North American Regional Airline Industry in Transition
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North American Regional Airline Industry in Transition MITRE Corporation Center for Advanced Aviation System Development February 14, 2011 Safe. Professional. Reliable. Regional Airline Association (RAA) and RAA Members •RAA – Founded in 1975, Washington, DC-based trade association – Represents 29 member airlines (Canada, Mexico, U.S.) and 180 associate member suppliers – Provides a wide array of educational, technical, government relations and public relations services • Regional Airlines’ Critical Transportation Role –Provide the only scheduled passenger service to 496 of 653 (74%) communities with commercial service –Fly more than half (52%) of the scheduled flights – Serve more than 159 million passengers in 2009 (161 million projected for 2010) – Employ 52,000 airline professionals Safe. Professional. Reliable. Let’s talk about… • Regional Airlines - Then and Now • What is a Regional Airline • Fleet Transition • Airline Networks • Financial Trends • Safety Leadership • Rulemaking/Studies • Mergers and Consolidation • Opportunities Safe. Professional. Reliable. Regional Airlines – Then 1980 Safe. Professional. Reliable. 1978 Airline Deregulation Act Predicting the Critical Role of Regional Airlines “ If deregulation is to succeed, it will take the commuters to do it…Commuter airlines will play an increasing role in connecting main street to the business world and are making a great contribution to our country.” Harding Lawrence Braniff International Speaking at a Commuter Airline Association of America meeting in 1979 Mainline Carrier Regional Operating Partners Mainline Carrier Regional Operating Partners Bra n d Br a n d Alaska Airlines N/A Horizon Air FrontierSafe. Airlines Professional. N/A Reliable. Great Lakes Pe n insula Airw a ys Ly n x A v i a t i o n Republic Airlines jetBlue Airways N/A Cape Air AirTran Airways N/A Skywest Airlines Now – American Airlines American American Eagle Midwest Airlines Midwest Chautauqua Airlines Ea g le Co n n e ct American Eagle/ Republic Airlines* Exe cu t ive Network Partnerships, Frontier Airlines American Chautauqua Airlines New Role, Con n e ct ion United Airlines United Atlantic Southeast Safe, Professional, Reliable Exp re ss Continental Airlines Continental Chautauqua Airlines Co lg a n Air Exp re ss Exp ressJe t ExpressJet Airlines Con t in e n t al Ca p e Air GoJet Airlines Con n e ct ion Co lg a n Air Great Lakes 2010 Co m m u t Air Mesa Airlines Gulfstream Sh u t t le Am e rica International Airlines SkyWest Airlines Trans States Airlines Delta Air Lines N/A Atlantic Southeast Airlines US Airways US Airways Air Wisconsin Exp re ss Chautauqua Airlines Chautauqua Airlines Co m a ir Co lg a n Air Compass Airlines Mesa Airlines Mesaba Airlines Piedmont Pinnacle Airlines PSA Sh u t t le Am e r ica Republic Airlines SkyWest Airlines Trans States Airlines *Flights are outsourced Source: OAG Schedules, July 2010 Safe. Professional. Reliable. What is a Regional Airline (in North America) • One Primary Role – Connects small and medium communities with economic and transportation centers – 99% of flying conducted in code share network • One Level of Safety – Operates under F.A.R. 121 – Maintains mature, comprehensive training programs – Maintains experienced pilot workforce • 18,000 pilots • Captains avg. > 10 yrs. & 8,000 flight hours • First Officers avg. > 5 yrs. & 3500 hours TT (avg. age 32) – Embraces voluntary safety programs – Engages in sharing of safety practices (with other air carriers) – Operates a modern fleet (with up to 86 passenger seats) Safe. Professional. Reliable. General Business Arrangements and Regulatory Responsibility • Relationships with Networks Vary Widely – Contract and ownership – Capacity Purchase Agreements – Shared livery, reservations, marketing, ground handling, etc. – Single carrier may have multiple relationships • Each Carrier’s Relationship with FAA Includes – Operating certificates, Ops Specs, Part 119 officers – CMO principals – Manual system, procedures and training 8 Safe. Professional. Reliable. Fleet in Transition: Meeting Needs of Communities and Network Partners • Regional jet (RJ) performance increased route options communities • Loosened “scope” enable network carriers to fill the seating gap and to continued ASMs growth without increased burden on ATC Airframes in 2000 Airframes in 2009 Safe. Professional. Reliable. Stable Frequency of Departures Operations RJs Continue to Grow Monthly Scheduled Passenger Departures by Category (U.S. Carriers) Airlines April April April April April April April April Reporting 2003 2004 2005 2006 2007 2008 2009 2010 Turboprop Departures 140,737 125,782 108,799 100,508 100,717 93,615 82,226 72,342 RJ Departures 