It is 1984 again with US regional airlines. That year was a turning point for the industry, when the first capacity purchase agreements established the dominant model for the country's regionals for nearly three decades.
The industry has reached another such turning point, agreed regional airline executives during the recent Boyd Group International Aviation Forecast Summit in Dallas. Changes include the reduction in 50-seat jets, a rethink of the ubiquitous capacity agreements and the make-up of the future regional fleet.
Delta Air Lines is leading the way in replacing 50-seaters. Its pilots approved a new contract in June that allows it to replace 218 50-seat jets with 70 76-seat jets at its regional partners and 88 110-seat Boeing 717-200s in its mainline fleet. It cited the poor economics of the small jets for its decision. Small regional jets have some of the highest per passenger unit costs in the industry, exacerbated by high fuel costs. This has resulted in most mainline carriers taking an operating loss on the aircraft.
Michael Boyd, chairman of Boyd Group International, says that larger jets would fill a need for more capacity to many small cities across the country. He says that 50-seater markets such as Detroit to Bangor (load factor 87.4%) on Delta, Dallas-Fort Worth to Baton Rouge (84%) on American and Denver to Bozeman (86.6%) on United could use the aircraft.
Scott Kirby, president of US Airways, says the airline's regional fleet will be "migrating to larger gauge" aircraft over time and Chuck Schubert, vice president of network planning at American Airlines, says his carrier will add larger regional jets as well.
Delta-subsidiary Comair was a casualty of this shift. Once the largest operator of 50-seat regional jets, the airline flew its last flight between George Bush Intercontinental airport in Houston and Minneapolis-St Paul at the end of September. Delta said the regional airline's business model was "no longer sustainable" as the unit cost of regional flying has evolved, when announcing the decision in August.
Demand for service to small communities will continue, even as mainline carriers upgauge their regional fleets. The number of small cities served will drop - the common expectation is that 100 cities in the USA will lose commercial airline service during the next 10 years - but regional airline executives agree that there will remain a market for airlines and small aircraft to serve the remaining communities.
Cape Air, Great Lakes Aviation and Silver Airways are all pursuing a strategy of codeshares and interline agreements with multiple mainline carriers to make flights to small cities profitable. Mickey Bowman, vice president of essential air service at Silver, says the airline is migrating its reservations to Sabre in the near future, which will allow them to codeshare with multiple airlines.
"We don't feel that we can be dependent on one airline anymore," he says.
Regional airline executives also highlight a lack of new small aircraft. The average age of turboprops in service with commercial airlines in the USA is 18 years, the fleet mostly comprising Beech 1900Ds, Bombardier Dash 8s, Embraer 120 Brasilias and Saab 340Bs, according to Flightglobal's Ascend Online database.
The ATR 42 is the only turboprop in production with fewer than 50 seats. However, the type has not gained significant traction in the US market. Brad Rawson, manager of network planning at SkyWest Airlines, says that 50-seat regional jets are still cost effective - even with their high unit costs - when compared with high ownership costs of the ATR 42-600. Only Cape Air and Island Air fly the type in the USA.
The strategies to address the lack of new aircraft vary. Andrew Bonney, vice president of planning at Cape Air, says the carrier "essentially remanufactures" its own aircraft every few years but would prefer to be able to buy new equipment at some point. The regional carrier operates two ATR 42-300s and 66 Cessna 402s.
He says they are following development of the up-to-11-seat Tecnam P2012 Global Traveller.However, he adds it is not clear when it will be available.
Rawson also highlights an issue SkyWest faces with its ageing fleet of Bombardier CRJ200s. Upkeep of the aircraft becomes too expensive to keep it flying after a "trigger point" of 40,000 cycles, he says. The regional airline is working with Bombardier on a way to reduce maintenance costs after this point.
Regional airlines in the USA face a tumultuous few years. Fleets and feeder contracts are set to change, especially once American completes the anticipated divestiture of American Eagle. But if there is one thing the executives are confident of, it is that the regional industry will persist.