The 100 airlines in this survey operate over 2,800 aircraft, mostly new generation turboprops, and employ almost 70,000 people. Most of the carriers reporting net results made a profit last year, and the airlines which provided profit figures for both 1994 and 1993 increased their collective net income by 50 per cent.
Regional aviation is a buoyant sector of the market. Airlines which gave figures for 1994 and 1993 recorded collective passenger growth of 18.6 per cent and revenue growth of 17.9 per cent in US dollars.
The major airlines have taken most regional airlines under their wing. Three quarters of the regional airlines surveyed here have some form of agreement with major partners, and majors have ownership stakes in 36 of the 100 top airlines.
Partnerships
The structures of such partnerships vary. Some regionals, such as AMR Eagle or Lufthansa CityLine, are wholly owned subsidiaries of their major parents. Others, such as Mesa Air Group, are independently owned and have codesharing tie-ups with one or more majors. But the truly independent regional, carving a furrow in the marketplace alone, is a rarity - in the top 25 only TransAsia, ACES Colombia and TAM of Brazil come in this category.
Comprehensive information about the regional airline business is hard to come by on a global basis. Yet this survey shows that the regionals account for about 10 per cent of the world's passenger traffic, and that the majors are increasingly relying upon regional airlines to feed their long-haul operations and serve short haul, lower density routes which the majors are unable to sustain with their cost structures.
The airlines in this survey operate 2,350 regional aircraft - excluding larger aircraft - seating between 19 and 100 passengers. Almost 10 per cent - 223 aircraft - are jets in the 50-100 seat bracket. But modern turboprop aircraft form the bulk of the fleet - 1,697 aircraft.
Regional airlines find it easy to be secretive. Those that are owned by majors can claim, with some justification, that it is impossible to strip out financial data from the parent's figures, particularly profit or loss information. Many regionals are privately owned, and understandably do not want the outside world to scrutinise their figures. Only eight of the 100 airlines in this survey are publicly quoted companies. Yet sufficient airlines have revealed information to Airline Business to enable us to draw some useful conclusions.
Eclectic bunch
The 100 airlines included in this survey are an eclectic bunch. The largest regional airline is indisputably AMR Eagle, the wholly owned subsidiary of American Airlines' parent company. Eagle, which comprises four separate carriers, carried 11.8 million passengers last year and generated $790 million in revenue. The next two carriers are also conglomerates, but both USAir Express and Mesa Airlines are only half the size of Eagle. There are 25 more regionals carrying more than 1 million passengers, and after that the size of carriers reduces dramatically - Air Marshall Islands, ranked 100, carries only 44,000 passengers a year.
Not surprisingly, the bulk of regional carriers in this survey are from North America and Europe. The 35 North American carriers carried 58 million passengers, 56 per cent of the total. Some 37 European airlines carried 28.9 million passengers. The 15 Asia-Pacific carriers accounted for 11.5 million passengers, and the remaining 14 carriers are based in Latin America, the Caribbean, the Middle East and Africa.
The geographical breakdown is distorted a little by the fact that a greater proportion of US and European regionals replied to the Airline Business request for data. After all, they are more used to providing this type of data, especially in the US.
Around 25 regional carriers would have been large enough to appear in this listing, had they been prepared to divulge the necessary information within the required time limits. The largest carriers to be omitted are Canadian Regional Airlines (which provided revenue data but no passenger numbers); TAT of France; the UK's Manx Airlines; and Brasil Central.
The publication of this survey is designed to encourage more regional airlines to release information. In the olden days, a regional airline was a local business and could remain aloof from the rest of the world. Nowadays, regional airlines form an integral and growing part of the global air transport system. The outside world, including regulators, bankers and potential partners, needs to know about regional carriers' performance.
100 airlines ranked
The next four pages of this survey form its backbone. The 100 largest regional airlines which divulge passenger figures are ranked in descending order by 1994 passenger traffic. Revenues, net profits and net margins are also shown for those airlines that provided financial information - about three-quarters of them. Details of fleet, ownership and partnerships with majors complete the picture.
