Originally Posted by
HSLD
There is a context that one must understand when saying RJ's are not profitable - and that's how they are deployed under fee per departure agreements.
Consider that most RJ's are operated in fee-per-departure arrangements with fuel being a pass-through expense. This means that RJ operators get paid a set fee to operate the flight and don't pay for the gas.
For the purchaser (the UAL, NWA, DAL's of the world) the fee-per-departure model is a money loser when oil is at $100/barrel. RJ's are on the cost side of the balance sheet to be certain. The question is; what is the feed worth to the network?
For a network operator, an RJ flight might cost $4000 to operate (fee+fuel) but only yield $3000 in revenue (hypothetical round numbers). From a network operator's perspective RJ's are "unprofitable" with fuel at current levels and pass-through agreements.
Very true...a point not mentioned yet. The regionals are around for
feed...What is the value of the feed? Those connecting pax's
may bring an RJ, micro-speaking (operating in the red or at slim margin), into the black, in macro-terms.
Additionally, if United were to say that they no longer wanted to service ORD-DSM, for example...Those customers that were flying into ORD for international or other money-making routes may choose American and their Eagle feed instead.