Last year, the 100 largest regional airlines in the world carried 124 million passengers, employed 87,000 people, and flew 2,700 jet and turboprop aircraft. Only just over half provided revenue figures and even fewer divulged profits, but among those that did report financial figures, revenues grew 14.8 per cent to a total of $9.4 billion. The 33 regionals reporting profits made a collective net profit of over $200 million and a net margin of 3.9 per cent.
The volatility of the regional airline sector is underlined by the variation in passenger growth figures. The fastest growing regional carrier, SA Express, increased passenger numbers by 150 per cent to 500,000, and Brasil Central and Hamburg Airlines more than doubled their traffic last year. Several other regionals - such as Eurowings, Rio-Sul, Aer Lingus Commuter, Gulfstream International, TAM and Skyways of Scandinavia - achieved growth rates unheard of in the mainstream airline business.
However, some regionals contracted. In the US, USAir Express, CCAir and UFS saw large falls in passenger numbers, as did such carriers as Aerosur Boliviano and Loganair.
Financial results were variable, too. The table shows 17 carriers which improved their net profits, 13 whose profitability declined, and many which were unable or unwilling to disclose their bottom lines. TAM of Brazil achieved a net profit of $52 million, the highest in this survey, and along with Atlantic Southeast Airlines and Rio-Sul achieved a double-digit net margin.
The explanations for this volatility lie with the differing fortunes of a varied collection of airlines. Some, such as SA Express, are effectively still in a start-up phase. Others, such as Skyways, are taking over from defunct or contracting competitors.
In many cases, regional carriers' fortunes are heavily dependent upon wider developments in their home markets - specifically, the fortunes of the majors with which they are linked. Here, there are both positives and negatives at play.
Some regionals are taking advantage of the trend whereby majors are transferring shorter haul routes to their regional subsidiaries or partners, operating turboprops or regional jets much more cost-effectively than the majors themselves can.
However, American Eagle, the largest regional, saw its passenger traffic decline by 1.1 per cent - apparently small beer, but a decline equivalent to the total passenger base of some of the smaller carriers in this survey. Eagle suffered as its parent cut back its hubs at San Jose, Raleigh-Durham and Nashville.
Several other US regionals suffered from similar cutbacks, such as Continental's at Denver. USAir Express' traffic decline reflects a transfer of emphasis away from USAir's wholly owned subsidiaries towards independent affiliates.
The independent regional remains a rare beast, but some made major inroads during 1995. TransAsia, Sempati Air, TAM, Eurowings, Jersey European and Aero Asia International all achieved significant growth without being tied to a major's apron strings.
Reluctant
It is impossible to gain a complete picture of the regional airline industry worldwide, because the business is fragmented and many regional airlines are reluctant to provide information. However, this survey is as comprehensive as possible, and it does provide a fair reflection of trends.
Several large regionals have provided information for the first time this year, including Sempati Air, Canadian Regional Airlines, Air Littoral, Rio-Sul, TAT, Jersey European and Makung Airlines.
However, some carriers which were included last year failed to respond to our requests for 1995 data in time for our deadline, and have therefore been excluded. Notables in this category include Olympic Aviation, Transwede, Liat, Brit Air, Great Lakes, Malmo Aviation Schedule and Portugalia.
A further group of sizeable regionals has never appeared in our survey because of a lack of passenger data. This group includes Pelita, Taba, Japan Air Commuter, Aerolitoral, Air Atlantic and Mount Cook.
The age-old attitude that regional airlines only operate in their own home markets no longer holds good. The airline business is a global one, and regional carriers need to make their presence felt. They can no longer afford to operate in a vacuum, especially as their highest yield passengers are often foreign business people who will choose the regional airline which has a major alliance partner and a presence in the global distribution systems.
Despite the fact that each home market has its own unique characteristics, regional carriers can benefit from the experiences of their peers on the other side of the globe. Furthermore, outside observers - including regulators, financiers and manufacturers - need to be able to analyse this segment of the airline business.
Defining what makes a regional airline isn't getting any easier. This survey includes carriers which mainly operate 19-100 seat aircraft on short-haul routes. However, several regionals have been acquiring larger aircraft and moving onto longer trunk routes. In these cases a subjective decision has had to be taken about whether to include them.
100 airlines ranked
In the next four pages of this survey, the 100 largest regional airlines which divulge passenger figures are ranked in descending order of 1995 passenger numbers. Revenues, net profits and net margins are shown for airlines that provide financial information. Details of fleet, ownership and alliances complete the picture.
