a little bit more profit available on 70/76 seaters and in today's hiring market pilots don't really care if their flying a 50 or a 70 seater, they want to make money and it's really easy to go onto apc select regionals and see who will pay you what. Through in the lesser maintenance cost on generally newer large regional aircraft and you can see why 50 seat operators struggle.
 
KlimaBXsst
Posts: 906
Joined: Wed Jan 23, 2019 4:14 pm

Re: Regionals next business model

Fri Feb 28, 2020 5:10 pm

Temporarily..... maybe some

non-daily ULCC frequency style operations flying to weather the storm and provide niche connectivity as the nation and world weathers this phony or real storm.

The North American media has let the “pandemic Jeannie” out the proverbial bottle in an attempt to shape current events, now that it is affecting their livelihoods, they are finding out it is hard to put back in the bottle.
Aesthetically the A 340 got it right!
 
catiii
Posts: 3641
Joined: Mon Mar 31, 2008 1:18 am

Re: Regionals next business model

Sun Mar 01, 2020 8:28 pm

crjflyboy wrote:
catiii wrote:
MIflyer12 wrote:
The rise and fast fall of Independence Air could be instructive for a few people.



Independence was 15 years ago, in a vastly different market landscape. Oh, and they operated 319s.


They operated mainly CRJ aircraft ....

https://www.planespotters.net/airline/Independence-Air


And they operated A319s. 15 years ago. In a vastly different market landscape. Using them as an example of anything relevant to today's industry is worthless.
 
User avatar
PatrickZ80
Posts: 4327
Joined: Tue Jul 13, 2010 5:33 am

Re: Regionals next business model

Sun Mar 01, 2020 8:44 pm

ewt340 wrote:
They could copy Ryanair business model of creating routes that could only be served by LCC. I think this would be one of their best bet yet cause the mainline wouldn't be able to compete unless they operate the flight illegally (by lowering the ticket soo much to the point where it doesn't cover the costs to operate the flights, which is illegal, similar to the bombardier case).


Kind of weird that it's illegal for an airline to lower the ticket price to the point where it doesn't cover the costs to operate the flights. As far as I know, this isn't illegal in Europe which is the reason Ryanair is able to undercut the legacies by a significant margin. In the USA the difference between LCCs and legacies is much smaller than it is in Europe.

Ryanair sell plenty of tickets at a loss. That's fine because they make up for that with the profits from other more expensive seats.
 
User avatar
hOMSaR
Moderator
Posts: 2360
Joined: Tue Jan 19, 2010 4:47 am

Re: Regionals next business model

Sun Mar 01, 2020 9:00 pm

PatrickZ80 wrote:

Kind of weird that it's illegal for an airline to lower the ticket price to the point where it doesn't cover the costs to operate the flights. As far as I know, this isn't illegal in Europe which is the reason Ryanair is able to undercut the legacies by a significant margin. In the USA the difference between LCCs and legacies is much smaller than it is in Europe.

Ryanair sell plenty of tickets at a loss. That's fine because they make up for that with the profits from other more expensive seats.


How can you really say that they sell tickets at a loss? If the flight itself is profitable, then the tickets aren’t really sold at a loss, even the cheapest ones.

The economics of air travel is such at 99% of your cost is there whether or not you sell the ticket, so getting €1 for a seat that would otherwise be empty is still coming out ahead. If they only charged fares that were higher than the average cost per seat allocated for the total cost of the flight, they (and probably most other airlines) would actually be less profitable (or maybe even not profitable at all).
I was raised by a cup of coffee.
 
USAirKid
Posts: 681
Joined: Mon Jun 13, 2016 5:42 am

Re: Regionals next business model

Sun Mar 01, 2020 9:48 pm

PatrickZ80 wrote:
ewt340 wrote:
They could copy Ryanair business model of creating routes that could only be served by LCC. I think this would be one of their best bet yet cause the mainline wouldn't be able to compete unless they operate the flight illegally (by lowering the ticket soo much to the point where it doesn't cover the costs to operate the flights, which is illegal, similar to the bombardier case).


