The exclusive magazine covering the news and activities of the Association REGIONAL HORIZONS FIRST QUARTER 2010 Issue 40 Available on www.raa.org

Regionals weigh challenges of growth opportunities

RAA 35th Annual Convention Milwaukee, Wisconsin PUBLISHED BY May 24 – 27, 2010 Preliminary Schedule of Events inside IN PARTNERSHIP WITH

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Regional Airline Association 2025 M Street, NW, Suite 800 Washington, DC 20036 Tel: 202/367-1170 Fax: 202/367-2170 [email protected] • www.raa.org RAA staff We are safe, professional President Roger Cohen and reliable… Vice President Scott Foose as we’ll prove once again in Milwaukee Vice President-Technical Services David Lotterer Of all the tough questions and sharp criticisms — fair your job smarter, better, and most importantly, safer. Vice President-Legislative Affairs and unfair — we addressed last year, the cheapest But RAA excels at multi-tasking – and we’ve re- Faye Malarkey Black shot was when one US Senator claimed that our 2009 fined and improved every element for our expected Senior Director-Industry & Regulatory Affairs Convention agenda “had very little mention of safety.” 1,400 guests in Milwaukee: Liam Connolly Struggling to keep myself composed (and seat- • Expanded show hours, with every meal and gen- Operations Manager ed), I explained that RAA was founded to promote eral session smack dab in the middle of the Exhibit Staci Morgan safety, and that sharing safety information and best Hall, including a private VIP “sneak preview” so Association Associate Pepper Weeks practices comprised the bulk of every RAA Conven- that each exhibitor, regardless of size, gets to Convention Manager tion dating back to 1975. In fact, my wife remarked personally meet the airline CEOs. John Rubsamen she couldn’t believe when well past 7 pm she walked • Improving maybe our most popular and valuable Sponsorship Manager by a roomful of airline reps, deep in discussion on Convention benefit – the Purchasing Forum offering Diana Lundie safety issues – despite open bar Happy Hour right exhibitors the chance to meet face-to-face with Sponsorship Assistant Susan Young next door. airline purchasing officers. Airline safety will be even more front and center • And two Major League events: RAA’s Golf Tourna- 2009-2010 board of directors Chairman in Milwaukee, where we’ll host the first ever joint ment at Brown Deer – site of the PGA Milwaukee Russell “Chip” Childs, SkyWest Airlines meeting of the RAA and ATA Safety Councils, bring- Open (and where Tiger Woods shot his worst pro Vice Chairman ing together in one room all the top safety officials score), and Wednesday night’s gala at the Brewers- Jim Rankin, from all US airlines, and regional. It’s also Astros game – great box seats, all you can eat and Treasurer Dan Wolf, where RAA’s Strategic Safety Initiative Task Force of drink, private suites to network with your friends, Secretary our safety and operations experts will roll up their door to door rides to and from. Keith Houk, PSA Airlines sleeves and continue to review ways to prevent So, look forward to seeing you again in Milwaukee, Directors accidents. And we are thrilled NTSB Chair Debbie and for everything you need to know, just go to Peter Bowler www.raa.org. American Eagle Airlines Hersman has accepted our invitation to give her John Bendoraitis remarks as our General Session Keynote Speaker, and FAA’s Hank Krakowski will be the Presidents’ Council Tim Komberec luncheon speaker. Whether your responsibility at your company Doug Voss Roger Great Lakes Aviation focuses on operations, maintenance, inflight, security, Dave Hackett flight training, dispatch management or public rela- PS I’ve personally invited that US Senator to join us this year Gulfstream International Airlines – hope he can make it. Joseph Randell tions – you’ll leave Milwaukee with the tools to do Jazz Air Bryan Bedford Rick Leach UPCOMING RAA EVENTS Trans States Holdings INSIDE 2010 Convention schedule ...... 4-5 REGIONAL HORIZONS April 27-29 World Aviation and Regional Airline Training Conference Haiti flights...... 6 & Tradeshow Regional Horizons is published quarterly Report from Raymond James Orlando, FL (at the Rosen Shingle Creek Resort) by Emerald Media in partnership with RAA. Growth Airline Conference ...... 8-9 RAA Annual Convention Editor Kelly Murphy, Emerald Media May 24-27 Q&A with John Nance...... 10 [email protected] Milwaukee, WI Green Scene...... 11 Contributing Carole Shifrin July 25-27 RAA Summer Seminars Horizon’s First WAAS Flight...... 11 editors Al Ditter (dates and location TBD) News Briefs...... 12 Design Jennifer Moore 2011 and Aeris Graphic Design Industry Trends/Analysis...... 13 layout [email protected] May 16-19 RAA Annual Convention Report from FAA Annual Forecast....14 Advertising Cheryl Goldsby Nashville, TN [email protected]

