Mainline Mergers Affect U.S. Regional Market

By Sean Broderick
Source: Aviation Week & Space Technology

The deal gave Pinnacle much-needed financial support as its cash reserves were dwindling. For Delta, which recently withdrew from the regional subsidiary business by shuttering Comair, the agreement underscores the urgency to secure large RJ capacity. Pinnacle was slated to exit bankruptcy in early May.

Delta's Pinnacle venture is part of a larger plan to increase the size of its regional aircraft. Delta's revised pilot agreement caps 50-seat aircraft at 125, down from about 350, and allows Delta to fly 102 70-seaters and up to 223 76-seaters. In exchange for boosting 76-seaters, Delta is adding mainline capacity (and mainline pilot jobs) in the form of 88 former AirTran Boeing 717s. Delta also has 30 CRJ900 options, likely meaning more work for a regional partner.

Interestingly, the small RJ's mass-exodus has some airlines eyeing 50-seaters as a possible contrarian's pick for short-term lift. While the economics are tenuous at current market rates, a rock-bottom acquisition cost contrasted by a possible tightening in the large RJ market could change things quickly.

“You can . . . imagine an environment where everyone is trying to get large regional jets and as a result, large regional lift becomes expensive and 50-seat regional lift becomes inexpensive,” says Scott Kirby, US Airways president. “We're agnostic about whether we have 50-seaters or larger regional jets. It is all about the economics. Today, the economics of large regional jets are better, but five years from now, that might be different.”

While business is always top of the minds in airline boardrooms, the U.S. regional sector's biggest concern in 2013 may be regulatory. FAA is facing an August deadline to issue a final rule revamping pilot qualifications. The new regulation will require 1,500 flight hours and an air transport pilot (ATP) rating for all first officers, up from the 250 flight hours and commercial pilot rating currently needed.

FAA's draft rule includes some exceptions, such as military experience, that would lower the minimums. However, if the agency doesn't get the rule out by Aug. 1—it is already more than a year late—Congress has mandated that the 1,500-flight-hour requirement become law.

Rule or no rule, RAA says its members will be ready, but it is a costly process. American Eagle says it had nearly 1,600 pilots flying the line who fell short of FAA's proposed requirements when they were published in February 2012. Eagle's estimated cost to comply with the requirements: $2.2 million.

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