Kind of weird that it's illegal for an airline to lower the ticket price to the point where it doesn't cover the costs to operate the flights. As far as I know, this isn't illegal in Europe which is the reason Ryanair is able to undercut the legacies by a significant margin. In the USA the difference between LCCs and legacies is much smaller than it is in Europe.

Ryanair sell plenty of tickets at a loss. That's fine because they make up for that with the profits from other more expensive seats.


Its generally not illegal to price a product below your costs. From the FTC:

Pricing below your own costs is also not a violation of the law unless it is part of a strategy to eliminate competitors, and when that strategy has a dangerous probability of creating a monopoly for the discounting firm so that it can raise prices far into the future and recoup its losses. In markets with a large number of sellers, such as gasoline retailing, it is unlikely that one company could price below cost long enough to drive out a significant number of rivals and attain a dominant position.


I'd argue that there are still enough competitors in the travel market that any one carrier creating a monopoly on a set of city pairs is unlikely.
 
User avatar
Polot
Posts: 10892
Joined: Thu Jul 28, 2011 3:01 pm

Re: Regionals next business model

Sun Mar 01, 2020 9:58 pm

TWA772LR wrote:
I’d love to see the mainlines adapt a P2P model for their regionals. Like DEN-STL-MEM-IAH or things like that.

Or regionals become (gasp!) airlines for their respective regions under their own brand. To bad the Recession made Expressjet cease their branded ops.

Expressjet announced the end of their branded ops in Summer 2008, before the recession that really started in September that year. It was the rising fuel prices that did them in (and others like ATA, Champion, Aloha). Their costs were going through the roof and they never really established a solid customer base.

catiii wrote:
crjflyboy wrote:
catiii wrote:

Independence was 15 years ago, in a vastly different market landscape. Oh, and they operated 319s.


They operated mainly CRJ aircraft ....

https://www.planespotters.net/airline/Independence-Air


And they operated A319s. 15 years ago. In a vastly different market landscape. Using them as an example of anything relevant to today's industry is worthless.


A large part of Indepedence’s existence was CRJ only. You can learn a lot from it, especially as honestly the environment for an independent regional in the US was probably in better shape then than today (weaker legacies, basically no ULCC) penetration).
 
ExMilitaryEng
Posts: 642
Joined: Mon May 01, 2017 7:12 pm

Re: Regionals next business model

Mon Mar 02, 2020 4:12 am

Independence Air was in the process of introducing the A319 when it went belly up. And they had only a few of them - so still at the phase of incuring more costs than generating revenues.

They were still a CRJ2 operator for the most part.
 
FlyingElvii
Posts: 997
Joined: Wed Dec 27, 2017 10:53 pm

Re: Regionals next business model

Mon Mar 02, 2020 6:31 am

DiamondFlyer wrote:
MIflyer12 wrote:
bluecrew wrote:
Where's the money? Where are the planes?


And where is the branding, marketing, and distribution? The rise and fast fall of Independence Air could be instructive for a few people.

To the OP's question: regionals will continue to shrink as 50-seaters get retired, and as current scope-compliant large RJs age out. Route pairs (and airports) will lose frequencies (and service entirely) unless avg fares are high enough to support mainline service at mainline costs.


None of those are the problem. There aren’t pilots, and without pilots the regionals (in their current form) cease to exist. A few may survive to do some 50 seat flying, but the 70-76 seat flying will end up at the mainline carrier.

The pilot shortage is about to a very abrupt and sharp end.
 
SkyVoice
Posts: 422
Joined: Tue Feb 14, 2017 9:34 pm

Re: Regionals next business model

Mon Mar 02, 2020 6:52 am

catiii wrote:
crjflyboy wrote:
catiii wrote:

Independence was 15 years ago, in a vastly different market landscape. Oh, and they operated 319s.


They operated mainly CRJ aircraft ....

https://www.planespotters.net/airline/Independence-Air


And they operated A319s. 15 years ago. In a vastly different market landscape. Using them as an example of anything relevant to today's industry is worthless.


You don't have to look back that far at Independence Air's experience to see what might happen. Have we all forgotten about OneJet (J1)?

