32LTangoTen

November 16, 2011

"The old regional airline, capacity-purchase model is well and truly broken and airlines must evolve to find a more profitable model, Dahlman Rose analyst Helane Becker said in her latest briefing in a harsh evaluation of the sector based on losses and current efforts to restructure.

Regionals have been evolving, expanding capacity purchase portfolios or acquiring branded operations such as Republic’s acquisition of Midwest and Frontier to form Frontier Airlines. Even so, that doesn’t seem enough simply because they are still so many aircraft in a vastly shrinking regional airline system."

With the American regional aviation model broken, consolidation is the answer | CAPA

Good article

Ferlofodder

Wow....great article. Anyone who is well informed, can you please tell me what this quote from the article means?

"Mesa Airlines provides the key to the fate of regionals who do not cooperate..."

TheBills

That mesa airlines business model has failed.

Sniper

You want the whole story? Here's the details (sorry for length, you asked for 'well informed'):

If you don't cooperate, the major you're flying for will take advantage of a loophole in the contract to put you in serious trouble or just go with another carrier who's willing to do the flying for less (even @ a loss), and you might have to go Ch. 11 to fix things.

Delta wasn't happy with Mesa for whatever reason (could have been that Mesa was trying to cut corners in contract compliance, like flying virtually empty flights 6-8 hours behind schedule just to keep the completion factor high, or short-staffing the crews, which is a contributor to why the fleet was running 6-8 hours behind schedule).

Mesa put Dash 8's on the Freedom certificate to operate JFK flights for Delta. These Dash's had lots of MX issues initially, but Mesa finally got them up to speed and started running a good operation with them. Then Delta said, 'No more Dash's." So, Mesa had just spent all this $ to get the Dash's on the certificate, had displaced pilots and FA's, paid to train these pilots and FA's, had invested $ to get the operation working . . . and now had no flying for them, and had to displace all those crews to something else.

Shortly after this, Delta pulled the Delta-owned CRJ's that Mesa had just started operating and gave them to Pinnacle to operate (Commair had been flying them prior to Mesa). Mesa now had CRJ trained crews on their Freedom certificate, but no CRJ's, and had to pay to transition them. More $ down the drain.

Then Delta had Mesa's ERJ fleet (on the Freedom certificate, a scope end-around @ Mesa just like Shuttle America is @ Republic) operate a majority of the JFK regional operation, rather than the Orlando operation. Mesa, like any carrier would, struggled to meet their performance #'s in JFK compared to Orlando (on-time departures, arrivals within 15, complaints generated from Mesa-operated flights, completion factor, cancelations, etc). It's hard to run an on-time shop out of JFK, especially the banks of flights that are scheduled at the same time all the trans-atlantic flights arriving each afternoon around 14:00 and departing around 18:00. Mesa gets compared to Skywest operating mainly SLC and LAX stuff, or Commair operating CVG stuff - surprise, Mesa's #'s are worse (ASA out of ATL had/has bad #'s too, but Skywest likely knew this when they bought ASA, and has some language to mitigate this).

Then, Delta starts asking Mesa to cancel flights out of JFK to use the slots for larger mainline aircraft during high delay periods or bad weather. Mesa, desperate to do anything to curry favor with Delta, cancels the flights. However, Delta's contract with Mesa still counts these canceled flights against Mesa. Now Mesa has a ton of cancelations, and Delta says "you didn't meet your performance #'s, we are going to cancel the contract". Mesa sues, but, in the end, withdraws the suit b/c Delta's right - the cancelations count against Mesa, even if Delta initiated them (brilliant move by Delta, honestly).

Mesa has to declare bankruptcy because of Delta's actions (among other things - Mesa's United operation out of ORD and IAD was not exactly stellar either). Delta's not hurt at all - every regional out there will bid to fly 'Connection' flying for Delta, even after what they did to Mesa.

So, if you don't cooperate by allowing your contract to be 're-interpreted' or agreeing to do costly things that you thought you'd never have to do, the mainline carrier will make it hard for you to remain in compliance with your contract, or might simply refuse to sign a new contract with you. The regional will be left with airplanes that have monthly lease payments due, but no home for them.

Mesa (Mountain West, Liberty, Florida Gulf, Desert Sun, Air MidWest, CC Air, and Freedom are just some of the former certificates), who had around 2,000 pilots in 2007 and was one of the 'Big 3 Independents' (with Skywest and Republic) tried to say 'not fair' and fight their customer. Now they have around 600, 1 certificate, and are controlled by creditors after a trip through bankruptcy court.

Anyone else want to try the 'don't cooperate with the mainline carrier customer' strategy?