189,719 232,600 276,124 264,266 271,767 280,918 264,985 271,223 Total Regional Departures 330,456 358,382 384,923 364,774 372,484 374,533 347,211 343,565 * Domestic US Departures Only ** Fleet data is as of April 1 of each year Source: OAG Schedules iNET, OAG Fleet iNET As of April 13, 2010 Safe. Professional. Reliable. Stable Total Fleet Trend Towards Longer Flight Segments Increasing Scope includes Jets (“RJs”) & Turboprops (TPs) with 19 to 100 pax seats 2285 total airframes (446 TPs, 1224 1st gen RJs, 615 2nd gen RJs) April April April April April April April April April April April Category 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Turboprops (includes Q400s) 1,332 1,226 1,070 918 824 710 652 605 563 467 446 Q400s 0 4 15 15 18 19 21 25 49 61 65 Small RJs (50 seats &under) 373 566 770 1,007 1,233 1,362 1,322 1,356 1,342 1,240 1,224 Large RJs (51 - 100 seats) 72 74 80 109 171 279 344 372 484 578 615 Total Turboprops & Jets 1,777 1,866 1,920 2,034 2,228 2,351 2,318 2,333 2,389 2,285 2,285 * Domestic US Departures Only ** Fleet data is as of April 1 of each year Source: OAG Schedules iNET, OAG Fleet iNET, April 13, 2010 Safe. Professional. Reliable. Modern Fleet Safe. Professional. Reliable. Air Carriers In Transition Largest 20 airlines fly 99% of regional passengers Not your father’s regional airlines… Passengers Enplaned 2010 percent of total regional traffic activity Safe. Professional. Reliable. Safe. Professional. Reliable. Networks The System we have developed to take passengers anywhere in the world Santa Fe Dallas Santa Fe – Dallas Ame rican Eagle Flight 2850 – ERJ140...connecting Dallas–Buenos Aires American Airlines Flight 997 – Boeing 777 Bue no s Aire s Safe. Professional. Reliable. The System we have developed: one ticket to take passengers anywhere in the world Appleton–Chicago O’Hare United Express ExpressJet Flight 5877 – ERJ145...connecting Chicago O’Hare–Beijing Ame rican Airline s Flight 187 – Boeing 777 Apple t o n Ch i c a g o Be ijing Santa Fe Dallas Santa Fe – Dallas Ame rican Eagle Flight 2850 – ERJ140...connecting Dallas–Buenos Aires American Airlines Flight 997 – Boeing 777 Bue no s Aire s Safe. Professional. Reliable. US Airports Served Exclusively by Regional Airlines Safe. Professional. Reliable. Regional Airline International Service Has Grown Dramatically (as of July 2010)North Transborder Routes South Transborder Routes Safe. Professional. Reliable. Hub feed critical to air transportation system: Percentage of Regional Operations at 10 busiest US airports • Atlanta 39% • Chicago O’Hare 60% • Denver 45% • Dallas/Ft. Worth 37% • Los Angeles 25% • Houston 57% • Charlotte 57% • Detroit 61% • Philadelphia 54% • Minneapolis 54% Safe. Professional. Reliable. Financial Trends 2010: Recovery of Business Travel The worldwide economic recession caused an unprecedented drop in business travel Premium-fare travel collapsed in 2009, off by more than 30%, but recovered gradually through 2010 – This represents passengers traveling in first and business class Yields are up but domestic business travel in the U.S. is still down from the pre-recession peak The problem: business travelers contribute the highest margins for the airlines The opportunity: continuing recovery of the economy can boost both business and leisure travel from current levels Safe. Professional. Reliable. Regional Airline Industry Growth 1980-2009 Average Passenger Trip Length Average Seating Capacity miles 475 60 450 457 425 442 55 400 50 375 50 350 325 40 300 275 296 37 250 30 225 30 200 217 26 175 194 24 20 150 174 125 129 16 100 10 75 50 25 0 0 1980 1985 1990 1995 2000 2005 2009 1980 1985 1990 1995 2000 2005 2009 Revenue Passenger Miles Passengers billions m illion s 80 170 160 159.45 70 72.91 150 152.55 67.41 140 60 130 120 50 110 100 40 90 80 82.49 70 30 60 50 58.31 20 24.38 40 41.49 30 10 12.64 20 26.99 S li F t R Ai iN 41 t OAG a worldwide and slightly smaller in the U.S. the in smaller slightly and worldwide a The New United is slightly larger than Delt than larger slightly is United New The h e N e w U n i t e d i s s l i g h t l y l a r g e r n the first three quarters of 2010 of quarters three first the n i venues e he major airlines added a combi a added airlines major he T ned $12.8 Billion of operating of Billion $12.8 ned t h TD Revenues Are Up Sharply Up Are Revenues TD a Y n ajor Airline Airline ajor D M e l Safe. Professional. Reliable. Professional. Safe. t a w o r l Safe. Professional. Reliable. egional Airline Capacity Purchase Agreements (CPA) ad to Stable Regional Carrier Revenues 24 Billion in 1H 2010 versus $5.19 Billion 1H 2009 AG Form 41 iNet, Airline Reports Safe. Professional. Reliable. Major Airline Net Profits Have Rebound Considerably A $2.8 Billion Net Loss Improved to a $2.6 Billion Net Profit SF41iNAiliR Safe.