RAH future.
 

Does anyone think that BB will pull his planes out of the contract business once this new "single named airline" is formed? Or do you think he will keep RAH flying for USAirways/Delta/NW and whoever else he can fly those planes for? You'd think he would want that metal flying for his own brand, unless he thinks he has some security flying empty planes on Parker's dime. (This isn't meant to be a flamebait session towards RAH so please don't go down that road.)

Every Major will dump RAH as the contracts expire. Maybe even sooner. They can just juggle the numbers to look like RAH is not meeting the performance metrics. BB needs to be able to hold his own in the big boy sandbox before then.

The big mistake ACA made when switching over to Independence Air after their tiff with UAL was doing it all at once with aircraft too small to compete.

BB appears to be gearing up to become either an LCC with a wing of regional feeders or a completely independent LCC. He's doing it smartly, IMHO, but doing it incrementally. To answer your question, I think he'll renew the current contracts, but in 10 years, they could be a direct competitor.

On the subject of competition, no airline wants to hire someone who is directly competing with them on other routes, so how BB wants to play this out is interesting to me. Tactically, he might be competing with some in order to send a message, "Look, you can either hire me or compete with me. Your call". Off hand, I think he'd currently want to feed in some areas then deploy his larger airliners in areas uncontested by his legacy partners.

The Airline Deregulation Act of 1978 is still the impetus for change in this industry. No doubt, RAH is among those evolving and adapting to the new environment.

Air Transportation: Deregulation and Its Consequences

Airline Deregulation: The Concise Encyclopedia of Economics | Library of Economics and Liberty

BB will keep the regional feed contracts going as long as possible. His venture into branded ops was not about replacing revenue sources, but rather diversifying revenue sources. BB stated that his regional contracts will provide about $100 million in profit for 2010. That guaranteed revenue will help offset startup costs and unexpected fuel costs associated with branded ops.

Yes, RAH branded ops are competing for some of the same passengers their mainline partners are fighting for. But a few things to keep in mind:

1) The main threat of direct competition faced by a RAH mainline partner is United in Denver. United has willingly cut its domestic fleet and has been maximizing its use of regional feed. A codeshare with Frontier out of Denver could allow UAL to outsource more domestic feed. I am not advocating outsourcing, I am just pointing out Tilton's apparent business model.

2) Most of the routes RAH flies under branded ops either have no direct competition, or compete against Airtran and Southwest. UAL, DAL, AA, US, and CAL all would love to see someone take away marketshare from FL and SWA. By contracting with RAH through CPA's, the legacy carriers are getting both regional feed, and they are investing in an airline that can possibly act as a roadblock to Southwest's total domestic domination. Instead of US trying to fully fund an assault on SWA, they are sharing the cost/investment with DAL, UAL, et al. CPA payments to RAH are a cheap way to bleed Southwest and Airtran just a little bit.

3) RAH inherited a Denver hub when they acquired Frontier, but beyond that the growth and expansion has been in Midwestern cities and connecting those cities to a few choice markets. UAL doesn't want to serve 12 cities from MCI. US Airways doesn't want to serve the west coast from Milwaukee. RAH has grown in ways that do not offend their mainline partners.

4) No RAH partner airline has canceled or threatened to cancel any part of a regional feed contract. Delta dropped the very limited one-way codeshare agreement with Midwest, but in six days we are going to see that is because the Midwest name will no longer exist. Also, the DAL/YX agreement was a leftover from the the NWA merger. DAL never wanted it, and the dropping of the Midwest name gives them the opportunity to get out. Neither DAL nor YX saw a significant benefit from the deal. If DAL was really concerned about the strength of Airtran, they could always open up a MKE-focused codeshare agreement with RAH. Delta seems quite content letting Airtran play in MKE for now though, perhaps to keep RAH from succeeding too much.

A couple of excellent posts...BB is a dirtbag, but no fool.

Mess with best Die like the rest :eek:

Where the rubber will meet the road on this is actually down the road so to speak.

Right now, no major has grounds to terminate or even threaten to terminate RAH's feed. They all have no-compete clauses I'm sure, but these tend to be certificate specific and often define "competing" with reference to hubs.

Where things get interesting is at renewal time...any major who believes or suspects that RAH is a competitor, or has the potential to become one, can simply not renew the contracts. No law says that you have to allow a competitor to bid for new work.

BB has three options:

1. Maintain a very low footprint with Midtier in select markets which won't annoy his feed customers, basically enough to keep it running on the back burner and turn a small profit. That way he has his backup plan if he ever needs it. But he's probably already past V1 on this with UA and DEN (unless UA can bypass more scope with codeshares)

2. Try to carefully grow midtier while BS-ing his feed partners in hopes of stringing them along while midtier becomes self-sustaining.

3. Go all-out with midtier right now, and hope that it's self-sustaining by the time his feed contracts expire.

His decision will be influenced by aircraft leases...assuming he's on the hook for a bunch of RJ leases he has to either figure out how to employ those in Midtier service, or try to string along his majors to pay for them until the leases expire. I don't know how much tail risk he has.

The next big deal in this industry is going to be codeshare vs. contract. Under a contract, a regional airline can fly a given amount of ____ seat regional jets. Under a codeshare the opportunities are endless.

So if Republic got A-319's in a "codeshare" agreement with United for example, UAL could essentially outsource ALL of their Airbus flying. This is where BB is headed IMO.

I don't know if this helps to answer the UA codeshare/scope issue:

"1-C PERMITTED CODE SHARING, MARKETING, OWNERSHIP AND OTHER ARRANGEMENTS
1-C-1 Feeder Flying
The Company or a Company Affiliate may enter into code sharing with Feeder Carriers in conformance with the provisions of this paragraph C-1. The Company or a Company Affiliate may create, acquire, Control, manage, take an Equity interest in, enter into code sharing arrangements with, or sell, lease or transfer aircraft to Feeder Carriers that comply with the provisions of this paragraph C-1 below, without the flight operations of such air carrier being considered Company Flying or the aircraft of such air carrier being considered Company Aircraft."

"1-C-1-a Key Cities
1-C-1-a-(1) A Feeder Carrier shall not operate a Feeder Flying Non-Stop between current or future Company Key Cities unless the Company demonstrates that a Company Round Trip operating in that Market instead of the Feeder Flying Round Trip would not pass the BIRR Test."

"1-C-2 Other Domestic Code Sharing Agreements.
In addition to the code sharing permitted by LOA 02-11 (US Airways Code Share), the Company may enter into or maintain code sharing with Domestic Air Carriers ("Domestic Code Sharing Agreements") that permit such carriers ("Domestic Air Carrier Associates") to apply the Company's designator code to their operations. Prior to entering into such agreements the Company will meet and confer with the Association regarding the appropriateness of any labor terms relative to the particular circumstances of any proposed code share agreement. Following such discussions, the Company will negotiate with the prospective partner any labor protections that it deems appropriate to the circumstances consistent with its business judgment, which shall include a commitment to negotiate as much reciprocal code share as reasonably possible, subject however, to a reduction for circumstances and/or limitations that are beyond the Company's control."

Close, but NOT entirely true. Some of the props (for a short time) and the DelCon program flew after the start of I-Air.

Also, I don't know if "mistake", nor "tiff" are the proper terms. UAL had the advantage of being in BK and pulling all the strings. Negotiations between UAL and ACA management went on for quite some, almost right up to the point of launching I-Air trying to reach an agreement.

There's A LOT that when on there that most people have no clue about. But that's all revisionist history.