The results of the 1996 survey of the world's 100 largest regional airlines suggest a continued improvement in the health of this sector, with passenger numbers and revenues both recording double-digit growth. This bodes well for a sector which had to contend with unprecedented criticism in 1996, particularly from the safety lobby. Yet the many predictions that all the negative press would have an adverse effect on performance have failed to materialise.
Nevertheless, comparing the performance of individual regionals and the sector overall is difficult at the best of times as many carriers operate in fragmented markets and in very specific niches. The task is made tougher by the reluctance of many to disclose information and is made even more frustrating by the inconsistency of responses in that some carriers that have replied in previous years have either failed to file or have provided only partial returns.
Still, this remains the most comprehensive survey available and shows that in 1996 the world's top 100 regional airlines carried 142.5 million passengers, up 13.3 per cent on 1995. They employed almost 96,000 people and operated nearly 2,800 turboprop and jet aircraft. Only 60 of them reported revenues, which rose by 16.4 per cent to $10 billion.
Aside from Air Baltic, whose phenomenal growth is due to it only having started operations in October 1995, Alitalia's regional subsidiary Avianova recorded the highest passenger growth of 153 per cent. But the carrier's 1996 passenger figures should be treated with caution as it was merged into Alitalia Team in November and the figures are believed to contain two months of contributions from 12 A321s on European trunk routes.
Much of Crossair's passenger growth of 72.6 per cent is due to the addition of Swissair's 100-seater jet operations and Balair/CTA's European charter routes. Other carriers experiencing high growth, like Air Nostrum and Cimber Air, reflect a more genuine rise, as a result of fleet and passenger expansion from a small base.
Four carriers suffered a large drop in passengers. Transwede's traffic fell after its charter operation was demerged from the scheduled operation following the acquisition of half of the Swedish carrier's equity by Braathens Safe. GP-Express Airlines' data is for the first three quarters of 1996, after which the carrier ceased operations. Business Express entered Chapter 11 bankruptcy protection in January 1996 but continued to operate, albeit at a reduced level. Binter Mediterraneo's traffic figures also suffered after parent Iberia cut back some of the carrier's routes in a bid to stem losses.
The only top 50 carrier to disappear from this year's survey is Deutsche BA, which sold its regional operations to Regional Airlines last year, and no longer fits our criteria as it concentrates on its head-to-head battle with Lufthansa on German domestic routes. The four apparent newcomers in the top 50 - Great Lakes Aviation, Liat, Malmö Aviation Schedule and Transwede - all lack 1995 rankings because they failed to report for that year. But all four carriers had featured in the 1994 survey.
Over the next four pages of this survey, the 100 largest regional carriers which divulged traffic data are ranked in descending order by 1996 passenger numbers. Revenues, net profits and net margins are shown for airlines that provide financial figures. Further data is provided on employee numbers, ownership structure, fleet and alliances.
Page 34 contains an alphabetical list of the regional airlines in the survey with their rankings. This is accompanied by a commentary on changes in the way in which carriers are included. Then on pages 35 and 37 we rank the top 20 airlines by revenue and profit. The last page of the survey, page 38, carries a table cross-referencing each major carrier's main regional relationships, together with definitions and notes for the whole survey.
Defining a regional airline
The principal definition of a regional airline used in this survey is a carrier whose fleet is mainly composed of aircraft smaller than 100 seats, flying scheduled services on regional routes of up to 800 km. Airlines which operate mainly on trunk or long-haul routes are not included, but major carriers' regional subsidiaries do meet the criteria. Some carriers combine regional flying with different types of operation - such as charter flights, longer haul routes or trunk routes - and in these cases a judgement is made about whether the airline's operations are principally regional in nature.
Airlines appear in the form of their corporate entity. For instance, there is a single entry for American Eagle's four carriers which are wholly owned by AMR Corp, and also for the four Air Canada Connector subsidiaries, Canadian Regional Airlines, and the three wholly owned US Airways Express carriers. The Mesa Air Group, which comprises six carriers with different franchise and codeshare partners, also appears as a single entry.
Most regional airlines are privately owned, either as independent companies or wholly owned subsidiaries of major carriers. This means that many are reluctant to divulge financial information, making passenger traffic the basic ranking criterion.
The ups and the downsany of the comings and goings in this survey are still due to the unwillingness or just straight refusal of carriers to provide information on an annual basis.