Printed in USA March 2010 Cover photo: Milwaukee’s riverwalk, location ©2010 RAA All rights reserved of the 35th RAA Annual Convention REGIONAL HORIZONS | First Quarter 2010 | 3 RAA 35th Annual Convention Milwaukee, Wisconsin at the Midwest Airlines Convention Center May 24 – 27, 2010 Wednesday, May 26 7:30 am – 5:30 pm Preliminary Schedule of Events Media Center Open Sponsored by GE All events take place at the Midwest Airlines Convention Center unless otherwise indicated 7:30 am – 8:30 am Continental Breakfast in Exhibit Hall Thank you to our Hometown Airline Sponsors! Air Wisconsin & Frontier/Midwest Sponsored by PowerJet 8:00 am – 5:00 pm Monday, May 24 Tuesday, May 25 Registration Open Registration sponsored by Superjet International 7:00 am – 4:00 pm 7:00 am – 8:00 am Badges sponsored by NAASCO Exhibitor Breakfast with Airline CEOs NEW! RAA Golf Tournament General Session in Exhibit Hall Buses leave hotels at 6:15 am; shotgun start at 8:15 am; (for 20x20 Exhibitors and larger at the Hilton) tournament reception 2pm-4pm 7:30 am – 5:30 pm 8:30 am – 10:00 am Media Center Open Welcome by RAA Chair Chip Childs Sponsored by GE Keynote Speaker: Challenging layout, 8:00 am – 7:00 pm NTSB Chair Deborah Hersman with 60 sand-filled Registration Open 10:15 am – 11:30 pm bunkers, tree-lined Registration sponsored by Superjet International Airline Presidents’ Q&A Session fairways and water Badges sponsored by NAASCO 8:30 am – 5:00 pm winding throughout 8:00 am – noon Flight Deck Automation Work Group the course. Even pro- RAA Board/Presidents’ Council Meeting (Hilton) 8:30 am – 11:30 am fessionals navigate 8:00 am – noon RAA Flight Training Forum this stately course Exhibit Hall Move-in 9:00 am – 1:00 pm – the home of the 8:00 am – 11:00 am Dangerous Goods Working Group Meeting PGA Tour’s Greater RAA Associate Member Breakfast & Meeting (Open to airline employees only) Milwaukee Open! 8:30 am – 5:00 pm 10:00 am – 5:00 pm From Jack Nicklaus, Flight Deck Automation Work Group Exhibit Hall Open 8:30 am – noon 11:30 am – 1:30 pm Arnold Palmer to Brown Deer Golf Course Tiger Woods, a rookie RAA Maintenance Forum Buffet Lunch in Exhibit Hall (Open to all attendees) playing his first event as a professional, the greatest players Sponsored by Pratt & Whitney Canada 8:30 am – noon in the game of golf have made Brown Deer Golf Course noon – 1:00 pm RAA Safety Task Force their home for one week. Panel discussion “Flying Above the Social noon – 1:30 pm Golf busing sponsored by FlightSafety International Presidents’ Council Luncheon (Hilton) Media Fray” Continental breakfast sponsored by Saab FAA COO of the Air Traffic Organization Hank Krakowski 1:00 pm – 4:30 pm 8:00 am – 5:00 pm featured speaker ATA Safety Council Meeting Exhibit Hall Move-In Sponsored by ATR 1:00 pm – 4:30 pm noon – 6:00 pm noon – 1:00 pm RAA Safety Council Meeting Registration Open Joint ROC and Operations and Maintenance Forum Lunch 1:00 pm – 4:30 pm Registration sponsored by Superjet International 1:00 pm – 5:00 pm Flight Training Committee Badges sponsored by NAASCO RAA Operations Forum 1:30 pm –4:00 pm 1:00 pm – 5:00 pm 1:00 pm – 4:00 pm Joint ATA/RAA Security Council Meeting Flight Deck Automation Work Group RAA Environmental Committee Meeting (Open to RAA Security Directors and ATA Security Council only) 1:00 pm – 5:00 pm (Open to all airline environmental personnel and invited guests) 1:30 pm – 4:00 pm RAA Regional Operations Council (ROC) 2:30 pm – 3:30 pm Joint ATA/RAA Safety Council Meeting 4:00 pm – 5.45 pm Private Exhibit Hall Walk-thru with Airline CEOs 2:30 pm – 3:30 pm Semi-Annual RAA Public Relations Committee 3:30 pm – 4:00 pm Emergency Response Preparedness: (Open to all Airline & Associate Members) RAA President and Chairman Briefing with Media Everything Nobody Ever Told You! 5:30 pm – 7:00 pm followed by Exhibit Hall Ribbon-Cutting Official Opening Mark Dombroff of Dombroff Gilmore Jaques & French Operations and Maintenance Forum Reception 4:00 pm – 7:00 pm 4:00 pm – 5:00 pm Sponsored by GE Exhibit Hall Open RAA “Happy Hour” in Exhibit Hall 6:00 pm – 7:30 pm 5:30 pm – 7:00 pm Sponsored by Mitsubishi Aircraft Corp. Chairman’s Welcome Reception (Invited guests only) 6:30 pm – 9:30 pm RAA “Opening Reception” in Exhibit Hall Media Dinner (Invited media guests only) Sponsored by Embraer 6:00 pm – 10:00 pm RAA Evening Event A Night at the Ballpark Buses leave hotels at 5:30 pm for 7:10 pm Milwaukee Brewers vs Houston Astros game at Miller Park. Exclusive Club Level seating for all. Enjoy watching the game, socializing and feasting on special ballpark food and drink. Miller Park

Sponsored by Bombardier and Rockwell Collins

4 | REGIONAL HORIZONS | First Quarter 2010 Please check the RAA website for updates and additional details on convention events. www.raa.org EXHIBITORS BOOKED TO DATE (as of 3/1/2010)

