A central theme of this year's Regional Airline Association meeting is that the first stage of the regional jet revolution is now over, with the industry moving into an era where large regional jets will offer a proxy for regular mainline service.
US Airways president David Siegel said: "We are seeing a migration to the 70-seat and larger jet, and the dual-class cabin will carry us into the next stage." Speaking at RAA in Phoenix, Siegel said the Embraer 170s that US Airways will begin to receive late this year, along with Bombardier CRJ700s, would be deployed to serve mainline routes using a first-class cabin. This is seen as a way to differentiate the airline's product, as well as to attract business and international travellers "in a trend toward a mainline-like cabin".
According to Siegel: "This is important to attract premium passengers on a connecting basis and would work well at hubs where we have less market power. We expect it, at worst, to be revenue-neutral but it will likely be profit-and-loss-positive." Bruce Ashby, in charge of US Airways Express, said the first-class section will be important in selling to corporate accounts because the ability to upgrade is an important element of corporate loyalty.
The US Airways order, with a book value of $4.3 billion, brightened the entire outlook at the RAA event. Covering 60 Bombardier CRJ200s, 25 CRJ700s and 85 Embraer 170/175s, the transaction is almost fully financed, mostly by lessor GE Capital Aviation Services. The CRJ700 order is in fact for the larger CRJ900, recertificated as a 75-seater, a model that was made attractive by the economics of the deal.
US Airways would even use the Embraer aircraft "on lower-demand time channels on the Northeast shuttle," adds Siegel, where it now uses the Airbus A319. The airline is also seriously contemplating adding even larger Embraers such as the 190, says Siegel.
Embraer president Mauricio Botelho said that the 170 should receive FAA certification in September and deliveries are to start in November at the rate of three per month to US Airways. The airline anticipates switching about half of its orders to the 175 once it is certified in June next year. In the wake of the US Airways order, Embraer is looking to increase the production rate of the aircraft.
Bombardier Regional Aircraft president Steve Ridolfi separately insisted that the "the regional airline revolution continues", citing as an example Lufthansa CityLine. The German carrier was the first customer for the Bombardier CRJ100 in 1992 - the effective opening shot of the revolution. CityLine just took its 18th CRJ700, which was the carrier's 63rd Bombardier jet and the 100th 70-seater to roll off the Canadian production line.
Rolls-Royce forecaster Richard Evans said the larger regional jets will be the main tool for regionals to respond to low-cost carriers. The regional carrier has long been seen as simply unable to fight well against the low-cost carriers, but with the roughly 30% lower seat-mile costs they enjoy on the larger regional jets, they can respond, if not hold their own. Mesa Air Group chairman Jonathan Ornstein said, though: "The real issue is one of finance since we would take as many regional jets as we can finance."
Skip Barnette, head of Delta Connection ASA (Atlantic Southeast Airlines), said the airline found the larger Bombardier product was key in its rapid expansion in April at Dallas/Fort Worth as Delta Airlines dramatically reduced its mainline operations there. "The plane lets us fly all the way to the West Coast," he says, adding that the CRJ700 series is profitable on short routes such as the Atlanta-Augusta route within Georgia of about 200km (125 miles). But Barnette has no plans to add a first-class section to the larger ASA jets, saying that Delta Connection's passengers prefer frequency and availability. Barnette serves as RAA chairman this year.
His situation sums up the industry predicament: "We'd love to have more of them [70-seaters], but until scope loosens up, that won't happen." The industry as a whole has seen great progress on relaxation of scope-clause restrictions which limit the number of larger regional jets that can be flown, how and where they can flown and by whom. However, that progress has been brought about in large part under duress as United Airlines and US Airways went through the bankruptcy process. American Airlines, itself close to bankruptcy, joined these two in using their financial crisis to bring about scope-clause change.
Further progress, most at the RAA agreed, will be gradual although it will come. It is unlikely that Congressional action will address scope clauses soon despite efforts to put the issue on the political agenda, according to RAA's legislative counsel, Faye Malarkey.
DAVID FIELD PHOENIX
Source: Airline Business