But the third year of the survey has brought some stability to our rankings with only one airline disappearing from the top 50 and for good reason. Deutsche BA, ranked 17 last year, falls out because it no longer is a regional operator, having sold its regional aircraft and network to French carrier Regional Airlines. It now competes head-to-head with Lufthansa on domestic trunk routes with a dedicated B737 fleet. But other carriers operating 'big' jets, such as Aces Colombia, Aerosur Boliviana, Binter Canarias, Arkia, Crossair, Merpati, Rio-Sul, Sempati, TransAsia and UNI Air, have been retained in this survey because they have substantial regional operations.
Another 13 carriers have disappeared from the 100 listing because they either failed to report data or have disappeared. Those failing to report are: Inter-Canadien (67 last year), Scenic Airlines (72), Satena (84), Impulse Airlines (88), Air Martinique (91), Air Malawi (94), Air Creebec (97), Aerotransportes Casanare (98) and Surinam Airways (99).
The 'disappeared' include Karair (57) and Finnaviation (83), which were quietly merged into Finnair in September 1996. Loganair (81) was still sorting itself out after a management buyout at the end of 1996 and is probably too small now to register in the top 100 anyway. This is due to a reorganisation in April 1996 by holding company Airlines of Britain, which merged the British Airways franchises operated by Loganair and Manx Airlines Europe into British Regional Airlines. The latter is ranked 41 in this year's survey and also carries Manx Airlines Europe's 1995 ranking, hence it is not classed as a newcomer.
There are two other name changes among incumbents: Makung Airlines, ranked 40 in 1995, is now called UNI Air and has jumped up to 25 thanks mainly to the 4 MD-90s it now operates, which are not listed in this survey. Airlink Airline now operates as SA Airlink and has dropped from 82 to 84 in the rankings.
New Zealand's Air Nelson (45) failed to report 1996 traffic; its ranking this year is based on 1995 passenger numbers as an estimate.
GP Express Airlines ceased operations during the year and its Continental Connection franchise will be operated by Gulfstream International from May.
Among the 14 new entrants, only nine are truly 'new' because they have either reported for the first time, have experienced enough passenger growth to propel them into the top 100, or are a regional startup. Air Baltic (97), which was launched in October 1995, falls into the latter category. Its phenomenal 715 per cent traffic growth can be explained away because 1996 is its first full year of operations. The other eight are Mount Cook Airline (61), Bangkok Airways (66), Air Caribbean (82), Gr¿nlandsfly (88), Gill Airways (90), Air Engiadina (98), Chicago Express Airlines (99) and Air Exel Commuter (100).
The other five carriers - Great Lakes Aviation (42), Liat (48), Malm¿ Aviation (50), Transwede (51) and Portugalia (58) - return after failing to report last year.
Several carriers would undoubtedly feature if they reported, but their significance can only guessed at by the size of their fleet. Brit'Air in France operates 12 ATRs, eight Canadair RJs and three Saab 340s. Olympic Aviation operates 11 ATRs and seven Do228s. Pelita in Indonesia operates a mixed fleet of 11 regional jets and 12 Casa/IPTN 212s. Brazilian carrier Taba operates four Dash 8s, eight EMB.110s and two F100s. Japan Air Commuter operates 11 YS-11s and nine Saab340s. Aeromexico subsidiary Aerolitoral operates 27 Metros and Canadian Partner carrier Air Atlantic has a fleet of three BAe146s, five J41s and three Dash 8s.
UK startup Debonair, which began operations in May 1996, should almost certainly make it into next year's survey; it now has a fleet of five BAe146s.
Profits rise for the fewThe US regionals are back on top and a connection with Delta Air Lines appears to be the key to profitability.
Delta Connection carrier Comair, which feeds the major at Cincinnati, was the most profitable regional airline with a doubling in net income to $60 million. In third place comes Atlantic Southeast Airlines, Delta's feeder carrier at Atlanta, which reported a profit of $56.6 million - up from $51.1 million in 1995.
Not to be outdone, Brazil's two largest regionals sandwich the Delta operators. TAM, the most profitable regional in 1995, is just pushed into second place with profits of $58.8 million, a rise of $11.2 million on 1995. Rio-Sul, in fourth place, pushed profits up 58 per cent to $41.4 million.