TUESDAY Thursday, May 27 AAR Corp. HMG Aerospace / Low Fare & Regional Absolute Aviation Services Airlines Presidents’ Council 8:00 am – 9:00 am Hotel Connections, Ltd NEW! Accel Aviation Accessories, LLC Luncheon Speaker Continental Breakfast HRD Aero Systems, Inc. with Champagne in Exhibit Hall Accessory Overhaul Group Inc As Chief Operating Officer of Accessory Technologies Corp IMS Flight Deck 8:30 am – noon the FAA Air Traffic Organization, Accommodations Plus International JDA Aviation Technology Solutions Joint RAA/ATA Security Council Meeting (API) JS Firm Hank Krakowski will oversee (Open to RAA & ATA Security Council & invited Government guests only) ACE - Applied Composites Engineering Kamatics Corporation the implementation of NextGen 9:00 am – 11:00 am ACSS - Aviation Communication and Kenyon International Emergency as the agency gears up to Exhibit Hall Open Surveillance Sys Services Aero Hardware & Supply Inc. Kilfrost Limited replace its entire workplace in Hank Krakowski 8:00 am – 10:00 am Registration Open Aero Instruments & Avionics, Inc. LaserShip the next 10-15 years. Registration sponsored by Superjet International Aero Parts Mart, Inc Leading Edge Aviation Services, Inc. Drawing on his 30 years of experience at Badges sponsored by NAASCO Aero-Craft Hydraulics, Inc. LodgeX Airline Solutions Aero-Mach Labs, Inc. Lufthansa Technik A.E.R.O. GmbH , Krakowski flew the line, was a union 8:30 am – 5:00 pm Aerosim Technologies Machida, Inc. advocate and worked with management in flight Flight Deck Automation Work Group Aerosource, Inc. Magellan Group crew services and dispatch. Ultimately, he managed 8:30 am – 1:00 pm Aerospace Dynamics Marathon Norco Aerospace all aspects of United’s corporate and flight safety as Ramp Safety/Human Factors Meeting Aerospace Products International Michelin Aircraft Tire 8:30 am – 11:30 am well as security and regulatory compliance. Aerospace Welding Inc Midnite Express RAA Inflight Forum Aerotec International Midwest Aero Support, Inc. (Open to airline, exhibitors and associate members) Aeroxchange Ltd. Mitsubishi Heavy Industries, Ltd. WEDNESDAY 8:30 am – 11:30 am Aircraft Propeller Service, Inc. MTU Maintenance Hannover GmbH Keynote Speaker Dispatch Management Forum Airline Component Parts, Inc. Nationwide Hospitality 9:00 am – 1:00 pm Airworthy Aerospace Industries, Inc NORDAM National Transportation Safety Purchasing Forum Ametek Ameron Northrop Grumman Navigation Systems Board Chair Deborah Hersman Offers exhibitors the chance to meet face-to-face with AMETEK MRO NSL Aerospace airline purchasing officers. A-PRO (Aero Precision Repair and OAG is this year’s keynote speaker Overhaul) (Exhibitors only) Pacific Propeller International on Wednesday morning. The ARINC Pacific Scientific Aerospace 12th NTSB Chair, her two-year ATR Aircraft Transparencies Repair Inc. Repair, Inc. term runs until July 2011. She ATR North America, Inc. Piedmont Aviation Component Services Av-DEC is also serving a second 5-year PowerJet Deborah Hersman AVEOS PPG Aerospace term as a Board Member, which Aviall, Inc. Pratt & Whitney Canada expires on December 31, 2013. Aviation Exteriors Louisiana, Inc. Precise Flight Inc. A Member of the NTSB since June 21, 2004, Aviation Inventory Resources Precision Electronics LLC Aviation Representatives Inc Hersman has chaired a number of public events Premier Aviation Overhaul Center Inc. Aviatron Inc Professional Aircraft Accessories, Inc. hosted by the Board, including CO Flight 3407. She Avion Graphics Inc. Ramco Systems Avmax Group, Inc. holds a commercial drivers license with passenger, RAA Purchasing Forum RCI - Safety Barfield, Inc. RCM Aeroservices school bus, and air brake endorsements. She 12:30 pm – 4:30 pm Bill Thomas Associates, Inc. Rockwell Collins successfully completed a motorcycle basic rider RAA Inflight Committee Bombardier Commercial Aircraft Saab Aircraft Leasing, Inc. course and holds a motorcycle endorsement. She 12:30 pm – 4:30 pm Broadwing Air Repair Sabre Airline Solutions is a certified Child Passenger Safety Technician. RAA Dispatch Management Meeting CAE Inc. Safety Operating Systems Camtronics She has also completed the 40-hour HAZWOPER Safran Friday, May 28 Clariant Corporation Saft - America (Hazardous Waste Operations and Emergency Comtek Advanced Structures Ltd Saywell International, Inc. 8:30 am – noon Response Standard) training course. Crew Outfitters, Inc. Schneller, Inc. Flight Deck Automation Work Group Cryotech Sky Harbour Aircraft WEDNESDAY DAC International Inc Skyservice Dallas Aeronautical Services SkyVantage Corporation Flying above the Social Media Fray Hotel Information DataSource Inc. Soundair Panel discussion during Exhibit Hall Buffet Lunch Dean Baldwin Painting, LP Specmat Technologies, Inc. Both RAA host hotels have skywalks to the Midwest Derco Aerospace Inc. How does your company rate its Social Media Score StandardAero Airlines Convention Center. All the convention events Desser Tire and Rubber Sterling Courier Card? Hear the aviation experts discuss the hows will be held in the convention center. RAA has room DTC Duat Service STG Aerospace, Inc. and whys and answer your questions. blocks at the following Milwaukee Hotels: ECS - Electronic Cable Specialists STS Moderated by Elbit Systems of America SuperJet International Empire Airlines / Empire Aerospace Pat Cleary – Fleishman-Hillard Senior VP-Digital Hyatt Regency Milwaukee Texas Air Composites 333 W. Kilbourn Avenue EMTEQ Texas Pneumatic Systems / Turbine Public Affairs Enflite, Inc. Fuel Systems Mary Kirby – FlightGlobal’s Runway Girl Milwaukee, WI 53203 ExelTech Aerospace The Allen Groupe (414) 276-1234 Brett Snyder – Cranky Flier Exxon Mobil Aviation Lubricants Trax USA Corp. Room rate: $172/night FAA Navigation Services Triumph Group Benet Wilson – AviationWeek’s Business Aviation FAA/Surveillance & Broadcast Services Tronair Now blog Hilton Milwaukee City Center FlightSafety International Universal Avionics Systems Corporation 509 West Wisconsin Avenue Fokker Services Vision Aerospace, Inc. WEDNESDAY Milwaukee, WI 53203 GA Telesis W. S. Wilson Corportation (414) 271-7250 GE Aviation Wencor, Inc. Emergency Response Preparedness: Room rate: $175/night Gentz Industries, Inc. Wencor, Inc. Everything Nobody Told You! When making your reservation, please request the Global Aerospace Corporation Wings Financial Federal Credit Union Goodrich Corporation Woodward Mark Dombroff will provide insight on preparing RAA Room block. The last day to book rooms is April Hawker Pacific Aerospace World Courier, Inc 23, 2010 at both properties. for and dealing with emergencies. Topics to include HEICO Aerospace /Future Aviation Zodiac Services Americas NTSB and FAA issues, involvement of civil litigation, Hotel keycards sponsored by Hentzen Aerospace Zokman Products Inc criminal investigation, dealing with the media, LodgeX Airline Solutions Herber Aircraft Service, Inc. employees and customers and codeshare issues.

