Originally Posted by
higney85
When regional feed is roughly half of the domestic brand feed, chopping off the rj kills not only the half of domestic feed, but the majority of intl feed, on a macro level. Few truly fly from JFK-LHR as their trip, it's a layover involving an RJ to complete the journey. You get no pushback on mainline taking flying back, but regionals exist to supply feed at a discount. Thinking otherwise isn't following the money. If 2 mainline flights a day, same seats, cheaper overall costs, worked better than 5-6 RJ's a day, it would have been done in 2009 when things went sideways. Instead of 5-6 a day, the schedule was 4-5 in an effort to ensure profitability, or minimize loss. You can't put mainline (76+ everywhere) and make a profit without frequency and a network to meet demand of both time and cost. Once you kill a station from one carrier, the others simply grow the presence. The same existed with 19 seats, 34 seats, and 50 seats. The population grows and costs come down per seat to allow overall growth, but at the end of the day the frequency is still a need and empty seats are lost revenue. Years down the road a 50 seater 5x a day will likely be replaced with a 76 seater 6x a day. That's 250 seats vs 456 seats. The difference is population growth vs operating costs. More seats filled, lower cost, newer aircraft are cheaper per seat mile, if you fill them. Economics 101. If you can fill 400+ a day at X price, the margin of profit is higher than 250 @ Y.
I do understand the network externalities of a hub and spoke model as well as the need for frequency.
My point was regrading profitability accounting and the insinuation that regional feeder routes need to be profitable. Tickets are priced and sold by origin-destination market. So revenue is really accruing at a level of:
ROC - LHR
SYR - LHR
etc.
But cost are obviously incurred by route, i.e. ROC - JFK, SYR - JFK and JFK - LHR.
To come up with any sorts of profitability metric to speak of you need to allocate revenue from the ROC - LHR OD market between ROC - JFK and JFK - LHR. There are various approaches to do that, e.g. distance in miles and other ways. But they are just artificial accounting practices and generally speaking, the long-haul portion looks more favorable, i.e. more profitable than the feeder portion in all of these approaches as costs are generally not linear with distance flown or whatever other metric they chose.
From a mainline partner point of view it really comes down to minimizing the cost in general and optimizing network profitability. But talking about feeder profitability is a little misleading.