Long acknowledged as a quiet revolution, the issue of regional jet aircraft service was catapulted into the public domain when the potential American Airlines pilots strike became a staple feature of the evening news. Yet the operation of moderate-sized jets seating between 50 and 90 passengers, including the Canadair Regional Jet (CRJ), Embraer EMB.145 and AI(R)/Avro RJ, has been a growing phenomenon in the US for more than five years. And American's intention to operate small jets of its own is in line with the current order cycle. Since mid-1996, US-based carriers have placed more than 100 firm orders plus 300 additional options for various models of regional jets.
Grappling with many of the same internal issues which have brought American's pilots to the brink of a strike, cross-town rival United Airlines is also in the midst of a regional jet assessment of its own. One truth is undisputed: the marketplace has embraced small jet service to such an extent that carriers that lack them in their fleet mix will be at a distinct competitive disadvantage.
To their credit, the various airframe manufacturers, including Fokker and Short Brothers, assumed much of the early risk by identifying that numerous route opportunities exist for small jet service. Confirmation of this concept in the US occurred rather slowly at first, but ultimately the surviving manufacturers have had their optimism validated. Fokker, of course, is not among those companies still in business to enjoy the recent order surge. Like other significant industry developments, the success of the current regional jet programmes has turned out to be a function of both good timing and luck. Fokker identified the need for a small jet very early on when it produced its 44-seater jet, the 614, in conjunction with Bremen-based VFW as early as 1968. Furthermore, the current AI(R)/Avro RJ programme has its antecedent in the Hawker Siddeley 146, launched nearly 25 years ago. More recently, Shorts was to launch an all-new 50-seat jet of its own, the FJX.
Few today would question just how large the stakes are in a commuter industry which has suffered from poor public perception. Hundreds of small and medium-sized US communities now rely on regional carriers for the lion's share of their schedules. Given that nearly two thirds of the 481 commercial service airports in the lower 48 states have their sole link via regional carriers, those carriers which provide a jet service have a distinct advantage over those which do not.
The trade-off between a jet and a turboprop or driving in local, mostly short-haul markets, is an academic one. There is, however, significant evidence that today's regional jets, despite having similar cabin cross-sections and in-flight service or passenger amenities to many turboprop aircraft, engender a significant market share premium, especially on medium- and long-range itineraries. While the notion of 'turboprop avoidance' has been tacitly acknowledged by the regional industry, until recently the absence of any large-scale competition has meant it has largely gone unaddressed. This has begun to change, most notably in market-pairs which require an enroute connection.
Perhaps the greatest potential impact that regional jets will have on future air service to and from America's small- and medium-sized cities will be on hub-and-spoke routes of between 400 and 1,200 miles. Passenger traffic levels are currently too low on these routes to justify multiple nonstop daily frequencies with 100-plus seat equipment by major carriers.
The best proof of the regional jet's ability to transform a secondary hub into a first-rate connecting complex is the at Greater Cincinnati-Northern Kentucky International Airport, where much of the success is due to Delta Connection affiliate Comair. Since mid-1993, the carrier has incrementally increased its CRJ fleet to 45 aircraft. As a direct result of ordered growth, Cincinnati has boomed to become the nation's third-largest regional airline hub.
During the third quarter of 1996, Comair accounted for nearly 474,000 enplaned passengers at Cincinnati, a level which placed it behind only two other airports, Dallas-Fort Worth and Chicago/O'Hare, in terms of regional passengers. Comair's average hub stage length has steadily grown to 362 miles and to the point where more than one third of the carrier's Cincinnati passengers are now flying on routes in excess of 400 miles; a portion which is expected to grow even more. Critically, of the 26 markets of 400 miles or more now linked nonstop by Comair through the hub, more than half were unserved by any airline, Comair and Delta included, only five years ago.
If by the end of 1995 any doubts still lingered as to the potential for expanding the catchment area of a hub with a dedicated fleet of regional jet aircraft, they have been more than countered by the spectacular success achieved by both Comair and Delta at Cincinnati. Indeed, similar fortunes are expected at two other nearby airports: Continental's hub at Cleveland/Hopkins and Northwest's base at Detroit/Metropolitan.
