The Changing Face Of The Small Jet Provider Industry

Small Jet Providers (SJP), known to many in the uninformed public as "regional carriers, or regional airlines" are going to be shifting their role in the industry as the fad of regional jets starts to dwindle, and their role will become diminished.

Fewer Players:  There are going to be fewer players in the industry, period. Only the small jet providers who are diversified in several carriers, and who can change with the times will survive in the next few years. Expect Skywest, Mesa, and Republic to be the heavyweights, Trans States is probably going to be around, considering that they are getting a new United Express contract. Air Wisconsin, though well run, might be in trouble due to the financial troubles of US Airways, and United's objections to AirWis becoming a US Airways Express carrier. Also, Colgan, who up until recently was exclusively a US Airways Express carrier and will start flying under the Continental banner soon. Colgan will be lucky to survive, especially if US Airways goes under. ExpressJet, Pinnacle, Mesaba should be safe, barring any unforeseen events, however, these three will not expand beyond their current brands of Continental for ExpressJet, and Northwest for Pinnacle and Mesaba.

Declining Role of 50> Jets, Possible Role for SJP's In Larger Jets: The introduction of the Embraer 170/190 series aircraft will allow airlines to serve mid-sized markets more efficiently, as these aircraft add capacity, and have considerably lower available seat mile (ASM) costs. These jets fill a capacity gap of 70-110 seats that isn't being filled by regional jets, and isn't covered by 737 or A320 aircraft. Many are calling these aircraft "regional jets" but these are not regional jets. The two reasons for this are first, the Embraer 190/195s can fit over 100 people, there are "mainline" aircraft such as the DC-9 and 717 that fit these many people. Even some smaller versions of the 737, such as the -500 and -600 fit these many people. The second reason is that these aircraft are much more efficient than regional jets, and can fit many more markets. Aircraft such as the 170 and 190 can be put into markets where instead of a daily 737 flight, airlines can provide more convenient service into a market by providing two 170 or 190 flights. The 170/190 can do this very efficiently, unlike regional jets. At the same time, these jets can fly between Seattle/Tacoma and Chicago, New York and Miami. Now, these jets are going to transform both the SJPs and the major carriers, which is why I go into detail about them. Because these jets are so versatile and efficient, they will become popular. The debate here is whether SJPs should be operating jets this large, especially the 190. Republic Airlines is already operating the 170 for United Express, and this fall JetBlue will get the first ever 190, followed by at least 99 others. In fact, Republic is so excited about these jets, they have purchased for $1 million the struggling Shuttle America, which is currently flying turboprops for United Airlines. "Republic's decision to purchase Shuttle America is in anticipation of increased demand for the Embraer 170 and to provide Republic with the opportunity to operate aircraft larger than 70 seats such as the Embraer 190 while complying with certain scope restrictions that some of its major airline partners currently have in place." As the role of 50> seat jets decline due to poor economics and low yields, the 170/190 series will be quite popular. Many markets which are served by the 50> seat jets, may not be served again, at least with jets, because of poor economics. Many regional carriers are shifting to adapt to new markets, bigger markets, and are going to need the bigger aircraft. The 70 seat CRJ700 won't work well, because it's an extension of the 50 seat technology, and it's not efficient enough. However, JetBlue is treating the 190s as mainline aircraft, and it's expected that most majors will if they purchase them. That's something that regional carriers don't like, and carriers such as Republic who might be interested in 190s, will put up a fight to be able to use these planes. However, they might run into trouble with union contracts, and other red tape.

A Resurgence of Turboprops? Turboprops, certainly not the public's favorite plane, may be making a comeback as they are more efficient than ever, and with high fuel prices, they might be adopted by SJPs. In particular, the Q400 turboprop is ideal for markets with current 50 or 70 seat regional jet service that are within 400 miles of the destination. The Q400 is used in this country by Horizon Air, Alaska's regional subsidiary, and they are very happy with the performance of the plane. One of the main selling points of the plane is that it flies like a jet, and can be within 5 minutes of a regional jet when flying routes less than 400 miles, and it also has the same trip cost as a 50 seat jet, but the Q400 holds 70-75 people. If small jet providers are able to convince major carriers that these planes would be better than regional jets, then they will be utilized. However, this plane doesn't have the potential that the 170/190 series does, but it can and should be utilized more on short routes currently operated by regional jets. Other turboprops might come back, such as the smaller, less efficient versions of the Q400, the Q200 and Q300, but those planes are much less attractive to airlines.

Keep in mind, small jet providers are contractors, and contractors can be replaced at any time, and if small and mid-sized markets don't provide the revenue they should, then the contractors will not be needed.