SkyWest Airlines is asking vendors for concessions as part of an effort to reduce the costs it passes on to Delta Air Lines and United Airlines
Chief financial officer Brad Rich told analysts both Delta and United are "very aggressively" seeking cost reductions in ongoing rate renewal negotiations. He says SkyWest expects to achieve the savings desired by changing its reimbursement models and securing vendor concessions.
"It will require creativity internally as well as cooperation from our partners," Rich says. "We are asking various vendors to help be sensitive to the [economic] environment just like we're being sensitive to the environment."
SkyWest has not yet set pay rates with its major carrier partners for 2002 and is therefore now operating flights for Delta Connection and United Express without knowing how much it will get paid. But Rich says SkyWest is confident new rates can be set shortly that will help its partners improve their cash flow without compromising its margins.
Potential
Rich expects SkyWest to wrap up rate renewal negotiations with Delta "very quickly". He says SkyWest has further to go in talks with United because the carrier's attention has been diverted recently by labour problems.
Rich confirms SkyWest is also in preliminary talks to add a third major carrier partner, US Airways. He says the two carriers have discussed how operationally SkyWest may be able to help US Airways quickly expand its regional jet operation if it gets the scope relief it is seeking from its mainline pilots. But Rich stresses these talks have not developed to commercial topics, including the setting of possible pay rates.
"They are looking at some potentially rapid expansion," Rich says. "They're looking at SkyWest as a carrier that can provide expansion very quickly."
He says the carrier has the capability to potentially add aircraft for a third partner. But SkyWest's ability to meet possible US Airways requirements also depends partly on current scope restrictions at United. Rich says SkyWest is considering shifting Bombardier CRJs now intended for United Express to US Airways if these restrictions remain.
"Because of some uncertainty relative to [the United Express] fleet plan and how United scope affects it, we're looking at other alternatives," Rich says.
Rich says SkyWest's United Express expansion plan will start conflicting with United's scope clause late this year. But he points out there are still several months for United and its pilots to resolve the scope issue. Even under the worse case scenario – United Express CRJ delivery deferrals beginning very late this year – there will be no material impact until 2003.
Source: Flight Daily News