OTOH, Ultimate Air Shuttle (UE) has made a go of it. But, they are a FAR Part 135 air charter carrier serving smaller and/or older airports in large cities--like BKL, MMU & PDK--from Cincinnati's LUK, aka "Sunken Lunken" due to Ohio River flooding & river fog. Still, they have managed to maintain their regional service by holding onto some of the business that Comair (OH) used to have before they were caught & killed by Delta.
"Tough times never last. Tough people do." - Dr. Robert H. Schuller
 
DiamondFlyer
Posts: 3416
Joined: Wed Oct 29, 2008 11:50 pm

Re: Regionals next business model

Mon Mar 02, 2020 1:39 pm

FlyingElvii wrote:
DiamondFlyer wrote:
MIflyer12 wrote:

And where is the branding, marketing, and distribution? The rise and fast fall of Independence Air could be instructive for a few people.

To the OP's question: regionals will continue to shrink as 50-seaters get retired, and as current scope-compliant large RJs age out. Route pairs (and airports) will lose frequencies (and service entirely) unless avg fares are high enough to support mainline service at mainline costs.


None of those are the problem. There aren’t pilots, and without pilots the regionals (in their current form) cease to exist. A few may survive to do some 50 seat flying, but the 70-76 seat flying will end up at the mainline carrier.

The pilot shortage is about to a very abrupt and sharp end.


Maybe for a few months at best. COVID-19 will make little to no long term impact on regional flying. Even if there is a slow down economically, it won't have anywhere near the impact of 2008. The total stoppage of hiring from 2008 was a combination of both the economic slowdown, and a 5 year increase in retirement age.
From my cold, dead hands
 
Noshow
Posts: 1808
Joined: Wed Jun 15, 2016 3:20 pm

Re: Regionals next business model

Mon Mar 02, 2020 1:44 pm

Next business model? I could imagine that some high yield point to point routes would make sense. Like Everett/Boeing Field to San Jose or from Burbank or Carlsbad to San Jose or similar. Bypass those hubs, get easy access and parking away from the masses and such. Regionaljets are so capable today and have all the range. It might even work with turboprops on shorter routes.
 
ewt340
Posts: 1290
Joined: Tue Jul 10, 2012 7:22 pm

Re: Regionals next business model

Mon Mar 02, 2020 2:28 pm

USAirKid wrote:
PatrickZ80 wrote:
ewt340 wrote:
They could copy Ryanair business model of creating routes that could only be served by LCC. I think this would be one of their best bet yet cause the mainline wouldn't be able to compete unless they operate the flight illegally (by lowering the ticket soo much to the point where it doesn't cover the costs to operate the flights, which is illegal, similar to the bombardier case).


Kind of weird that it's illegal for an airline to lower the ticket price to the point where it doesn't cover the costs to operate the flights. As far as I know, this isn't illegal in Europe which is the reason Ryanair is able to undercut the legacies by a significant margin. In the USA the difference between LCCs and legacies is much smaller than it is in Europe.

Ryanair sell plenty of tickets at a loss. That's fine because they make up for that with the profits from other more expensive seats.


Its generally not illegal to price a product below your costs. From the FTC:

Pricing below your own costs is also not a violation of the law unless it is part of a strategy to eliminate competitors, and when that strategy has a dangerous probability of creating a monopoly for the discounting firm so that it can raise prices far into the future and recoup its losses. In markets with a large number of sellers, such as gasoline retailing, it is unlikely that one company could price below cost long enough to drive out a significant number of rivals and attain a dominant position.


I'd argue that there are still enough competitors in the travel market that any one carrier creating a monopoly on a set of city pairs is unlikely.


I'm sorry but uhmm, if mainline started to operated the routes and loses money, many passengers would fly with them. This would drive the regional airlines out of business, and when those regional airlines terminated that particular routes, then the mainline get to raise the prices like they always do. Then it became a monopoly and it became illegal.

The mainline "could" getaway with this strategy, but the regional airlines that terminated their routes have the right to sue if they did found out that the mainline operated their flight at a loss.
 