REGIONAL HORIZONS | First Quarter 2010 | 5 special FEATURE

REGIONAL AIRLINES PROVIDE AIRLIFT FOR HAITI

In the wake of Haiti’s disastrous January 12 earthquake, numerous member airline aircraft flew humanitarian flights carrying medical personnel, relief workers and supplies. In addition, their aircraft transported survivors, orphans and media Photo: www.laniganslens.com Photo: from the devastated country. Republic Airways transported 53 orphaned Haitian children on an Embraer 170 jet to Pittsburgh, where they received medical attention from the University of Pittsburgh Medical Center. Previously, the delivered 3,000 pounds of medical/surgical supplies donated by Brother’s Brother Foundation in Pittsburgh. Also on board the flight were Governor Ed Rendell, Congressman Jason Altmire, members of their staff and a team of UPMC medical professionals, who checked on the condition of the children and assisted in clearing their departure from Haiti.

American Eagle flew in much needed supplies, and on March 12 began new service into Haiti from its San Juan, Puerto Rico hub. Flying the ATR 72, American Eagle offers a daily nonstop flight as well as two flights through Santo Domingo and Santiago.

Cape Air dedicated two Cessna 402s to Haiti relief missions. One aircraft flew medical relief teams and supplies between the US Virgin Islands and Port-au- Prince. The other aircraft flew relief supplies from Santiago, Dominican Republic to several smaller communities in Haiti.

6 | REGIONAL HORIZONS | First Quarter 2010 AP_usa_GB_8x11.indd 1 18/02/09 17:40:09 feature STORY by Carole Shifrin

The challenge of finding growth opportunities for regional airlines Jim Parker of Raymond James predicts limited organic growth for regionals but more outsourced legacy airline flying with larger regional jets

Raymond James & Associates, which has been 2009, but at a more moderate pace than legacy “If you take following U.S. regional airlines since 1992 and airline mainline capacity, leaving the regional has championed their integral role in the over- sector with a relatively stable market share, into account the all US airline industry, painted a much bleaker the Raymond James report noted. It added growth we have picture for the future of the industry in this that large regional jets, seating 70 to 100, were year’s Growth Airline Outlook. the only aircraft category which grew in the on the books now plus “Going forward, we believe regional car- US in the 12 months between September 2008 what we have over the riers have limited opportunities for organic and September 2009. The 21 percent increase growth,” Raymond James analysts said. in large RJ units compared with a 4 percent next few years, the fu- “While legacy carriers will seek to outsource decline in total aircraft during the period. ture looks good.” more flying to larger regional jets over time, Both Phil Trenary, President and Chief in our view, this growth will be offset by a Executive Officer of Pinnacle Airlines, and Phil Trenary, Pinnacle Airlines reduction of smaller 50-seat regional jets. Brad Rich, Executive Vice President and Chief President and CEO Consequently, growth for regionals will come Financial Officer of SkyWest Airlines, told the via consolidation or higher risk (non fixed- conference they believe they are well posi- fee, contractual flying).” tioned for future growth, even though both have considerable fleets of 50-seat RJs. Regionals operating 90-100 seat aircraft? Trenary said Pinnacle does not own any A bright spot could be a change in the size of the 126 Bombardier CRJ200s it has, and of aircraft regional airlines may fly for their contracts under which 50-seaters operate run legacy partners. Jim Parker, who started the through 2017. At that point, they can be re- “In spite annual Growth Airline Conference 18 years turned “without any obligation to Pinnacle.” It of all the ago, raised the possibility that, in contract also operates 34 Saab 340s, Trenary said, which negotiations coming up, legacy carriers could are in demand and work very well for the difficulties and seek and achieve some loosened scope restric- carrier. “If there were a new Saab being built challenges in the tions to enable their regional partners to oper- today, we would buy the airplane.” ate 90-100 seat aircraft. Trenary noted legacy contracts covering industry, we really are “There’s some logic in that as legacy 468 50-seat aircraft will come up between very optimistic and labor wants to be made whole on everything now and 2017. In bidding for that business, that they’ve give up,” Parker said at the 2010 he said, “we will get our share.” Pinnacle enthusiastic about the Growth Airline Conference in New York in also has larger, newer-technology Bombardier opportunities in this February. “The legacies perhaps can get some- Q400 and CRJ900 aircraft – with additional thing in return…” All legacy carrier contracts, deliveries expected this year. “If you take industry, particularly except , are currently open for into account the growth we have on the books for regional carriers.” renegotiation, according to Bryan Bedford, now plus what we have over the next few Chairman, President and Chief Executive Of- years, the future looks good,” Trenary said. Brad Rich, SkyWest ficer of Republic Airways. “We think we have a very competitive cost Executive Vice President and CFO Regional carrier capacity was reduced in structure when it comes time to win some of