Competitively, Cincinnati has achieved a significant advantage by virtue of having been the first regional jet hub in the area. However Cleveland and Detroit offer some unique advantages of their own. Both cities, for example, offer a significantly larger number of locally-originating passengers than Cincinnati. The former has nearly 1 million more local residents, while the latter surpasses Cincinnati by a ratio of more than two-to-one.
More critically, regional carrier operations at both Cleveland and Detroit have substantial opportunites to grow in both range and scope. Indeed, if regional jet operations at Detroit were to grow to the same level of prominence as they have at Cincinnati, where Comair now accounts for one of every five Delta passengers, Northwest's partner could theoretically contribute four times as many passengers as it does at the moment.
Continental's hub at Cleveland will receive the first service by its Express subsidiary's new 50-seater Embraer EMB.145. Continental Express' recently announced initial service pattern for the aircraft includes both large jet replacement as well as complementary large/small jet service.
While no all-new routes have been made public yet, AvStat has identified 18 Cleveland-based market-pairs of between 400 and 1,200 miles - a majority of which are located in the southeast and Florida - which could support at least twice daily nonstop schedules with a 50-seater aircraft and which are not currently being served. Understandably, Continental is not revealing any detailed operating plans. With a potential order for as many as 175 Embraers, the carrier has clearly embraced the concept of the regional jet in a large way, not only at Cleveland, but at its other hubs at Newark and Houston/Intercontinental.
Across Lake Erie, less than 100 miles to the north of Cleveland /Hopkins Airport, Northwest has competitive regional jet ambitions of its own. In October last year, Northwest placed an order for 12 AI(R)Avro RJ85s which the carrier will lease to its independently owned codesharing affiliate Mesaba Airlines. The first aircraft arrives in April. Configured for 69 seats, Northwest's jets will be unique among regional airliners because of their two-class seating arrangement. Although originally destined to replace the major's ageing fleet of DC-9s, a number of which are more than 30 years old, the company has also acquired options on up to 24 additional RJ85s. This is with good reason: the Detroit market is even stronger than either Cincinnati or Cleveland. AvStat has identified 25 passenger markets within a 400 to 1,200 mile range of the city that could sustain at least two daily roundtrip flights with a regional jet and which currently have no nonstop service.
Those major carriers which have committed to incorporating regional jets into their schedules have done so by a variety of means. The approach invariably takes into consideration both the ownership status of the small jet operator as well as the scope clause of the major carrier's pilot contract. Northwest, for example, purchased its RJ85s through its Northwest Aircraft Leasing subsidiary which will then sub-lease them to Mesaba. In this case, the major's scope clause permits codesharing partners to operate jet aircraft provided they seat fewer than 70 passengers - hence the two-class, 69-seat configuration.
Continental, in contrast, elected to acquire its EMB.145s from Embraer on behalf of its wholly owned subsidiary, Continental Express. Comair, like Mesaba, is for all practical purposes an independent and publicly held company. However, unlike Mesaba, Comair bought its jets directly from the manufacturer. So did two other Delta affiliates, Atlantic Southeast Airlines and Utah-based SkyWest Airlines. In early January, ASA negotiated the purchase of 30 CRJs and 60 options directly with Bombardier.
Less than a month after the ASA order, Atlantic Coast Airlines, a United codesharing partner headquartered at Washington/Dulles Airport, announced its own order for 12 CRJs plus up to 36 options. This development is a curious one given that Atlantic Coast is not formally permitted by United's current pilot union contract to fly any jet aircraft as United Express. Does the carrier intend to operate its regional jets independently, without the United code? That is a very real possibility. Relative to other hubs, the ratio of local to connecting passenger activity at Dulles is considerably higher, so Atlantic Coast is far less reliant on United's code to fill seats than are some of the major carrier's other partners.
Mesa Airlines, another United Express affiliate, purchased 16 of its own CRJs in September. Faced with the same constraints as Atlantic Coast, it too has targeted an independent regional jet operation, this one based at Forth Worth's Meacham Field. Management at both Atlantic Coast and Mesa would naturally prefer to achieve the benefits of code-sharing regional jet service, but are prepared to seize other route opportunities until the matter is resolved with United's pilots.
