Second quarter results for both US regionals and independents paint a generally bright picture with demand high for low-cost flights and regional jet service.

Some regional carriers warn that their business is seasonal and second half results may not be as bright. But most airlines seem to be maintaining a firm grip on costs and, consequently, improving margins.

US independent carriers continued their upward swing with notable improvements in profitability and operating margins, especially at Atlanta, Georgia-based AirTran, and Denver, Colorado-based Frontier Airlines.

Having survived a generally bloody period for low-cost carriers in the late 1990s, the survivors are reaping increased revenues while simultaneously keeping costs in check. If the US public's renewed enthusiasm for the independent carriers stays true, and they continue to play smart in identifying niche markets, it augurs well for the remainder of this year and for 2000.

The chief lesson that the low-costs seem to have learned is not to go head-to-head with the incumbant major carrier. Typical is Kansas city-based Vanguard, which reported its fifth consecutive quarter of operating profits. The airline cites its new strategy of flying in high density, short-haul markets with little competition. Frontier also reported its fifth consecutive profitable quarter and talks of the "profitable niche" that it intends to continue to exploit. The low-costs have also learned the lesson of adaptability. AirTran, the former ValuJet, has added a business cabin, for instance, as part of a major restructuring at the company.

But strong demand underscores much of the financial successes for both regionals and independents.

Source: Airline Business