8 | REGIONAL HORIZONS | First Quarter 2010 INDUSTRY FORECASTS

RH asks Regional Airline Executives to share their “Growth prospects in the industry, forecasts for 2010 John Sullivan quite frankly, we think are limited. Chairman and CEO We see legacy carrier consolidation CommutAir The majors need to demonstrate and hub rationalization.” continued capacity restraint in their efforts to rebalance their systems Bryan Bedford, Republic Airways after the recent pulldown, and to Chairman, President and CEO concentrate on developing sustain- able business plans. If they do so, they will benefit nicely as the economy slowly emerges from the recession. The regional sector is undergoing a transformation, at the same time it continues to grow. Fuel price increases in recent years, coupled with a recessionary environment, have challenged the economic viability of regional jets over shorter stage lengths. Modern, faster, and more fuel- efficient turboprops are an effective replacement tool for the majors to employ at their hub cores, as they redeploy contracted RJs to longer stage lengths. There will continue to be a surplus of RJs until this process is complete, and RJ operators will face dual challenges from simultaneous that business with the major airlines.” nities in this industry, particularly for regional capacity and rate cuts as they compete with one another SkyWest’s Rich also is optimistic about the carriers,” he said. for places to deploy aircraft. future. The combined SkyWest and Atlantic Besides its 50-seaters and smaller Embraer At CommutAir, we finished 2009 about 30 percent Southeast Airlines (ASA) fleet of 451 aircraft Brasilias, SkyWest operates a substantial num- ahead of plan, and will concentrate on expanding our fleet to serve an increasing number of hub core CPA (Capacity includes 252 50-seaters which Rich said have ber of larger CRJ700s and CRJ900s, as does Purchase Agreement) assignments. We continue to identi- gotten “a little bit of bad press” recently. “The ASA. The company also is evaluating larger fy new potential capital sources, as the financial community airplane is a good solid airplane; it works very aircraft, such as the Bombardier CSeries, Rich rights itself, in order to be well-positioned for this task. effectively in and out of low-density short- said. “We are actively involved in analyzing haul markets where the aircraft are deployed,” additional aircraft types… and the opportuni- Brad Holt he said. Like Pinnacle, though, SkyWest has ties for that equipment,” he said. Chairman and CEO very little “tail risk” on the aircraft, Rich said, Does he think legacies will be able to ex- Atlantic Southeast Airlines Safety continues to be ASA’s top defined as a mismatch between the length of a pand scope to let regionals operate 90-100 seat priority, because without it, contract with a major carrier where the aircraft aircraft? “We hope they do,” Rich said. Even nothing else we do matters. ASA operate, compared with the regional’s financial though legacy pilots don’t want more flying has leading edge safety programs, obligation on the airplane. going to regionals, “the economics say that this and we continue to voluntarily is very clearly what should be done.” implement proactive safety Settling “tail risk” on aircraft Republic’s Bedford is not sure scope programs in all our divisions. In a deal signed with United Airlines last clauses will change, and though “the fixed fee ASA will continue to focus on improving programs related to our people, their quality of life and their job year, SkyWest settled most of its tail risk on business outlook is stable,” is more pessimistic satisfaction, because ASA people are outstanding aviation the aircraft, he added. The deal consisted of about opportunities for regionals. “Growth professionals. an $80-million secured loan to United with prospects in the industry, quite frankly, we We will concentrate on improved operational performance interest payments of 11 percent; deferral of think are limited,” he said. “We see legacy and customer satisfaction in an effort to remain financially certain amounts payable by United, at an 8 carrier consolidation and hub rationaliza- strong and positioned well for opportunities as they arise. percent annual fee; extension of SkyWest’s tion.” That would mean demand for regional Our industry will continue facing unprecedented chal- rights to operate 40 regional jets for United, products is reduced, he suggested. “This lack lenges in 2010. One of the many challenges for regional airlines this year will be the reporting of misguided infor- and a new opportunity for ASA to operate 14 of organic growth opportunities is really what mation regarding safety, experience and professionalism of RJs as a United Express carrier. “We aren’t a caused Republic to rethink its long-term busi- regional carriers. No matter how misguided the reporting bank,” Rich acknowledged, saying the “very ness model and start this process of transfor- may be, we must do a better job of representing ourselves, material deal” for SkyWest allowed it to re- mation into more at-risk flying.” and ultimately getting the facts of our industry, and what duce its tail risk by extending contracts, some With its acquisition of Midwest Airlines we’re really made of, out there clearly. by 10 years. At the same time, “United had a and , Republic is now in the In light of the scrutiny placed on regional carriers it is need for liquidity.” process of simplifying its overall fleet. It plans imperative that all carriers work together to ensure safety information and best practices flow freely between carri- Noting SkyWest’s strong balance sheet to replace all Q400s operated by Frontier’s ers. Competitiveness must be set aside when it comes to – with more cash on hand than any other Lynx Aviation with its Embraer 170/190s safety; there should be no safety secrets or hesitation in regional - Rich said it was positioned for the and is terminating leases on seven remaining sharing, regardless of competitive factors. future. “In spite of all the difficulties and CRJ200s operated by . We must stay engaged in the rulemaking and legislative challenges in the industry, we really are very “We do believe there is an oversupply of 50- process. Specific proposed rules are missing the mark and optimistic and enthusiastic about the opportu- seat regional jets,” Bedford said. RH will not accomplish what their writers intend.

REGIONAL HORIZONS | First Quarter 2010 | 9 industry EXPERTS

Q&A with John Nance

A pilot and a veteran Boeing 737 Captain for , Nance is an internationally recognized air safety analyst and advocate. He is best known to North American tv audiences as Aviation Analyst for ABC News and Aviation Editor for Good Morning America. An author of 19 books, Nance is a dynamic speaker presenting entertaining and pivotal programs on teamwork, risk management, motivation and coping with competition.