FRAborn
Posts: 57
Joined: Sat Feb 09, 2013 1:43 am

Re: Regionals next business model

Mon Mar 02, 2020 3:40 pm

PacoMartin wrote:
heretothere wrote:
The future of independent regional flying is in part 135 public charters a la JSX and Contour. CPA flying will continue to shift towards 65+ seats, leaving a nice hole for these operators to fill.


Part 135 is a set of rules with more stringent standards for commuter and on-demand operations. Part 135 operator rules govern commercial aircraft.

FAR (Federal Aviation Regulations) Part 135 which is titled "Operating Requirements: Commuter and On Demand Operations and Rules Governing Persons On Board Such Aircraft" applies to turbojet engine powered aircraft with 1-30 seats, non-transport category turbo-propeller powered aircraft with 10-19 seats, and transport category turbo props with 20-30 seats. Applicants for a FAR Part 135 certificate must have exclusive use of at least one aircraft.

I can see how there might be a hole opening, but Isn't this a relatively tiny niche?


Maybe. I flew JSX for kicks a few months ago while I was in the States. I can see the appeal if they're offering a "faster, premium" product. The US is not a fan of HSR (for good reason) and I can see 135 operations as a very cost effective alternative. Many possible HSR routes could be filled by 135 operators. Think DFW (area) to Houston/Austin/NOLA and Chicago to KC/SL etc. Just my opinion.
 
GalaxyFlyer
Posts: 6516
Joined: Fri Jan 01, 2016 4:44 am

Re: Regionals next business model

Mon Mar 02, 2020 3:47 pm

ewt340 wrote:
USAirKid wrote:
PatrickZ80 wrote:

Kind of weird that it's illegal for an airline to lower the ticket price to the point where it doesn't cover the costs to operate the flights. As far as I know, this isn't illegal in Europe which is the reason Ryanair is able to undercut the legacies by a significant margin. In the USA the difference between LCCs and legacies is much smaller than it is in Europe.

Ryanair sell plenty of tickets at a loss. That's fine because they make up for that with the profits from other more expensive seats.


Its generally not illegal to price a product below your costs. From the FTC:

Pricing below your own costs is also not a violation of the law unless it is part of a strategy to eliminate competitors, and when that strategy has a dangerous probability of creating a monopoly for the discounting firm so that it can raise prices far into the future and recoup its losses. In markets with a large number of sellers, such as gasoline retailing, it is unlikely that one company could price below cost long enough to drive out a significant number of rivals and attain a dominant position.


I'd argue that there are still enough competitors in the travel market that any one carrier creating a monopoly on a set of city pairs is unlikely.


I'm sorry but uhmm, if mainline started to operated the routes and loses money, many passengers would fly with them. This would drive the regional airlines out of business, and when those regional airlines terminated that particular routes, then the mainline get to raise the prices like they always do. Then it became a monopoly and it became illegal.

The mainline "could" getaway with this strategy, but the regional airlines that terminated their routes have the right to sue if they did found out that the mainline operated their flight at a loss.


Predatory pricing is not found In the “wild”. Look, the mainline starts to exercise some pricing power and, if the route is profitable, attracts a new competitor, end of monopoly.
 
User avatar
william
Topic Author
Posts: 3350
Joined: Thu Jun 10, 1999 1:31 pm

Re: Regionals next business model

Mon Mar 02, 2020 4:02 pm

With the consolidation of Regionals to maybe three or four, will that put an end to the "shopping for the lowest bidder" syndrome? The majors will quickly realize there is a floor. Will the majors give the regionals a little more freedom to bypass the hubs for more direct flying between two city pairs? Especially if the majors own the equipment.

And equipment, one of the major OEM for regional jets is getting out of the business, one (Mitsubishi) has yet to prove itself, and the other, Embraer, seemingly has a product thats too big. The return of the turboprop?
 
ewt340
Posts: 1290
Joined: Tue Jul 10, 2012 7:22 pm

Re: Regionals next business model

Mon Mar 02, 2020 4:20 pm

GalaxyFlyer wrote:
ewt340 wrote:
USAirKid wrote:

Its generally not illegal to price a product below your costs. From the FTC:



I'd argue that there are still enough competitors in the travel market that any one carrier creating a monopoly on a set of city pairs is unlikely.


