Originally Posted by
wally24
Another thing: are regionals more economical? I really don’t think so. If you were to compare the pay scales of the pilots (not including other costs, FA’s and maintenance) there is a huge difference, but that cost saving is not being realized because now Delta has to pay a “fee for departure” and I would be willing to bet that that fee for departure more than makes up the difference in labor costs. Now I wish I had the numbers to back it, but I don’t. For an example, look at Republic. Republic’s branded operation is taking a pounding right now, even though they have some of the cheapest labor costs around. Another example would be Expressjet’s branded operation. It took a severe hit as well. If these regionals are so efficient, they are having an awful hard time operating by themselves.
The mainline operators have economies of scale on their side, they need to use this instead of just outsourcing it. Outsourcing was a thing of the 90’s, the latest in Harvard economics. Ask Boeing how that outsourcing thing went on their 787 program.
Fee-For-Departure contracts discourage efficiency. As long as the plane gets from A to B the regional gets the same pay. In the future I am sure regionals will have to take on more risk, to the point where they will be responsible for the majority of costs related to the flying, and will in turn share some of the revenue generated (if any). I believe Skywest has already signed some contracts with Airtran that are to this effect.
I think the branded operations struggle for different reasons besides efficiency, mainly brand recognition and lacking the economies of scale that larger legacy carriers have.
I really hope AA/CAL can hold their ground on scope, but more importantly is to have the rest of the legacy carriers bring back that scope they have sold out. AA/CAL can only hold the line for so long before it becomes a serious competitive disadvantage trying to run MD80/737s against CRJ900s/E190s.