Q From your perspective, what is your overall a big point of saying that it would be inappro- ity for FAA action. The truth is, even the best impression of today’s major and regional airline priate — and maybe even morally or ethically of the regionals cannot be expected to take partnerships? unreasonable — to ask “what do our pilots do the most conservative road to crew scheduling A The relationships are maturing. Instead off duty?” However, pilots, like any human, for minimizing fatigue when their competitors of the majors merely controlling the regionals, need adequate food, shelter and rest to be pro- work their crews to the maximum. there seems to be more of a balance. I worry fessional on the job, and there is an identifiable constantly, though, about the major carriers lower threshold for salaries below which — for Q In your experience, does salary impact a having the continuous propensity to switch a given region — a normal if minimal life sim- safety professional’s performance? partners whenever there’s a penny to be saved, ply isn’t financially possible. Is this something A We are not talking about it enough. with zero regard for the fate of the regional a smaller carrier should be expected to factor Where is the lowest level of salary that’s that might have been serving them very well. into their thinking? Absolutely. As a company enough to buy food and shelter? We must This promotes instability, and instability does holding a federal certificate and the public take that into account, since you can’t expect not serve the cause of safety. trust, it’s simply not acceptable to say “it’s not to show up to work professionally ready for our problem if our guys are living in overly duty if you sleep in a cardboard box and can’t Q Are regional airlines safe as mainline stressful conditions or even under a bridge take a shower or buy food. It’s ludicrous to carriers? somewhere.” Yes, it IS your responsibility. say this doesn’t affect performance. But we A In most cases, brilliantly so. I’ve wit- must ask ourselves, will the feds step in if the nessed the maturation of regionals over the Q Did you ever sense there is a fatigue issue carriers do nothing? A federally mandated years, which now all operate under Part 121. among regional airline pilots? minimum salary may be neither workable or But the enemy of stable flight safety is exces- A There is a higher propensity for fatigue even possible, but the likelihood of Congress sive cost control, and regionals are still held among the regionals than among the majors. imposing one is high if regional carriers turn hostage to the need to maintain a rock-bottom However, what has still not been studied ad- a blind eye to the deleterious effect of what cost structure to survive. But the idea of find- equately is cumulative fatigue whether in the may constitute poverty wages. ing the safe-unsafe dividing line is a myth. regional or major airline pilot. We know the It’s never that simple, and if maintaining the current FAA rules are archaic and inadequate Q Should there be commuting rules for lowest cost structure is your prime directive, and do not address regional aviation’s chal- employees? you have to understand that there is no guar- lenges or, for that matter, the way major Part A Putting reasonable commuting protocols antee you’re going to make the right choices 121 carriers operate. And interestingly, this in place which employees are expected to fol- about what is and what is not prudent to cut. is not confined to aviation – fatigue is an is- low (such as how far in advance of duty com- Carriers respond differently to emergency sue affecting all Americans. It’s this country’s muting pilots should arrive in their base) are cost controls, and some push too far towards contemporary lifestyle…look at the number legitimate elements of guidance. Trying to the wrong edge. Regionals have their hearts of two-income families trying to stay afloat. mandate many more aspects of a pilot’s per- in the right place and want to be safe, but It’s truly critical that we can come together on sonal life in order to assure better performance eternal cost pressures have a high propensity this issue and spur the FAA to come up with — especially without myriad adjustments for of compromising the highest levels of safety. a workable and realistic set of rules covering cost-of-living differences — will probably fail And what about the low-cost equation when fatigue and protecting the flying public. And and certainly be viscously resisted. But region- it means paying pilots very little? Well, most for pilots, whether you are a Part 135 small als who fail to establish reasonable and humane regional pilots conduct themselves profes- operator, or a 747 pilot or fly RJs, we need to guidelines, and work with their people — as sionally on and off duty, but it takes money understand the propensity for fatigue-related well as stay aware of the challenges they may to live, and even money to survive, and when human failures in the current environment. face — are painting a large bull’s-eye on their aircrew are under severe financial pressure, During the last 10 years, fatigue has been too flanks and daring the federal government to that pressure cannot help but influence their often cited as a contributing factor in acci- mandate what they refuse to touch. performance. Some regional carriers have made dents, so this is and must remain a high prior-

10 | REGIONAL HORIZONS | First Quarter 2010 green SCENE

» A first step in understanding regional environmental and financial accounting soft- Comparison of life cycle GHG emissions between airlines’ eco-environment and its sustain- ware solution helps organizations to identify Figure.conventional 3 - Compari jetson fuel of li fande cycle aviation GHG emissions biofuel between con- ability efforts, EQ2 has launched a pilot pro- and map their environmental impacts to their gram with nine RAA member airlines using its bottom lines using real-time measurement of software program to analyze numerous factors resource inputs. of its carbon footprint. “We focus on risk management versus “The information that EQ2 will provide to RAA, green management,” says Burt, underlining based on the input from our membership, will the program analyzes every aspect of an air- allow RAA to be at the forefront of national line’s operation including fuel, waste and emis- discussions on Cap and Trade initiatives,” notes sions output and then couples the results with Senior Director Industry & Regulatory Affairs a plan on how to save money going forward. Liam Connolly. He underlines, “The report that EQ2 will provide us when the program » Bombardier is the first OEM to earn ac- is completed will represent 70 percent of the creditation from Aircraft Fleet Recycling regional airline industry’s statistics with regard Assocation (AFRA). The Canadian manufac- to environmental impact.” turer’s accreditation was awarded following a Additionally, the data will allow RAA to be comprehensive two-day audit, covering tear- armed and ready for the Environmental discus- down efforts for CRJ100/200 regional jets at sions on Capitol Hill on issues like Cap and Bombardier’s Service Centers in Bridgeport WV Trade schemes. and Tucson, AZ. AFRA is recognized worldwide London-based EQ2 is a sustainability eco- for its leadership in promoting best practices nomics company and provides organizations for salvaging and recycling components taken with the most accurate and up-to-date infor- from aging aircraft during disassembly. mation relating to their environmental impacts, The AFRA endorsement marks another step in sustainability risks and financial performance Bombardier’s drive to reduce the environmen- implications. tal impact of its products at each stage of the CEO Steve Burt tells Regional Horizons the aircraft’s life cycle, up to and including the end EQ2 developed Evolution, an enterprise carbon, Source: Beginner’s Guide to Aviation Biofuels, ATAG 2009 of its service life. Horizon Makes Aviation History with First WAAS Flight

