The commercial airline networks that connect the USA are headed for stability in the coming decade, say various speakers at the Boyd Group International Aviation Forecast Summit in Dallas on 17 and 18 September.
Hubs and destinations are expected to remain largely static while regional feed, low-cost carriers and fuel will either see or prompt the biggest changes.
"Any time in the past 30 years you could have answered quickly 'a lot different than it does today'," said Scott Kirby, president of US Airways, at the summit. "I think in 10 years it will look remarkably like it does today, which is a testament to a world where we're finally on the brink of stability for the airline industry."
Large mergers were largely undiscussed at the conference. Kirby said that he could not speak on US Airways' discussions with American Airlines due to their recently signed non-disclosure agreement. While Michael Boyd, chairman of Boyd Group International and a respected industry analyst, only referred to the possible combination briefly despite voicing strong stances on numerous other topics.
Regional airlines are where changes network changes will occur in the coming decade. Boyd and others mentioned the widely used statistic that about 100 small cities in the USA are likely to lose service within the decade, but the coming reduction in the number of 50-seat regional jets and the future of the less than 50-seat market were the most popular topics.
Gary Chase, executive vice president of financial planning, analysis and investor relations at Delta Air Lines, outlined the carrier's well documented plans to reduce the number of small jets in its regional fleet. It will replace them with a combination of 70 76-seat regional jets and 88 110-seat Boeing 717-200s in its mainline fleet.
Kirby spoke about US Airways regional fleet "migrating to larger gauge" aircraft and Chuck Schubert, vice president of network planning at American, said that American would not only be adding larger regional jets but also spreading its regional feed among a number of operators.
American signed a deal with SkyWest Inc for SkyWest Airlines to feed the mainline carrier at its Los Angeles hub and ExpressJet to feed it at its Dallas-Fort Worth hub from November, earlier this month. Republic Airways has said that it is in talks with American regarding operating large regional jets for the carrier.
While mainline carrier executives focused on upgauging, regional airline executives highlighted the lack of new small aircraft at the summit. They noted that there would remain a demand for these aircraft to serve small cities.
Andrew Bonney, vice president of planning at Cape Air, said that the carrier "essentially remanufactures" its own airplanes every few years but would prefer a "brand new airplane". The regional carrier operates two ATR 42-300s and 66 Cessna 402s.
SkyWest Airlines plans to replace its Embraer Brasilia 120s with CRJ200s when the turboprops reach the end of their useful life, said Brad Rawson, manager of network planning at the carrier. He noted that the regional jet is cost effective when compared to the ATR 42-600, which has ownership costs that are "off the charts".
One issue SkyWest faces with the CRJ200 is that upkeep of the aircraft becomes too expensive to keep it flying after a "trigger point" of 40,000 cycles, said Rawson. The regional airline is working with Bombardier on a way to reduce maintenance costs after this point, he added.
Low-cost carriers are optimistic that they can keep growing, albeit with a hint of discipline. Maurice Gallagher, chief executive of Allegiant, reiterated its plans to use the first of its Airbus A319s for growth but added that the type would eventually be used to replace its MD-80 fleet in a "10-year timeframe". Ben Baldanza, chief executive of Spirit Airlines, said that the carrier would focus more on growth in its existing markets while looking for new revenue sources, for example selling advertising on the exterior of its aircraft.
Gary Kelly, chief executive and president of Southwest Airlines, said that the carrier maintains its plans to keep capacity flat until at least after the AirTran Airways integration is complete in 2014.
Fuel was the wildcard on everyone's watch list. Boyd said that fuel is the number one expense for airlines today, which is up from the third largest expense after labour and capital expenditures a decade ago. He noted that airlines are much more attuned to oil markets now than they were at the time, especially with the rapid price fluctuations that occurred during and since 2008.
"You've got to give Delta kudos for trying something new," said John Armbrust, chief executive of the aviation fuel consultancy Armbrust Aviation Group, regarding the airline's purchase of the Trainer refinery in Pennsylvania in June. He said that Delta took a "calculated risk" in buying the facility and will have to worry about the price of crude oil and where to source that oil as well as the cost of jet fuel as a result.
"The school is still out on them," concluded Armbrust.