Jetrader - Winter 2015 - 41

European Regional Carrier Weekly
Capacity by Airline Type
Airline Type

2005

2015

% Change

ACMI

4,892

 

-100%

407,000

389,685

-4%

Affiliate
Franchise

24,468

55,042

125%

Independent

738,937

639,137

-14%

In-House

451,619

477,885

6%

Subsidiary

1,367,653

1,244,705

-9%

884

9,440

2,995,453

2,815,894

Virtual
Grand Total

-6%

Largest European Independent Regional
Carriers by Weekly Capacity
Flybe

Country

Weekly Capacity

UK

227,148

Norway

129,177

Binter Canarias

Spain

69,444

Malmö Aviation

Sweden

33,536

Cityjet

Ireland

32,900

UK

19,077

Wideroe

Aurigny Air Services
bmi regional

U.S. Regional Carrier Weekly
Capacity by Airline Type

968%

European independent regional carriers have been acquired by
their mainline partners, merged or ceased operations. OAG data
shows that while there were 71 independent regional carriers in
Europe operating scheduled services in 2005, this has decreased
to just 40 carriers in 2015. Weekly capacity of scheduled seats
has decreased by 14 percent while overall capacity has increased
by 30 percent illustrating the challenges the business model has
faced. Victims include Skyways (Sweden), Alpi Eagles (Italy),
Cimber Air (Denmark), EUjet (Ireland), Euromanx (UK) and Cirrus
Airlines (Germany), six of the top 15 independents still operating
in 2005, now all out of business. Subsidiaries have not fared much
better, with capacity down 9 percent as legacy carriers cede some
of this business to LCCs or rail services.
More than half of scheduled weekly capacity of independent
regional carriers is currently provided by just Flybe and Wideroe.

Carrier

11 percent more seat capacity provided by third parties. Capacity
offered by subsidiaries has decreased by over 40 percent due to
sales/spin-offs by their network carrier owners (e.g. Continental
and ExpressJet, which was subsequently acquired by Skywest) and
the reduction in hubs as a result of consolidation. Part of this flying
has been picked up by affiliates, whereas independent airlines,
which were only 6.7 percent of regional capacity in 2005, saw
capacity fall 44 percent and are now only 4 percent of capacity.

UK

17,004

Nextjet

Sweden

14,634

Danish Air Transport

Denmark

14,248

InterSky

Austria

10,732

Of the remaining independent regional carriers, quite a few
of them either operate a) a wide range of public service obligation routes (i.e. Wideroe, Nextjet), b) are able to leverage their
geographical market niches (i.e. Binter Canarias, Aurigny Air
Services, Danish Air Transport) with a high dependency on routes
over water where key competition comes from slow ferry services
or c) operate from attractive airports close to the city centers
of Stockholm and London (e.g. Malmö Aviation and Cityjet) with
runway constraints allowing them to retain yield premiums over
more distant larger airports served by network carriers and/or LCCs.
In the U.S., the vast majority of regional capacity is operated
by independent providers (affiliates) or wholly owned subsidiaries
of the network carriers. An analysis of weekly capacity comparing
data from 2005 and 2015 for U.S. regionals shows a trend to outsource regional flying by network carriers to major regionals with

Airline Type
Affiliate
Independent

2005

2015

2,363,297

2,624,430

% Change
11%

293,567

165,422

-44%

In-House

 

274,867

 NA

Subsidiary

1,754,710

1,049,823

-40%

Virtual
Grand Total

 

2,277

 NA

4,411,574

4,116,819

-7%

An analysis of ch-aviation pro fleet data reveals that of 1,934
regional aircraft with a capacity between 30 and 100 seats operated on scheduled services in the U.S., only 87 aircraft are currently operated by independent regional carriers (Corporate Flight
Management, Corvus, Elite, Great Lakes, IBC, Island Air, PenAir,
Silver, Ultimate Jetcharters and ViaAir).
Given the reliance of U.S. regional carriers on capacity purchase
agreements (CPAs) with network carriers (essentially just three
customers with significant volume: American, Delta and United),
a race to the bottom from a cost perspective can be observed.
Originally, the network-regional relationships were mainly based
on pro-rate agreements where revenues were shared between
regional carriers and their customers. This has gradually changed
with the introduction of CPAs where regional carriers are paid
based on block hours. The move from proration to CPAs with
regional flying being awarded by network carriers to the lowest
cost operator through RFPs has led to a situation where regionals cannot optimize or control revenues themselves anymore. For
example, American's RFP for 60 76-seat regional jets following
the scope clause imposed on its pilots during bankruptcy led to
the selection of Republic. The carrier now, however, has been
challenged to meet its flight commitments given the recent
FAA rules requiring a minimum of 1,500 flight hours before first
officers may pilot scheduled service and its inability to secure a
new pilot contract that would allow it raise pay for its most junior
pilots. As a result, Republic shares fell 48 percent on 27 July after
issuing a profit warning from a lack of pilots to crew its previously
planned schedules.
MIT's William Swelbar specifically describes the relationship between
U.S. mainline carriers and regional operators as a "race to the bottom" in a blog post with the same title. He describes the relationship
as one where low labor rates at regional carriers cross-subsidize the
higher rates paid at mainline operators and that the relationship
will eventually put service to smaller communities at risk as airlines
would tend to only focus on the largest markets in their network (as
regional service is provided by the capacity provider with the lowest
cost without much focus on service as it now increasingly is the case
for the mainline carriers themselves).
Jetrader  *  Winter 2015 41
Jetrader - Winter 2015

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