Horizon Air became the first scheduled- service passenger carrier to operate a flight using Wide Area Augmentation System (WAAS) technology. The December 30, 2009 flight, on the airline’s popular Portland-to- Seattle route, was flown by one of Horizon’s 76-seat Bombardier Q400 turboprops. “ has long been committed to innovation and technical excellence, and we’re particularly proud to be spearheading the use of this new technology, which holds the promise of benefiting many thousands of customers in years to come,” said Jeff Pinneo, president and CEO. An aircraft utilizing WAAS can, in some cases, land in adverse weather conditions with as little as a half-mile of visibility at 200 feet of altitude – conditions that would deter aircraft not similarly equipped. Currently, Horizon has one WAAS- based in Tucson, Ariz. The Federal Aviation with flight data on 300 legs of flying, so the equipped Q400, with a flight management Administration (FAA) has agreed to support agency can determine the full value of WAAS system developed by Universal Avionics, a WAAS upgrades on six more Horizon Q400s. technology. manufacturer of advanced avionics equipment In return, Horizon will provide the FAA

REGIONAL HORIZONS | First Quarter 2010 | 11 news BRIEFS

TECH TALK NAMES IN THE NEWS

» RAA Flight Training Committee reps » The first she is charged with growing the company Captain Greg Wooley of ExpressJet and woman re- and returning it to profitability, as well Andy Nagle of Colgan Air, will assist FAA gional airline as rebuilding employee moral, customer in leading a working group that will identify CEO has been confidence, reliability and onboard product industry best procedures and training named at quality. Island Air currently employs 250 practices for the agency’s guidelines for Hawaii Island and operates 392 weekly flights on all stall/stick pusher training. The working Air. Lesley major Hawaiian islands. group began meeting in March, and will Kaneshiro meet monthly until October 2010, to was promoted » RAA’s Liam Connolly has been develop updated training practices. RAA in January promoted to Senior Director-Industry formed a task force of 10 member airlines 2010 having and Regulatory Affairs. “Since joining that will provide support to the working served the RAA two years ago, Liam has helped Hawaii Island Air CEO group and will share the benefit of their Honolulu-based air- Lesley Kaneshiro our airlines get a full seat at the table individual efforts across the entire airline line as Vice President with the nation’s homeland security industry. It will also bring the aircraft Finance and Chief Financial Officer for decision-makers and has nurtured a strong manufacturers and the flight academies into four years. She has been with the Dash 8 leadership voice for regional aviation in the conversation as well. The FAA-Industry operator since 2004. Previously, Kaneshiro the critical environment arena,” says RAA Stall & Stick Pusher Training Working Group spent four years as Director-Treasury Ser- President Roger Cohen. Additionally, on plans to also meet in May during the RAA vices at Aloha Airlines. January 18, Liam and his wife, Nancy, Annual Convention. Last March, Island Air COO Les welcomed a baby girl, Mackenzie Lynn Murashige retired after 35 years in the Connolly. » Miami Air’s Chief Pilot John Passwater airline industry, and Bruce Wetsel was shared this charter airline’s experience named his replacement. After a year » MJet Executive Retires implementing the “paperless cockpit” and in that position, Wetsel retired as well Mitsubishi Aircraft Corporation Chairman adopting “the moving map” to the RAA and Kaneshiro was promoted to ensure Takashi Nishioka will retire March 31 and Flight Technology Committee meeting held the success of the independent regional Nobuo Toda will succeed as Chairman in Miami, Feb 23-25. Operating nine Boeing airline. effective April 1. 737-800 and -400s, Miami Air flies medium Kaneshiro tells Regional Horizons that and large group charters for sports teams, government officials and private companies. TAKEOFFS

» Mini Indy Racers return this Spring to Way and the SkyWest Scholarship Fund. ON THE FLY celebrate 10 years of Mini Indy — the The three-day charity event mixes fun » ExpressJet will fly up to 10 additional aviation industry’s premier charity race with fundraising and includes golf, ERJ-145s for United Express from May-December Aviation companies and go-cart banquets and adults racing go-carts in 2010 as part of an earlier signed agreement with aficionados across the world gathered adrenaline-pumping Competition. The Mini United covering 22 ERJ-145s. in St. George, UT on March 13 for the Indy has raised more than one million industry’s premier charity race dubbed the dollars for charity since its inception » Republic Airways Holdings is the first Mini Indy. Celebrating its 10th anniversary, in 2000. This year alone, the event is North American customer for the Bombardier hosts SkyWest Airlines, the City of St. expected to raise nearly $100,000 for CSeries with a firm order valued at $3.06 billion George and Dixie State College in Utah’s United Way. for 40 of the 138-seaters, plus 40 options. The Dixie, organized 30 racing teams to raise To see the 2010 race highlights visit first aircraft will arrive in the second quarter of money for charity – specifically United i www.miniindy.org 2015.

» SkyWest Airlines has a new marketing partnership with AirTran Airways to support its Milwaukee focus city offering 18 daily non-stop flights from MKE to six destinations.

» American Eagle is introducing First Class service on all of its CRJ700s. President and CEO Peter Bowler says by July 25 CRJs will be con- verted to the new First Class service (9 seats) and main cabin design, as well as delivery of the first two of American Eagle’s 22 new CRJs will also feature First Class comfort and amenities.

12 | REGIONAL HORIZONS | First Quarter 2010 industry TRENDS/ANALYSIS

FLEET

» The regional airline industry flies technologically advanced aircraft – Regional Airline Current Regional Airline Current about half the age of the mainline fleet with 1,842 RJs flying with an Fleet Status Fleet Totals Fleet Status Fleet Totals average age of 6.8 years old. The 478 widebody jets flying today are an average of 12.3 years, and the 3,022 CORPORATE GROUPINGS SINGLE ENTITIES narrowbody jets operating are SkyWest Airlines ExpressJet Airlines 242 about 12.4 years old. (See SkyWest Airlines 287 Horizon Air 58 OAG chart below) Atlantic Southeast 161 Air Wisconsin 70 American Eagle Gulfstream International 21 American Eagle 227 Cape Air 58* Executive Airlines 39 Great Lakes Aviation 39 Republic Holdings Island Air Hawaii 6 Chautauqua Airlines 92 Commutair 16 Average Age of Active US Scheduled Passenger Fleet Republic Airlines 81 ERA Aviation 6 As of 1/6/10 58 Scenic Airlines 10 Years Aircraft 3 16 3,200 Mesa Airlines 122 Salmon Air 1 Average Age Freedom Airlines 34 Lynx 11 14 No. of Aircraft 3,022 14.8 2,800 Pinnacle Airlines NON-REPORTING MEMBERS Pinnacle Airlines 142 12 12.3 12.4 2,400 AeroLitoral, SA de CV 45 Colgan Air 48 Air Canada Jazz, Inc. 137 10 2,000 US Airways Group 7 1,842 PSA Airlines 49 8 1,600 AirNet Systems, Inc. 180* 44 Empire Airlines, Inc. 47* 6 6.8 1,200 US Airways Express Trans States Airlines 30 4 800 Midwest Express 0 GoJet Airlines 24 Frontier 53 2 478 460 400 Delta Airlines 101 0 0 Regional Widebody Narrowbody Turboprop Comair 111 *Used RAA Annual Report Jets Jets Jets Aircraft Compass 36 Source: OAG Fleet iNET, January 6, 2010 Source: OAG Fleet iNET, January 6, 2010