I'm sorry but uhmm, if mainline started to operated the routes and loses money, many passengers would fly with them. This would drive the regional airlines out of business, and when those regional airlines terminated that particular routes, then the mainline get to raise the prices like they always do. Then it became a monopoly and it became illegal.

The mainline "could" getaway with this strategy, but the regional airlines that terminated their routes have the right to sue if they did found out that the mainline operated their flight at a loss.


Predatory pricing is not found In the “wild”. Look, the mainline starts to exercise some pricing power and, if the route is profitable, attracts a new competitor, end of monopoly.


The minaline have to actually lose money on the routes and the regional have to provide a proof that their predatory pricing is killing competition and driving them out of business on that particular route.
If the mainline operations are profitable, then it's not a predatory pricing. Even if it's only bringing in $1 profits per seat. By then, there is no problem.
 
Okcflyer
Posts: 687
Joined: Sat May 23, 2015 11:10 pm

Re: Regionals next business model

Mon Mar 02, 2020 6:42 pm

As irony has it, mainline pilot union’s desire to drive their members wages higher is creating market space for subcontracted regional carriers, just smaller overall size (fewer pilots)
 
WaywardMemphian
Posts: 1508
Joined: Sat Dec 13, 2014 9:05 pm

Re: Regionals next business model

Mon Mar 02, 2020 7:06 pm

TWA772LR wrote:
jetmatt777 wrote:
TWA772LR wrote:
I’d love to see the mainlines adapt a P2P model for their regionals. Like DEN-STL-MEM-IAH or things like that.

Or regionals become (gasp!) airlines for their respective regions under their own brand. To bad the Recession made Expressjet cease their branded ops.


Milk runs defeat the purpose. OO operates a few for UA (EAS markets) out of DEN and ORD but they are even consolidating those into nonstops.

Running their own operation is too risky. The majors are fine putting their code on whatever the regional will fly. OO operates some at risk flying under UA's code. If the major is willing to put their brand on it, why not do it? Why compete with the companies that are keeping your lights on?

I was thinking more of medium cities to medium cities like my example above. It would help legacies keep WN at bay as well as flying low capacity aircraft between cities that still have sizeable business demand without direct competition. Of course if the market would support it then they would be doing it, but this is just something I would like to see happen.


Some triangle routes
Mem-Ind-tys-mem
Mem-stl-xna-mem
Mem-msy-xna-mem

Based on some odes I saw recently
Mem-cvg-bdl-rdu-mem

Just playing around
 
User avatar
OzarkD9S
Posts: 5734
Joined: Tue Oct 23, 2001 2:31 am

Re: Regionals next business model

Mon Mar 02, 2020 8:30 pm

SkyVoice wrote:

OTOH, Ultimate Air Shuttle (UE) has made a go of it. But, they are a FAR Part 135 air charter carrier serving smaller and/or older airports in large cities--like BKL, MMU & PDK--from Cincinnati's LUK, aka "Sunken Lunken" due to Ohio River flooding & river fog. Still, they have managed to maintain their regional service by holding onto some of the business that Comair (OH) used to have before they were caught & killed by Delta.


One could argue that Comair's pilots killed Comair when they went on strike.

Back to topic. I would love to see the Cape Airs and Sliver Airways of the nation attempt to fly some of the inter-mid-sized-city pairs we've lost over the years. STL-MEM and MEM-MSY are two markets that I think could support Cape Air type service.
Next up: STL DEN PSP DEN STL
 
WaywardMemphian
Posts: 1508
Joined: Sat Dec 13, 2014 9:05 pm

Re: Regionals next business model

Mon Mar 02, 2020 9:19 pm

OzarkD9S wrote:
SkyVoice wrote:

OTOH, Ultimate Air Shuttle (UE) has made a go of it. But, they are a FAR Part 135 air charter carrier serving smaller and/or older airports in large cities--like BKL, MMU & PDK--from Cincinnati's LUK, aka "Sunken Lunken" due to Ohio River flooding & river fog. Still, they have managed to maintain their regional service by holding onto some of the business that Comair (OH) used to have before they were caught & killed by Delta.


