Now who cares about the contract. 40 more furloughs. and losing 4 RJs to ASA.

Horizon subleasing 4 CRJ-700s to SkyWest subsidiary
June 16, 2010

Horizon Air is taking a major step forward this summer in its transition to an all-Q400 fleet. As previously reported, Atlantic Southeast Airlines (ASA), a subsidiary of SkyWest Inc., approached us with an interest in subleasing four CRJ-700s. The resulting negotiations were concluded successfully, and a “letter of intent” was signed yesterday.

Horizon has been actively remarketing its CRJ-700s since mid-2008. In that time, Horizon has held talks with a number of parties. From those efforts, only one other customer has been found – South African Express Airways – and Horizon has subleased three CRJ-700s to the airline.

"Getting to a single fleet has been more difficult than we envisioned, due to poor market conditions,” says Mark Eliasen, vice president, Finance. “When a qualified customer approaches with interest in our CRJs, we must move quickly. Ideally we would have pushed this agreement with ASA later into the year, further past the busiest part of the summer, but long-term goals trump short-term objectives. This offer had to be accepted now."

Horizon currently has 57 aircraft in its fleet, 17 of those CRJ-700s. Two of the subleased CRJ-700s will leave the fleet after July 22 and the other two after Aug. 22. At that point, Horizon's fleet will consist of 53 aircraft.

To accommodate the smaller fleet, Horizon will need to trim both its schedule and its workforce. As much as possible, the flight changes focus on shoring up load factors by reducing flight frequencies (see table). Unfortunately, they also include closure of the Idaho Falls station, to which we have provided service since 1983. The Flagstaff and Prescott stations, where our ground operations are handled by a contractor, will also be closed with the elimination of a once-daily flight from both cities to Los Angeles.

As a result of these changes, Horizon will need to reduce staffing in a number of categories to arrive at a workforce that corresponds to the smaller fleet size. The reductions will include approximately 40 pilots, 40 flight attendants and 40 mechanics. Jobs at Idaho Falls and at some stations where frequency is being reduced will also be affected. Customer Service managers will be working through the revised schedule to determine if they necessitate staffing changes.

"The need to simplify our fleet is very important and this decision helps us get there, but the resulting impact on our people is without a doubt what makes it difficult," says Andy Schneider, senior vice president, People and Customer Services. "Every important step we take like this, combined with the wide range of other initiatives across the company, brings us closer to sufficient, sustainable profitability. But that doesn't make it any easier on the people affected by this change."

The People team will be working with each division to assist affected employees in their transition, including helping to identify other opportunities within the company, where possible.

For more details, see this Q&A. The answers were compiled from Horizon officers, including new President Glenn Johnson.