US regional operator SkyWest is poised to steal business away from competitors as it seeks to compete vigorously for contract renewals network carriers currently have with other regional airlines that are emerging during the next few years.
"We're talking to every major carrier in the industry on additional codeshare opportunities," said SkyWest Inc. chief executive officer Jerry Atkin during the 11 June Bank of America\Merrill Lynch transportation conference. "We're looking at contract renewals they have with our competitors." Currently SkyWest and its subsidiary Atlantic Southeast Airlines operate for Delta Air Lines and United.
Atkin explains not a large number of renewals are coming due during the next couple of years, but "then it starts to be pretty appreciable by year three".
To secure that business Atkin says SkyWest has put together a cost reduction plan to give the to further improve its cost advantage.
Through that strategy Atkin believes SkyWest can increase its market share by securing those renewals from competitors, "and that could be significant to us".
In the near term Atkin says SkyWest has started very early discussions with a current and potential partner to explore alternatives to the current fixed fee for departure contracts prevalent in the US regional industry. "To go into any more detail would be premature," says Atkin.
SkyWest operates some of its Embraer Brasilia turboprops under pro-rate agreements and recently signed a deal with current partner United to operate nine 50-seat Bombardier CRJ200s in the same type of scheme.
Under pro-rate deals regionals take on more risk such as fuel expense, pricing and some revenue management. Currently the network carriers handle those aspects in fixed-fee-for-departure contracts.
Those nine aircraft operating under a pro-rate deal for United exited flying SkyWest performed for Midwest Airlines, and through another restructuring Midwest is relinquishing the remaining 12 CRJs SkyWest has in operation for the carrier.
United has also recently brokered pro-rate deals with Trans States Airlines and ExpressJet.
Asked if he foresees consolidation among US regional airlines Atkin says there are likely to be fewer participants in the industry five years from now. But that should occur more through carriers shrinking and failing rather than traditional merger and acquisition activity.
Source: Air Transport Intelligence news