One could argue that Comair's pilots killed Comair when they went on strike.

Back to topic. I would love to see the Cape Airs and Sliver Airways of the nation attempt to fly some of the inter-mid-sized-city pairs we've lost over the years. STL-MEM and MEM-MSY are two markets that I think could support Cape Air type service.


If you could get the no TSA screening bumped up to 20 and utilize something like the new Textron Sky Courier
 
jetmatt777
Posts: 4340
Joined: Sun Jun 26, 2005 2:16 am

Re: Regionals next business model

Mon Mar 02, 2020 9:48 pm

WaywardMemphian wrote:
OzarkD9S wrote:
SkyVoice wrote:

OTOH, Ultimate Air Shuttle (UE) has made a go of it. But, they are a FAR Part 135 air charter carrier serving smaller and/or older airports in large cities--like BKL, MMU & PDK--from Cincinnati's LUK, aka "Sunken Lunken" due to Ohio River flooding & river fog. Still, they have managed to maintain their regional service by holding onto some of the business that Comair (OH) used to have before they were caught & killed by Delta.


One could argue that Comair's pilots killed Comair when they went on strike.

Back to topic. I would love to see the Cape Airs and Sliver Airways of the nation attempt to fly some of the inter-mid-sized-city pairs we've lost over the years. STL-MEM and MEM-MSY are two markets that I think could support Cape Air type service.


If you could get the no TSA screening bumped up to 20 and utilize something like the new Textron Sky Courier


And I think you'd need a dramatic shift in thinking by the airports. For that market segment to succeed on a wide scale, airports would need to invest in a "commuter" area that is connected to the main terminal yet leads to an unsecured area of the airport ramp. People are not comfortable with the idea of parking at an FBO and all that. It would need to feel as seamless as possible to flying a major carrier. Just minus the security.
 
dstblj52
Posts: 529
Joined: Tue Nov 19, 2019 8:38 pm

Re: Regionals next business model

Tue Mar 03, 2020 1:21 am

william wrote:
With the consolidation of Regionals to maybe three or four, will that put an end to the "shopping for the lowest bidder" syndrome? The majors will quickly realize there is a floor. Will the majors give the regionals a little more freedom to bypass the hubs for more direct flying between two city pairs? Especially if the majors own the equipment.

And equipment, one of the major OEM for regional jets is getting out of the business, one (Mitsubishi) has yet to prove itself, and the other, Embraer, seemingly has a product thats too big. The return of the turboprop?

The major's scope clauses regulate where regionals can fly to and from and none hub to spoke flying is severely limited under most of the contracts I believe, honestly, turboprops do so badly in most markets in the US that there more likely to cut markets then go to props. The only exception to that QX was all prop until delta turned up with its regional jets and QX went to jets almost immediately after

Popular Searches On Airliners.net

Top Photos of Last:   24 Hours  •  48 Hours  •  7 Days  •  30 Days  •  180 Days  •  365 Days  •  All Time

Military Aircraft Every type from fighters to helicopters from air forces around the globe

Classic Airliners Props and jets from the good old days

Flight Decks Views from inside the cockpit

Aircraft Cabins Passenger cabin shots showing seat arrangements as well as cargo aircraft interior

Cargo Aircraft Pictures of great freighter aircraft

Government Aircraft Aircraft flying government officials

Helicopters Our large helicopter section. Both military and civil versions

Blimps / Airships Everything from the Goodyear blimp to the Zeppelin

Night Photos Beautiful shots taken while the sun is below the horizon

Accidents Accident, incident and crash related photos

Air to Air Photos taken by airborne photographers of airborne aircraft

Special Paint Schemes Aircraft painted in beautiful and original liveries

Airport Overviews Airport overviews from the air or ground

Tails and Winglets Tail and Winglet closeups with beautiful airline logos