Originally Posted by
N1234
This is really simple…
INC is just optimizing their profitability.
XJT hasn’t been profitable for a long time and still isn’t based on the last INC earnings call. So They try to discontinue unprofitable flying. This is no different from the SkyWest side where all the UA 700 go away mostly because they are just not very profitable.
Once those aircraft EMB145 or CRJ 700 come of contract it is really about managing the tail risk of the lease financing - a place where many of the CRJ 200 already are. Ideally, they match any contract extension against the residual lease timeline which tends to be 2-3 years. And that is exactly what you see. After that it is all gravy if they get extended – or INC returns the plane, adjusts the work force via attrition and goes home happy.
So they are going for shorter term opportunities that also happen to be priced at a premium. Again, no difference between XJT and SKYW. A lot of the 50 seater flying at SKYW is short-term as well. I don't think UA is thrilled about this approach but that’s why they are propping up C5. Presumably they are willing and able to operate at lower price than INC wants to do either under XJT or SKYW. Note that a lot of the "new" SKYW flying is not with UA but AA....
Personally, I believe the 50 seaters will be here for a lot longer than everyone wants to make us believe. So these 2-3 deals will continue to roll barring any major economic downturn.
As for new dual class cabin flying, it simply comes down to unit cost. Pilot productivity is higher at SKYW than XJT and as a result unit cost are a lower (PBS vs. hard line with vacation touching and I am sure a host of other things). So the 175 stuff goes there – very basic economics really.
There is no tail risk with the 145s. And it's not Skywest calling the shots in short term deals with these 50 seaters. For example, if UAL wanted a long term deal (>2years) that Inc can make a profit from, of course they would sign that deal. Also, UAL has given long term deals for these same 145s to TSA and Commutair. Keep in mind that Inc has negotiated and renegotiated this money losing CPA three separate times and it's still unprofitable. It's UAL who has Inc over the barrel, and along with them the employees who have done nothing wrong to deserve what's happening.
UAL has said they are planning on having less than 100 fifty seat regional jets by 2019. With 36 of the 145s now at TSA (along with the dozen or so they already have) and 40 in the process of being transferred to Commutair, I don't see how that leaves any 50 seat jets for Skywest or XJT to operate for UAL, especially since UAL has tail risk on those 145s to at least 2020.
Lastly, the line bidding and vacation touching as not as lucrative as being portrayed relative to ASA's PBS. But it is true that pilot costs are higher than Skywest. So it makes sense that they put any and all CRJ and 175 flying at Skywest.