Next, on page 30, is an alphabetical list of the regional airlines in the survey, with notes about the criteria for the survey and which carriers are included. Then, on page 32, we rank the top 25 regionals by revenue and the top 20 profitmakers. Finally, on page 34, there is a table showing the regional partners of each of the world's major airlines with definitions and notes.
Who's in, who's out
Producing a survey of regional airlines remains the art of the possible. While many carriers are prepared to divulge information, several significant carriers are not.
In its second year, the makeup of the carriers included in this survey has changed considerably. Some 32 airlines are new, mostly because they have provided passenger data for the first time. Major additions in this category include Sempati Air, Canadian Regional Airlines, Air Littoral, Rio-Sul, TAT, Jersey European and Makung Airlines.
These mainly replace airlines which were not prepared to provide information, or could not give the 1995 passenger data required to give them a ranking. Seven airlines were in the top 50 last year but failed to provide data this year, including Olympic Aviation (27th last year), Transwede (32), Liat (35), Brit Air (37), Great Lakes (39), Malmo Aviation Schedule (43), and Portugalia (45).
A further 14 smaller carriers did not provide 1995 passenger data. These are Air Calédonie, Air Caribbean, Air Inuit, Air Nordic Sweden, Business Air, CityJet, Everest Air, Flandre Air, Gr¿nlandsfly, Harbour Air, Highland Air (formerly Holmstroem Air), Lone Star, Paradise Island, and Vanair.
Four carriers in last year's survey - Trans World Express (38), Markair Express (66), Alpha Aviation (97) and NorOntair (99) - have ceased operations. Another two, Comair of South Africa and Lapa of Argentina, are now mainly operating larger aircraft and therefore no longer qualify for inclusion in this survey.
For the other six large regionals which might have appeared in our listing, only known fleet information provides clues. Pelita of Indonesia operates around 26 regional aircraft, and Brazilian carrier Taba has 18 - two F100s, four Dash 8s, four FH.227s and eight Bandeirantes. Japan Air Commuter has a fleet of Namc YS-11s, Saab 340s and Dornier 228s. Aeromexico subsidiary Aerolitoral operates 14 Metros. Canadian Partner carrier Air Atlantic flies three BAe 146s, six Dash 8s and five Jetstream 41s. Air New Zealand subsidiary Mount Cook Airline operates seven ATR42s and a pair of Twin Otters.
For this survey, a regional airline is taken to be a carrier whose fleet is composed mainly of aircraft seating between 19 and 100 passengers, flying scheduled services on regional routes of up to 500 miles. Airlines which are mainly trunk or long-haul carriers are not included, although major carriers' regional subsidiaries are.
Some regional carriers also operate larger aircraft and may compete with major airlines on trunk routes as well as regional operations. Some such carriers, including Aces Colombia, Aerosur Boliviano, Binter Canarias, Air Malawi, Arkia, Crossair, Deutsche BA, Merpati Nusantara, Rio-Sul, Sempati Air and TransAsia, have been retained in the survey because they still have substantial regional operations. On the other hand, Comair and Lapa have moved to fleets mainly composed of larger aircraft.
Airlines appear in the form of their corporate entity. There is a single entry for American Eagle's four carriers wholly owned by AMR Corp, and also for the four Air Canada Connector subsidiaries, Canadian Regional Airlines, and the three wholly owned USAir Express carriers. The Mesa Air Group, which comprises six carriers with different codeshare agreements, also appears as a single entry.
Most regional airlines are privately owned, either as independent companies or wholly owned subsidiaries of major carriers. This means that many are reluctant to divulge financial information, making passenger traffic the basic ranking criterion.
Definitions
Passengers are systemwide for calendar 1995.
Financial data covers the most recent financial year indicated in the table. Net result is after extraordinary items and taxes but before dividends.
Currencies are converted into US dollars at the average exchange rate for the company's reporting period, taken from Reuters. Percentage changes in sales are calculated in US dollars and are therefore influenced by exchange rate movements.
Fleet includes aircraft in service as of March 1996, but excludes aircraft leased out or withdrawn from use. The fleet total includes all aircraft, but the breakdown includes only aircraft seating between 19 and 100 passengers. In the breakdown, 1+2+3 means one in service, two on order and three options. Orders and options for Fokker aircraft are included, but some may not be delivered due to the manufacturer's bankruptcy.
