Ok admittedly I took micro and macro about 17 years ago. I barely passed grad school intermediate micro. So give me some slack.

To me it seems logical that the legacies would bring flying in-house eventually. They pay regionals (like Republic) a guaranteed margin to operate a segment. They adjust those payments each year based on API or CPI depending on the CPA. They also pay for fuel. At some point they need to worry about the continuity of their business model/product if they actually value delivering a product that differentiates themselves from their competitors. I doubt there is much room for consolidation left among the legacies or LCCs although some may happen at the ULCC/LCC level.

So why not bring the flying in house? If you care about your product, don't want to deal with consistently ****ed off customers, and view regional staffing as a threat to your hub-spoke business? At some point it has to be cheaper to do the work with pilots on your own list than pay someone more than it costs to operate a segment, absorb the reliability hit, lose the product continuity and eventually exacerbate it by hiring the pilot from the regional.

I'm curious, other than the obvious cut 7-10 years off the seniority at a legacy, what is the incentive? Surely a legacy can secure better financing rates for a/c than a regional with questionable income streams and constant labor unrest.

This comment has nothing to do with X legacy acquiring y regional, I'm ignoring that rumor mill because I really don't understand THIS aspect of the thinking.