Time to Revisit the ExpressJet Model?

I’ve seen unleaded gas for $1.75 a gallon here in Oklahoma, a barrel of oil is hovering around $60, and jet fuel is just over $2.00 a gallon, nearly 30% less than where it was a month ago. With this plunge in fuel prices, is it time to revisit ExpressJet’s now defunct model of providing point to point service between smaller cities? I hope so.

Jim Ream and the rest of the ExpressJet crew received a lot of flack for going out on their own and starting what I called a “Southwest Express” type of model. Instead of using 137 seat planes to link larger cities as Southwest does, ExpressJet used 50 seat aircraft to link smaller cities like Ontario and Tucson or Sacramento and Colorado Springs where no service currently existed. I loved the idea, but with fuel prices climbing, the ERJ 145 became a very difficult plane to make this work. (That wasn’t their fault – they had to use those planes.)

In August 2007, the airline reported a very low 63.8% load factor during the height of peak season. A year later in August 2008, after pruning the flights that didn’t work, the airline turned in a very healthy 78.4% load factor and showed that there was demand for the service. Unfortunately with the price of oil, there was no way they could make this one work, so they shut it down.

But even with lower prices, the Embraer still isn’t the right plane for this operation. Actually, I think the 70 seat Q400 turboprop might be the perfect aircraft for it. It can handle the relatively short stage lengths with ease, and it sips fuel compared to the 50 seat jets. So who is the right airline to try this?

Horizon.

Horizon is in the middle of retiring its Q200 and CRJ-700 aircraft in favor of an all-Q400 fleet, but that transition takes time. The airline has to remarket its 70 seat jets before it can get rid of them, so it has been trying to work with Bombardier on slowing down the Q400 deliveries to coincide with their ability to ditch the 70 seat jets. So why not start taking those Q400s as planned and open some new routes in old ExpressJet cities? Fares are higher in general right now, so that will only help, though of course the weakening in demand is alarming.

But there would be several advantages for Horizon over ExpressJet here. The flights would be operated by an airline with a connection to several major frequent flier programs, unlike ExpressJet, and they could offer codesharing with major airlines as well.

I always liked the ExpressJet idea, and I’d like to think that this could now work. It’s never a great time to start to try something like this, but this doesn’t have to be a major rollout. They can just start picking and choosing the best ExpressJet routes and grow from there if it works. Come on, Horizon. Give it a shot.


16 Responses to Time to Revisit the ExpressJet Model?

  1. Dr Dave says:

    Isn’t this essentially what the UK airline Flybe are doing? They are focussing on a fleet of Dash 8 – Q400, supplemented by Embraer 195’s for the routes that develop higher loads (118 seats). They focus on short routes off the main trunks (i.e. they don’t fly to Heathrow). In September they announced that in the first quarter this financial year they made a profit of >£12 million.

    Incidentally, they couldn’t make the EMB145 work either and are selling them off.

  2. Greg says:

    I have worked for Horizon for a couple years now. By and large, it is a well run airline with a solid network.

    The airline already does this, a little bit. I do think it would be a great idea to expand in this direction. However, the current mindset with AAG is cash-preservation (pretty much at all costs). That combined with the very conservative way the airline is run means they probably won’t pursue too much of this market.

    Most of the recent new-routes have been focused on feeding traffic into AAG hubs (i.e.- more Los Angeles flying). That, and most of the new routes have revenue guarantees tied to them from the local communities. This would be a great opportunity for the Air Group but not likely.

  3. eponymous_coward says:

    Yeah, what Greg says, most of the traffic has been funneling into LAX… the two exceptions being STS-LAS and SJC-SMF-SBA.

    That being said, IIRC, SMF-SBA was one of ExpressJet’s best routes, no? Also, STS is now getting QX service to SEA, LAX AND LAS… so I think they might be willing to find another winner.

    I would think they aren’t likely to go TOO far outside their comfort zone in the West, but you might see some routes get added on.

  4. Randy says:

    While many routes within CA, or shorter routes such as CA to nearby NV or AZ might work with a Q400, many of Express Jets routes such as SAN-GEG or ONT to COS, are too long for a reasonable Q400 route. As FlyBE does, these might be better suited to an Embraer 175 or 190 which would have a much better CASM and comfort than the 145’s that Express Jet flew and also represent a good upgauge opportunity from a Q400 for higher demand routes.

  5. Wonko Beeblebrox says:

    I’m surprised XJ never flew into Williams Gateway Airport in Mesa/Phoenix. Allegiant certainly seems to be doing well point-to-point flights at Gateway…

  6. CF says:

    Dr Dave – Good point about FlyBE. They do seem similar in idea.

    eponymous – Not sure about which routes were best. I’ll have to dig in to the government data when I have more time.

    Randy – I actually don’t think those are too far, especially Ontario to Colorado Springs. But yes, the point is well taken. There are some routes that ExpressJet flew that the Q400 can’t do comfortably. (Not that the ERJ was that comfortable . . .)

    Wonko – That could have been interesting, but they would still be competing with airlines at PHX since they’re so close.

  7. what about when prices go back up again? then the model becomes defunct in america and the cycle begins again.

  8. CF says:

    Nomadic Matt – Not necessarily. First of all, there are many who don’t believe it will spike up to that near $150 level and stay there again. Sure, it may spike to $100, but it’s not unreasonable to bet that it will be within a reasonable range for startup. Second, you’ve got a completely diferent aircraft to work with here. The Q400 burns less fuel and has more seats, so you’re more insulated from high fuel prices. You also have, as I mentioned, connections into a major airline frequent flier program or two, and that’s important. So, I tend to think it’s worth a shot. Could oil have another super spike? Sure. But I still think it’s worth trying.

  9. Court says:

    There are two areas this would work, the East Coast and the West Coast. The CRJ-700 is a good airplane, but it still doesn’t give you the benefits the Q-400 has. The major benefit the Q400 has over any jet is that competing airlines are likely to discount it as a non-issue since it’s a prop. Great way to sneak in, take market share, then bring in some 150-seat jets to connect the dots. Sure are a lot of 737-300/400’s in the desert.

    Just sayin…

    I think Lynx has an opportunity to do this too.

  10. Hmm.. Seems like we’ve got the Horizon out as a possibility.. What about JetBlue attempting to place the E190s there? They’re a bit big, but the brand name and amenities might help them…

  11. CF says:

    Court – Good point about Lynx. I have no idea what’s going to happen to those guys, but this could finally be something that Frontier could do successfully that doesn’t involve Denver.

    Nicholas – Interesting. Now that they’re done flying the McCain campaign around, they do have some planes free again. But the 100 seat airplane is probably still too big for a lot of these routes, don’t you think?

  12. Jim says:

    Stocks? with falling fuel prices and a falling economy where do u gents see the price XJ in 2009?

  13. CF says:

    Jim – I’m definitely not the guy to predict stock prices. Oil isn’t such a big deal for them because they pass through most of the costs now that their own branded operation is gone. Still, it could mean expanded flying opportunities since the CRJs can become more profitable to fly.

  14. Does XJ still have their charter operation?

  15. CF says:

    Nicholas – Yes they do. A handful of planes are with the Corporate Aviation group.

  16. Mike Auster says:

    The restaurant at Muskegon Michigan is great. For your general aviation fans, Janesville, Wisconsin.

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