Parties as diverse as labour unions, airline company stockholders, travel agents, communities of virtually every size and description, and the passengers themselves all now have an interest in the growth of regional jet services.
Unlike the major national carriers, the US regional airline industry has not been presented with a significant improvement in engine technology until recently, some 40 years after the introduction of the first commercial jet aircraft into revenue service. The advent of small jets designed specifically to serve regional markets provides the industry with its first effective cure for the traveller's long-standing dislike of turboprops. While the impact of this stigma has never been adequately quantified, a recently conducted survey of a community of nearly 250,000 residents revealed that only 62 per cent of local business users planned to patronise turboprops for their future travel. In addition eight of 12 travel agencies indicated that bookings had fallen as a direct result of the use of smaller capacity equipment. Respondents also estimated that 40 per cent of their clients refused to fly on turboprops.
A growing fleet of small jets will sustain the US regional airline industry's above average rate of growth well into the next decade and beyond. This is critical for one important reason. The large scale passenger traffic increases which resulted when turboprops replaced and/or supplemented major carrier jet schedules during the past decade - especially the latter half - have nearly run their course.
The hub realignment process which ultimately saw the withdrawals of America West from Columbus; American from Nashville, Raleigh /Durham and San Jose; Continental from Denver and Greensboro; Northwest from Boston; and United from Orlando has had the desired effect. Marginal routes have either been eliminated or transferred to regional carriers and, as a group, the US majors have posted onboard load factors in the high 60 to 70 per cent range since the second quarter of 1995.
Perhaps the greatest impact that new-generation 50- to 90-seat jets will have on the competitive aviation landscape is their ability to connect airport pairs which have historically provided too few passengers to justify multiple daily nonstop links with large jet equipment or are simply too distant to be connected with turboprops. Certainly, hubs located in those cities which offer a healthy share of both local and connecting passenger activity (Atlanta, Chicago and Dallas-Fort Worth, for example) offer the greatest potential route application. As well served as Atlanta is, AvStat estimates that Hartsfield International can support twice daily regional jet schedules to 22 communities which are not now being served by a carrier on a nonstop basis.
Ironically, it is the proven flexibility of the regional jet and its ability to operate economically over several different route types - as large jet replacements, in complementary service patterns, and in pioneering new city-pairs - that has the pilot groups concerned. As one veteran industry observer observes concisely:'The dispute just may boil down to the definition of a regional jet. Is it just a regional aircraft providing feed at hubs or is it a mainline jet that, if flown by a regional subsidiary, will take jobs away from the major's pilots?' In reality, he notes, it is both, becoming a mainline jet when it is placed on thin longer-haul routes that cannot support larger jets.
The fact remains that Continental and Delta code-sharers are now, or soon will be, operating jets to many of the same spoke communities. The explicit market preference now being won by jet-equipped regional airlines over those offering conventional turboprop service will be extremely difficult to overcome as time progresses and passengers become accustomed to flying on jets. As one regional airline executive describes it: 'Competing with turboprop aircraft against a lone jet operator is frequently difficult enough, but going head-to-head against two regional jet carriers will be next to impossible.'
If the many small and medium-sized cities of the US are not already pressing their cases for new schedules, they certainly should be. Regional jets will offer many of them the first opportunity to have a cost-effective, nonstop service to the New York metropolitan area, for example. Lacking the same operating constraints as slot-restricted LaGuardia and JFK, Continental Express' EMB.145s are poised to link Newark Airport with dozens of markets up and down the US east coast and well into the Midwest heartland. Few of the large carriers operating from Kennedy or LaGuardia, including American, United or US Airways, will be able to respond to this.
The analogy is equally true elsewhere. The Continental and Mesa hubs at Houston/Intercontinental and Fort Worth/Meacham will both gain a market competitive advantage over Dallas-Fort Worth, which does not have American or American Eagle regional jet operations to the same spoke communities.
A concept whose time has come, the US public has not heard the last of regional jets. With several new programmes announced and others yet to be formally launched, the issue will remain at the forefront for some time to come.
Source: Airline Business