Employees include full-time workers as of 31 December 1995.
Sources
The primary source is individual airline reports, filed in response to an Airline Business questionnaire, plus annual reports and press releases. Additional sources were AvStat in Washington DC, the Regional Airlines Association (RAA), the European Regional Airlines Association (ERA), and the US Department of Transportation via Back Information Services.
Notes
Air Canada Connectors includes Air Alliance, Air BC, Air Nova and Air Ontario.
Air Littoral finances from Les Echos and TTG Europa.
American Eagle includes Executive Airlines, Flagship Airlines, Simmons Airlines and Wings West Airlines.
Augsburg Airways changed its name from Interot Airways.
Crossair 1995 traffic estimated by Airline Business.
Deutsche BA 1995 passengers forecast for 1995/96.
Mesa Air Group includes Air Midwest, Desert Sun Airlines, FloridaGulf, Liberty Express, Mountain West and WestAir.
Sata Air Acores, Sempati and Tyrolean financials for 1995 are estimated. TAM's are unaudited.
Skywest 1995 passengers are for the financial year to 31 March 1995.
USAir Express includes Allegheny Airlines, Piedmont Airlines and PSA (formerly Jetstream International).
Growing into profitability
The most profitable regional airline in 1995 was TAM Transportes Aereos Regionais, which made an unaudited net profit of $52 million. In 1995 the Sao Paulo based carrier increased its revenues by almost 50 per cent to $437 million. Its passenger volumes grew by 78 per cent to 2.6 million.
During 1995, TAM launched numerous new routes and increased its Fokker 100 fleet from 15 to 20 aircraft; another four have been added this year. The carrier now serves 35 destinations and competes against the Varig/Vasp/Transbrasil pool on the Sao Paulo-Rio shuttle.
TAM's subsidiary Brasil Central, which operates 22 Cessna Caravans to 42 destinations, carried an additional 427,400 passengers last year - an increase of 139 per cent over 1994.
TAM's net margin of 11.9 per cent was a considerable achievement for such a fast-growing company, but the award for the highest regional airline net margin goes again to Delta Connection carrier Atlantic Southeast Airlines. Despite a small reduction in its passenger traffic base, ASA increased revenues by 5.3 per cent and suffered only a 3 per cent drop in net profit.
Only one other regional achieved a double-digit net margin in 1995 - another Brazilian operator, Rio-Sul. Like TAM, this subsidiary of Varig also grew substantially, registering 50 per cent growth in passenger numbers and a 67 per cent revenue increase.
Two other Delta Connection carriers reported reasonable net margins - Comair at 8.1 per cent and Skywest at 6.1 per cent. United Express carrier Atlantic Coast turned from a loss to a $12.9 million profit following a major restructuring, giving it an 8.2 per cent net margin. Other regionals with reasonable net margins were Maersk Air UK (8.2 per cent), SAS Commuter (7.3 per cent), and Great China Airlines (6.4 per cent).
As is usual in the airline business, the regionals divide into haves and have-nots. The 20 most profitable regionals made $261 million between them last year.
Only three regional airlines reported losses for 1995. Plagued by low domestic fares in Indonesia, Merpati Nusantara lost almost $60 million despite a 16 per cent increase in passengers. Air Littoral lost $1.5 million and CCAir narrowed its loss to $362,000.
With only three loss makers and plenty of substantial profits, observers might conclude that the regional airline business is a bed of roses. Not quite. The 100 airlines which reported produced an overall net margin of 3.9 per cent, which may appear good by airline standards but hardly represents an exciting return; very few regionals achieved that. And only one third of the regionals in this survey provided net results for 1995. While some of these may well have been profitable, there can be little doubt that many were not.
The 65 regional airlines which divulged 1995 revenue data collectively generated $9.4 billion in revenue, roughly the equivalent of a single major carrier like Northwest Airlines. After eliminating carriers which did not provide a comparison with 1994, revenue growth in 1995 was a healthy 14.8 per cent.
Twenty-five carriers accounted for 80 per cent of this total revenue figure. Many of the largest, like American Eagle, Mesa, TAM and the Air Canada Connectors, are groups of two or more airlines. Notable among those not reporting revenue figures are USAir Express, Continental Express and Lufthansa CityLine, all of which are subsidiaries of major airlines and all of which would have appeared in the top 10 regionals by revenue.
Source: Airline Business