Next, on page 55, the survey provides an alphabetical list of the regional airlines included, plus notes about the inclusion criteria and missing carriers. Then on page 56 there are tables ranking the top 20 regionals by revenue, and showing the 20 most profitable carriers. On page 58, a table showing the regional partners of each of the world's major airlines is accompanied by notes and definitions.
Following the tabular sections, in three pages starting on page 61 Airline Business reports on the issues facing regional airlines in Europe, North America and Asia-Pacific.
Summary: 100 regional airlinesNE
# Total revenue 1994: US$7.9 billion
# Total net profit 1994: $176.7 million
# Passengers carried: 103.4 million
# Passenger growth: 18.6 per cent*
# Most profitable: Atlantic Southeast Airlines, net profit $52.7 million, net margin 16.9%
* Based on 86 airlines
Who's includedThe first question to answer when surveying the regional airline industry is: what is a regional airline?
Conventional wisdom is that regional airline operations cover short-haul routes flown by aircraft of 70 seats or fewer. But such aircraft can be used on routes anywhere between 100 miles and 1,000 miles and the 70-seat ceiling is being pushed upwards as regional carriers acquire more 80 to 90 seat aircraft. At some point, a short-haul regional route becomes a short-haul trunk route. And what about airlines which operate regional, trunk and long-haul routes?
For this survey, a regional airline is taken to be a carrier whose fleet is composed mainly of aircraft in the 19 to 100 seat bracket, flying scheduled passenger services on regional routes of up to 500 miles. Airlines which are mainly trunk or long-haul carriers are not included unless they have regional subsidiaries. To keep the size of the survey manageable, carriers only operating aircraft smaller than 19 seats are not considered. A few regional carriers also operate the odd long-haul route, which distorts the passenger numbers.
The creation of regional airline groups, some under the panoply of a single major and others feeding several competing majors, complicates the picture. The principle adopted in this survey is that airlines appear in the form of their corporate entity. So there is a single entry for AMR Eagle's four carriers wholly owned by AMR, and likewise for the Air Canada Connectors, Canadian Regional Airlines and USAir Express groups. The Mesa Air Group, which comprises five carriers with different codeshare agreements, 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 for this survey.
Some carriers are missing. Canadian Regional Airlines provided no traffic data, but it did provide a revenue figure which enabled it to be included in the revenue ranking. CRA probably carries around 3 million passengers, placing it at around number 10. Air Littoral provided no data. Its financials came from newspaper reports, and passenger numbers were probably around 1.5 million, placing it in the early 20s in the rankings.
For other large regionals, only known fleet information provides clues. TAT of France operates over 60 regional aircraft, but does not release traffic or financial information. Three Indonesian carriers are probably large enough to join Merpati Nusantara in the top 50 - Pelita with 26 regional aircraft, Bouraq with 21 and Sempati Air with 13. Air Nelson of New Zealand operates 21 aircraft, but again provides no passenger data. Brasil Central has a fleet of 30, and fellow Brazilian carrier TABA has 21. Britain's Manx Airlines claims to be Europe's largest regional with 24 aircraft.
Other sizeable non-repliers, with fleets of between 10 and 19 regional airliners, include Aerolitoral (Mexico), Air Atlantic (Canada), Air LA (USA), Air Nippon (Japan), First Air (Canada), GP Express (USA), Great China (Taiwan), Japan Air Commuter, Jersey European (UK), Rio Sul (Brazil), Sunstate (Australia) and WDL (Germany).
SA Express of South Africa started operations last year, and with 12 de Havilland Dash 8s, is sure to be large enough for inclusion in next year's survey. Other new carriers to look out for include Mahalo Air of Hawaii, with six ATR42s and three F27s, and Impulse of Australia with three Beech 1900s and five J41s.
Modest profitsGiven the fact that most regional airlines are privately owned, it is creditable that 75 have been prepared to reveal revenue figures. These airlines generated $8.3 billion in revenue last year, and the 55 carriers which gave revenue figures for both 1994 and 1993 reported a year-on-year increase of 17.9 per cent.
The revenue range is immense. At the top end, the four AMR Eagle carriers accounted for a total of $790 million in revenue last year, whereas the smallest revenue earner, tiny Aeropelican of Australia, generated just $4.4 million. Only 26 airlines in this survey reported annual revenues of more than $100 million, and these 26 accounted for $6.4 billion, or 77 per cent of the total.