Comair's performance is impressive given that the carrier added 19 Canadair RJs, retired its remaining Metros, and phased out most of its Saab 340s. The carrier's net margin of 13 per cent shows it had its cost base right to cater for a 21.3 per cent rise in passengers.
But the best net margin of 15.1 per cent was achieved yet again by Atlantic Southeast Airlines, which achieved an 18.4 per cent increase in traffic.
Qantas Airlink carrier Sunstate Airlines, which reported financials for the first time, recorded the second best net margin at 14.9 per cent on net profits of $6.6 million. Four other airlines achieved double-digit net margins in 1996 - TAM, Trans States Airlines, Rio-Sul and Atlantic Coast Airlines.
Only 32 regionals reported net results for 1996, with the top 20 earning total profits of almost $370 million - up from $261 million in 1995. Only four carriers reported losses. Great Lakes Aviation failed to report revenues but managed to slump further into the red from $2.7 million in 1995 to $11.3 million last year, despite a 25.8 per cent increase in passenger numbers. TAM subsidiary Brasil Central saw a 1995 profit of $1.1 million turn into a loss of $6 million. Australian regional Hazelton Airlines failed to turn itself around and instead increased its losses to $1.8 million. Sabena subsidiary Delta Air Transport slipped into the red with a loss of $287,000 from a small profit the previous year.
The average net margin for all 32 carriers comes out at 6.4 per cent - an impressive return by airline industry standards - but it does beg the question how that figure would change if more of the regionals disclosed their financials. Undoubtedly, a lot of those carriers will have reported losses for 1996.
However, almost two-thirds of the carriers in the survey reported revenue figures, with the total revenue for the 60 reporting airlines exceeding $10 billion. The top 20 revenue earners contributed some $7.2 billion of this total. After discounting the carriers that failed to report revenues in 1995, revenues grew by a solid 16.4 per cent last year.
Crossair is the exception among the top five largest revenue earners, in that the other four - American Eagle, TAM, Mesa Air Group and Air Canada Connectors - are groupings of two or more carriers. The Swiss regional's leap into second spot is due to it taking over Swissair's European charter operations with a fleet of eight MD-80s, as well as all of its parent's scheduled services operated by 100 seater jets.
Notable among those not reporting revenue figures are US Airways Express, TransAsia Airways, Continental Express, Air UK and Lufthansa CityLine. All five would certainly have made it into the top 10 by revenue.
DefinitionsPassenger figures are for calendar 1996 unless stated.
Financial data covers the most recent financial year indicated in the table. Net result is after extraordinary items and taxes but before dividends.
Currencies are converted into US dollars at the average exchange rate for the company's reporting period, taken from Reuters. Percentage changes in sales are calculated in US dollars and are therefore influenced by exchange rate movements.
Fleet includes aircraft in service as of early 1997. The fleet total includes all aircraft, but the breakdown includes only aircraft seating up to 100 passengers. In the breakdown, 1+2+3 means one in service, two on order and three options.
Employees include full-time workers only as of 31 December 1996.
SourcesThe primary source is individual airline reports, filed in response to an Airline Business questionnaire, plus annual reports and press releases. Additional sources were AvStat in Washington DC and the US Department of Transportation via Back Information Services.
NotesAir Canada Connectors is made up of the following carriers: Air Alliance, Air BC, Air Nova, Air Ontario and NWT Air.
American Eagle includes Executive Airlines, Flagship Airlines, Simmons Airlines and Wings West Airlines.
Bangkok Airways has estimated financials for 1996.
Delta Air Transport's passenger and financial data for 1996 are provisional.
Eurowings and Hazelton Airlines have estimated their sales for 1996.
Hamburg Airlines 1996 traffic figures include 198,000 charter passengers.
Highland Air 1996 traffic and sales data cover 16 months since startup.
Jersey European Airways profit is pre-tax.
Mesa Air Group includes Air Midwest, Desert Sun Airlines, FloridaGulf, Liberty Express, Mountain West and WestAir.
TAM's and TransAsia Airways financial data are unaudited.
Skywest's 1995 traffic data are for the financial year, 1996 for calendar year.
Sunstate Airlines' traffic data are for the financial year ending 30 June 1996.
USAir Express data covers the wholly owned subsidiaries Allegheny Airlines, Piedmont Airlines and PSA only.
USAir Express data covers the wholly owned subsidiaries Allegheny Airlines, Piedmont Airlines and PSA only.
Source: Airline Business
