SkyWest preparing for E-Jet demand

Washington DC
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SkyWest Inc. says it sees a demand for Embraer E-Jet regional jet flying from the major airlines and estimates it would take between six months to a year to add the aircraft family of jets to its operating certificate.

"We're very well positioned in our discussions with manufacturers and our people are very well-prepared and preparing for that type," said Bradford Rich, president of SkyWest, Inc. on a 14 February analyst call.

It says the timeline for adding the larger aircraft to its certificate aligns well with future demand from major airlines.

"By the way, that's not discouraging to us, because we think that it aligns very well not only with our delivery positions but with when the next round of demand will be from the major carriers," said Rich.

SkyWest and ExpressJet operated a fleet of 744 aircraft at the end of 2012, made up of both Bombardier and Embraer models. But the only regional jets in the 65 and 76-seat range that it has a certificate to operate are the Bombardier CRJ700 and 900. E-Jets include the Embraer 170 and 190, plus the 175 and 190 variants with upwards of 70 seats.

SkyWest's operating certificate allows it to fly the 50-seat Embraer 145 and 135 jets, smaller E-120 turboprops as well as the 50-seat Bombardier CRJ200. However, mainline carriers in the US are in the process of upgauging their fleets in favour of larger models like the E-Jets.

American Airlines has already indicated it is going forward with a new E-Jet model for its fleet transition, made possible by a pilot agreement that allows it to increase the number of large regional aircraft in its fleet. Last month, the carrier struck its first agreement for large regional jets with Republic Airways Holdings to fly 53 E-175 aircraft for American Eagle.

SkyWest and American have an existing flying agreement, but for smaller 50-seat CRJ200s. SkyWest and ExpressJet forged an agreement in September 2012 to fly 23 aircraft under the American Eagle brand, which as of 14 February have all been deployed at Los Angeles International and Dallas-Fort Worth International airports.

How the proposed merger between American and US Airways will affect the combined carrier's regional strategy remains to be seen. But SkyWest says new flying opportunities remain in light of the combination. The carrier has been in talks with both American and US Airways for regional flying, said Rich, although did not specifically mention the Embraer jet in that instance.

"We've had active and I would say somewhat advanced discussions with both carriers involved in the new American," said Rich.

There is an opportunity to find new regional flying in light of the merger, says Rich, but he adds that the two carriers have some decisions to make.

"I certainly would not say that we are viewing this in any way as negative," said Rich. "We still think there will be a significant opportunity for the new American to acquire and bring into service additional large regional aircraft. So we are still very optimistic."

SkyWest flies the larger CRJ900 for Delta, but the mainline carrier awarded Pinnacle with a contract to fly the 40 new Bombardier CRJ900s it purchased as part of a $1.85b deal in December. That order includes 30 options. Pinnacle will emerge from bankruptcy as a Delta subsidiary and operate a total of 81 CRJ900s for Delta after restructuring.

SkyWest also operates CRJ900s for Delta and adding additional 34 dual-class CRJ700s and 900s for the carrier as part of an agreement struck in August 2012.

The recent agreements at American and Delta lock in flying arrangements for nearly 100 new large regional aircraft. Despite this, SkyWest says it still sees "hundreds of aircraft worth" of new opportunities.

United Airlines is another carrier that could bring additional opportunities for regionals, including SkyWest. United has also indicated plans to upgauge its fleet with larger regional aircraft, but said on a 24 January earnings call that it would not be looking into ordering any regional aircraft in the next year and now redeploying E-170 aircraft following a collective bargaining agreement reached with pilots in December, which Shuttle America flies on its behalf. But 2014 could bring opportunities for additional aircraft.