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Regionals replacing the Majors or regionals going away?

Old 06-05-2008, 08:13 AM
  #11  
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Originally Posted by Flex81 View Post
Your positive outlook for your job fascinates me. I wish I had the same positive outlook, but unfortunately I am a realist. Do you really think that a major airline will sign a contract with a regional that guarantees the major financial losses? Why do you think delta is trying to get rid of Mesa, AA is reducing Eagle's flying, Horizon is going to an all TP fleet, Frontier dropped RAH all-together, and CAL is reducing XJT's flying and replacing some of it with TP's.

If the price of the installed drywall is so much that the value of the home is less than the amount invested to build it, then the general contractor would put in some sweet 80's paneling instead. The writing is on the wall (no pun intended).

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There are going to be reductions everywhere, but the entire airline industry is not going to vanish (assuming no large asteroid strikes or nuclear war).

A major has flexibility...it can add or delete flying at will, adjusting to market conditions such as oil prices. It has the risk, the potential for profit, and the flexibility to balance the two.

A regional on the other hand, has a CONTRACT to PERFORM a certain amount of flying. Are they going to guarantee that they will do the flying come hell or high-water, regardless of oil prices?

Not likely...under that scenario, what would happen if oil prices rise? The majors would cut mainline flying (which is now more expensive), but force the regional to keep flying since the extra fuel cost comes out of the regional's pocket, not mainline's. The regional would have to keep flying until it ran through all of it's cash, at which point it would liquidate. The regional would have no flexibility to compensate for higher fuel prices (marketing, route structure, etc)

What you are suggesting is ludicrous from a business perspective....the regional takes big risk, but has no potential for big profit if things go well. Most investors don't play THAT game

The only way you're going to see that kind of risk sharing is if a regional is in dire straights and has no other choice, or if a regional is able to negotiate a risk AND profit sharing plan...if both parties share the fuel costs, but also share profits derived from the feed and the subsequent mainline flights connected by the feed. This would actually make some sense, in that it would force some regionals to be more teamwork and customer service oriented.
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Old 06-05-2008, 01:01 PM
  #12  
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Originally Posted by Flex81 View Post
Your positive outlook for your job fascinates me. I wish I had the same positive outlook, but unfortunately I am a realist. Do you really think that a major airline will sign a contract with a regional that guarantees the major financial losses? Why do you think delta is trying to get rid of Mesa, AA is reducing Eagle's flying, Horizon is going to an all TP fleet, Frontier dropped RAH all-together, and CAL is reducing XJT's flying and replacing some of it with TP's.

If the price of the installed drywall is so much that the value of the home is less than the amount invested to build it, then the general contractor would put in some sweet 80's paneling instead. The writing is on the wall (no pun intended).

Flex
Correct me if I am wrong, but last I saw RAH chose to pull from Frontier because they didn't want to lose money paying for fuel.
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Old 06-05-2008, 01:13 PM
  #13  
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Originally Posted by Lostboys97 View Post
Correct me if I am wrong, but last I saw RAH chose to pull from Frontier because they didn't want to lose money paying for fuel.
http://biz.yahoo.com/prnews/080423/law052.html?.v=101
Frontier Airlines Discontinues Agreement with Republic Airways
Wednesday April 23, 8:00 am ET

DENVER, April 23 /PRNewswire-FirstCall/ -- Frontier Airlines Holdings, Inc. today announced it has reached a mutual agreement with Republic Airways to early terminate the airlines' code sharing agreement. There will be a structured reduction and gradual phase-out of Republic's 12 aircraft from Frontier's daily operation to be completed by mid-June.

"We appreciate the great job Republic has done in helping us serve our customers," said Frontier President and CEO Sean Menke. "Republic, while operating under the Frontier brand, provided a safe, efficient and customer-friendly product that is hallmark to our Company. Unfortunately with current economic conditions and other business changes, we have been forced to drastically rethink the use of regional aircraft in our fleet mix."

"We have enjoyed our partnership with Frontier and have a lot of respect for their people," said Republic CEO Bryan Bedford. "It's unfortunate that despite their many efforts to reorganize their business outside of Chapter 11, factors beyond their control conspired to force a deeper reorganization. We wish them success in their continuing efforts to combat persistently high oil prices."

With 12 aircraft being removed from the fleet, Frontier also announced the following schedule changes designed to reallocate existing aircraft into markets with more potential for long term profitability:
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