On the whole, regional airlines appear to be more profitable than the majors. Some 46 regionals provided net result information, and only nine of them reported a net loss. As a group, these carriers made a net profit of $177 million last year.
Most profitable
Atlanta based Delta Connection carrier Atlantic Southeast Airlines was the most profitable regional airline in 1994, with a net profit of $52.7 million. ASA also achieved the highest net margin of 16.9 per cent, extraordinarily high by airline standards.
Fellow Delta feeder Comair, based in Cincinnati, was the second highest profit maker with $28.5 million, followed closely by the Mesa Air Group with $27.7 million. Two Asian carriers, Merpati Nusantara of Indonesia and TransAsia Airways of Taiwan, took fourth and fifth places in the profitability ranking, followed by Crossair of Switzerland. Trans States, the Air Canada Connectors, SkyWest and TAR all made more than $10 million net, and SAS Commuter produced a healthy 11 per cent net margin.
At the other end of the scale, only four regionals lost significant sums. Aeromar's $21.6 million loss, a net margin of minus 56.7 per cent, arose partly from Mexico's financial woes and the devaluation of the peso late last year; the company was profitable in 1993. Transwede lost $37.7 million after a loss of $46.4 million in 1993, reflecting tough competition in the Swedish domestic market and on the carrier's longer haul routes.
Restructuring
Washington-based Atlantic Coast Airlines, a United Express carrier, lost $25.1 million net, after incurring $14.1 million in restructuring costs as the carrier withdrew from markets in Florida and New York/Newark, and returned its Brasilias and de Havilland Dash 8s to concentrate on Jetstream operations. UK carrier Business Air's loss of $5.6 million, a 19.1 per cent negative net margin, reflected fast growth and lower yields, as passenger numbers doubled yet revenues increased by less than half.
While the majority of regionals reporting net results improved their performance in 1994, and most were profitable, a note of caution is in order.
More than half of the carriers in this survey did not divulge their bottom lines, and of course they may be performing worse than those which did report. While it is likely that AMR Eagle would be profitable if its finances were reported separately, other regionals such as Deutsche BA are known to be losing money. And some of the smaller carriers are in the startup phase or serve low-yield social routes.
As a group, the regional airlines are certainly more profitable than the majors - the average net margin of the 46 carriers reporting net results is 3.0 per cent. However, this is not enough to excite most shareholders, nor to guarantee funds for future investment.
DefinitionsPassengers includes all systemwide traffic for calendar 1994.
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 March 1995, but excludes aircraft leased out or withdrawn from use. The fleet number includes all aircraft, but the breakdown includes only aircraft seating between 19 and 100 passengers. In the fleet breakdown 1+2+3 means one aircraft in service, two on firm order and three options.
Employees include full-time workers as of 31 December 1994.
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, the Regional Airlines Association (RAA), the European Regional Airlines Association (ERA), and Flight International.
Notes[to be read in conjunction with the tables]Aeromar financials are preliminary, unaudited.
Air Canada Connectors includes Air Alliance, Air BC, Air Nova and Air Ontario.
Air Littoral finances from Les Echos.
AMR Eagle includes Executive Airlines, Flagship Airlines, Simmons Airlines and Wings West Airlines.
Arkia passengers cover domestic operations only and are for 1993.
Avianova, Brit Air and Business Express data for 1993.
Canadian Regional Airlines includes Inter-Canadien, Ontario Express and Time Air.
Deutsche BA data is forecast for 1994/95.
Gronlandsfly data for 1993.
Hazelton passengers are for 1993/94 financial year.
Mesa Airlines Group includes Air Midwest, FloridaGulf, Liberty Express, Mesa Air and WestAir.
Mesaba Aviation financials are for parent company, AirTran Corp. Northwest shareholding to be finalised.
Sun Air parent is Bop Air of Bophuthatswana.
Transwede data from Dagens Industri and Svenska Dagbladet.
Tyrolean financials from Der Standard.
USAir Express includes Allegheny Airlines, Jetstream International Airlines and Piedmont Airlines. Jetstream traffic, which is about 15 per cent of the total, is for 1993.
Wideroe traffic and employees for 1993.
Source: Airline Business
