“I believe that there is likely to be an unprecedented demand for large regional jets in 2014 and 2015 that could leave some mainline carriers with unsatisfied demands,” said Charles Schubert, American's vice president for network planning, in an April court filing.
Republic, which includes Republic Airlines, Chautauqua Airlines, Shuttle America Corp. and Lynx Airways, carried 20.1 million passengers in 2012, down 3.2% from 2011's 20.8 million.
Chief among Republic's 2012 accomplishments was changing Chautauqua's fortunes. Like many 50-seat regional operators, Chautauqua found itself flying at a loss due to rising maintenance costs on aging RJs coupled with reduced reimbursement rates from major partners. Republic cut some lease rates and landed new contracts for idle planes. The result should improve cash flow by $45 million per year for the next five years, allowing the carrier to get by until it can get out from under 50-seat flying.
“As long as we keep aircraft operating under Chautauqua, it should produce near break-even results,” says Tim Dooley, Republic's chief financial officer.
Despite consolidation among the majors, Republic executives are confident that, as its American deal showed, regionals will have significant opportunity to add work.
“In general, just about anything that helps our partners achieve stability and sustained profitability is in our own best interests,” says Bryan Bedford, Republic Airways Holdings CEO.
The specter of capacity cuts by the merged American/US Airways entity looms large, however, even as the combined carrier pledges to keep its total of 10 hubs.
An analysis from LeighFisher consultants shows that six years after American's 2001 merger with TWA, the combined carrier had eliminated capacity equivalent to TWA's entire fleet. St. Louis was hardest hit, losing nearly 70% of its seats, while San Jose lost more than 60%. The 2006 US Airways-America West combination cost Pittsburgh about 75% of its seats by 2010, while Las Vegas lost slightly more.
“When you shut down all these hubs, what was flying out of them?” asks Glenn Engel, senior airline analyst with Bank of America Merrill Lynch. “You can't shrink hubs. They lose their connectivity. With all of these mergers, you are seeing airlines pick the hubs they need.”