AIRPORTS

» IAG estimates in a new report and medium-sized city air service trends are already on-going » Even during the fuel crisis and that 30 American airports today will continue, most notably as as Delta further rationalizes a recession, the percentage of are at risk of losing their last RJ average aircraft capacity grows 550-strong RJ fleet in favor of communities with regonal ONLY flights unless critical steps are while average flight frequency larger capacity aircraft such as the service actually increase in 2009 undertaken to better balance and the number of competitive CJR900 and Embraer 175. to nearly 75 percent, or 492 revenue, cost and compensation service options both decline (see communities. (See OAG chart rates. The dynamic nature of small table below). IAG notes these below)

Summary of US-Based RJ Schedules (Month of January) Percent Change US Airports receiving regional ONLY service 2002 2006 2010 2002-2006 2006-2010 US AirportsUS Airports receiving regional service RJ Markets Served 835 1,589 1,486 90.3% -6.5% RJ Spoke Airports 205 268 274 30.7% 2.2% 2008 2009 Carrier/Hubs 38 41 41 7.9% 0.0% AVERAGE 177 167 Flights per Market* 38.3 38.4 20.5 0.3% -46.6% 27.1% 25.3% Aircraft Size (Seats) 50.0 52.9 56.6 5.8% 7.0% 476 492 Hub Markets per Spoke 4.1 5.9 5.4 43.9% -8.5% 72.9% 74.7% Spoke Markets per Hub 22.0 38.8 40.2 76.4% 3.6% Stage Length (miles) 418 491 483 17.5% -1.6% Note: *Figure is weekly. Source: IAG analysis of schedules via Innovata. US Airports receiving Source: OAG regional ONLY service

US Airports receiving regional service REGIONAL HORIZONS | First Quarter 2010 | 13 Federal35th ANNUAL Aviation FAA AVIATION FORECAST CONFERENCE Administration

During the 35th Annual FAA Aviation Forecast Bryan Bedford agrees, claiming Kirby is “the should be around a hub using as an Conference in Washington, DC, March 9-10 father of a la carte pricing.” At Republic’s recently example. “Hub-raiding has extended catchment ar- speakers ponder whether the way ahead in purchased Frontier Airlines only 12 percent of eas below 200 miles, spokes may not be effective aviation is “rational rebound or irrational sta- the fares are still bundled products as 88 percent except in densest markets close-in spokes may no bility” predicting a tenuous recovery is taking of the customers choose the lowest priced fare, longer warrant service.” hold in 2010. underlines Bedford. » Regional airlines now represent 53 percent » Sustainability, profitability and growth are of commercial flights, RAA President Roger » During a panel on “Operating in an On- Bedford’s goals going forward for Republic. As Cohen said during his presentation, underlining Time World,” Jim May, Air Transport Association for the industry, Bedford sees additional consolida- regionals provide the only scheduled air service to President and CEO, defended the use of regional tion in the market. 492 US airports, nearly 75 percent of the nation’s aircraft at busy, slot-limited airports against sug- » Barclays PLC Managing Director Gary Chase airports. During the past decade, the number of gestions that they don’t pay their proper share of underscores the commercial airline business regional airline passengers has more than doubled system costs and could add to flight delays. For “needs higher margins and to be flexible.” to about 160 million. “Today’s regional airlines do many medium and small markets, May said, re- » FAA’s 20-year forecast shows operations at not look like the ones operating when RAA was gionals and their smaller aircraft “are a Godsend,” the nation’s 35 busiest airports will soar 60 per- founded back in 1975, but they are similar in three allowing an airline to offer three flights a day on cent from 2010 to 2030. US airlines will reach one key ways: a total commitment to safety; a respon- a route compared with a single daily flight with a billion passengers a year by 2023. sibility to provide air service to the vast majority larger aircraft. “They serve markets that couldn’t » Regional airline enplanements are forecast of American communities; and a demonstrated and wouldn’t be served” otherwise, he added. to increase 4.6 percent to 163.4 million in 2010, ability to adapt successfully to whatever economic » Airline fares are 55 percent lower compared and grow 2.9 percent a year thereafter, reaching challenges come their way.” with those in 1980 [pre-deregulation], and cus- 289.3 million in 2030. » Bill Swelbar tackled the hot topic of the tomers really want low fares, US Airways President » In its first regional airline breakout session future of scope clauses. Dubbing it “Ponzinom- Scott Kirby noted during a panel, “Will Recovery in since 2006, FAA invited George Hamlin to offer ics”, Swelbar guesses the mainline pilots “will not Aviation Lead to a Transformed Industry?” A game his predictions of what the future holds for re- outsource the 75-125 seat flying and will create changer that will be with the industry forever, gional airlines. A longtime follower of the regional the necessary economics under their existing Kirby predicts is “a la carte pricing...it’s a matter airline industry, Hamlin shared his “Donut Hole” collective bargaining agreement. The new trading of survival.” Republic Airways President and CEO theory questioning what the minimum radius currency for improvements elsewhere.”

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