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Over 70% of US airports with commercial air service are served exclusively by regional airlines. And almost all of those airports reside in or next to small or midsize communities. Unfortunately, both the communities and regional airlines face head winds in the coming years. New regulations coupled with the potential for additional taxes and reductions in subsidies will hamper the regionals’ ability to grow and operate with sustained profitability. This will have a direct effect on the small communities that regional airlines serve.

Most people have never heard of Pinnacle Airlines, ExpressJet Airlines, or Republic Airlines but have flown on them many times. An average regional airline flies turboprop aircraft or jet aircraft with less than 100 seats on a contract basis for mainline carriers such as United or Delta. Although separate companies, the regionals usually fly under the mainline’s brand such as Delta Connection or United Express. In most cases, Delta and United take care of scheduling, promoting, and selling tickets for the flights while the regional takes care of providing the primary product. Now, let’s hop into some of the issues.

One of the bigger impacts to the industry will be felt when new rules regulating pilot duty time kick in. (Cranky did a good job of breaking down this issue in a previous post.) These new rules were introduced to address ongoing concerns about pilot fatigue. Pilots will now work a little less and get more rest. This makes sense. Who doesn’t want a well-rested pilot at the controls?

But there is a flip side. The new rules governing duty and rest periods will force carriers to hire more pilots if they want to run the same schedules they have today. The savvy regionals will work diligently with their mainline partners to reoptimize schedules. But they will not be able to totally avoid higher pilot costs. Regionals will have to pass on the additional costs to their mainline customers to remain at current profitability levels.

Another new upcoming regulation will increase the minimum number of hours of experience a pilot needs to fly for an airline. Currently, a pilot only needs 250 hours along with a Commercial License to get hired with a regional airline. In a couple of years, this will increase to 1,500 hours and require an Airline Transport Pilot (ATP) certificate.

On the surface, this seems like a no brainer. More hours = more experience = safer flying. But there isn’t research proving that pilots with 1,500 hours consistently fly safer than someone with less experience. When this steep increase is implemented, it will create an artificial pilot shortage. Some pilots pay out of pocket or through loans to get to 250 hours. Getting to 1,500 hours on one’s own dime will push a bunch of would-be pilots out of the market. The shortage will push up wages to account for the lower supply and result in additional expenses.

In the fall of 2011, the Obama administration proposed creating a new $100 departure tax for all air carrier departures and general aviation jet departures. The proposal also increased security taxes on airline tickets and was given to the super committee for consideration. An impressive coalition of 30 organizations including airline trade groups, general aviation groups, unions, and manufacturers quickly got together to fight the proposal. The rally cry is that airlines and passengers already pay higher taxes than alcohol, tobacco and guns which are intentionally set high to discourage their use.

It appears that the White House quietly backed off the proposal because of the backlash it received during an election cycle. If the proposal was revisited and passed, it would have a disproportionate effect on regional airlines that carry fewer passengers each flight than their mainline counterparts. It’s much cheaper to spread $100 over 200 passengers than over 50.

Another debate in Congress has been the over subsidizing air service to small communities through the Essential Air Service (EAS) program. This program is designed to help provide small communities with air service that cannot, due to such low demand, support itself. I expect a haircut or possibly elimination of this program. Accordingly, many routes would cease to exist.

In isolation, each of these challenges would have a much smaller impact on the industry. Together, these policies would have significant negative economic effects and force airlines to cut flights on underperforming routes. And each flight lost in a small community has larger implications due to the community’s relative size.

These changes will burden an industry already struggling with consolidation and high fuel prices. Pinnacle is flirting with bankruptcy. SkyWest and Republic’s financials have been limping along since their acquisitions of ExpressJet and Frontier respectively. American Eagle’s anticipated spinoff from American Airlines will increase competition in an already saturated market. We’re seeing a steep decline in small jets which don’t work with today’s fuel prices. Turning a good profit in the regional industry is proving difficult even while their mainline counterparts are starting to enjoy being in the black.

Some municipalities and the airlines will come up with creative solutions to mitigate the effects. They will also need to continue lobbying the government to implement policies that have positive economic effects. Regardless, it appears that the end result will be fewer options in small communities.

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Matt Tregre is an airline enthusiast and has held positions in finance, revenue management, pricing, customer service, and baggage tossing with stints at Southwest, ExpressJet, & Pinnacle. During school, he developed marketing plans for small airports. He now works in revenue strategies for a corporate aviation company and greatly misses having flight benefits.

[Original photo via Wikimedia Commons user Paranomia/CC 3.0]

Why Delta Airlines Decided to Invade Iceland – BNET Headwinds
Delta’s going to Iceland, just like everyone else. But I don’t think it’s a bad move.

Stressed JetBlue attendant not flying solo – Crain’s New York Business
Crain’s asked me about the now famous JetBlue flight attendant who popped a slide and walked away.

JetBlue’s Stress Test: A Peek at the Secret Fantasy of Every Flight Attendant – BNET Headwinds
I honestly didn’t want to write about this, but the story blew up so fast, that I had to jump in.

Pilot Outsourcing a Tough Challenge for United-Continental Merger – BNET Headwinds
Pilot scope clauses are going to be front and center in the United/Continental merger. Did the SkyWest acquisition of ExpressJet have something to do with that?

JetBlue Plays It Smart (and Serious) After Steven Slater Incident – BNET Headwinds
It’s been an interesting week for JetBlue, and now the airline is talking directly to its employees about the Steven Slater incident. It’s an excellent letter.

It’s very clear that this is happening because of the AirTran deal, but it’s not your traditional regional contract. Then again, it’s not exactly the “innovative” and “groundbreaking” contract that these guys are proclaiming it is. This has been done before many times. The airplanes will say SkyWest on them, but you’ll have to go to AirTran to book. It’s a lot like the deal they had with Delta back in the day.

You may remember that SkyWest was flying as Midwest Connect until Republic came in and booted them out. Like most airlines, SkyWest has more 50 seat jets lying around than they need, so they figured they could just put them back into use on routes they know and love. Only now, they’ll get passengers from AirTran instead of Midwest.

The 50 seaters will fly from Milwaukee to Akron/Canton (Jan 5), Des Moines (Feb 11), Indianapolis (Jan 5), Omaha (Feb 11), Pittsburgh (Dec 4), and St Louis (Dec 4). All of those are Midwest markets except for Akron/Canton, which is a big airport for AirTran. Nice.

Some of you may remember AirTran’s last effort to use 50 seat jets. Back in 2002, they signed a deal with Air Wisconsin to fly as AirTran Jet Connect. That ended in 2004 when the airline realized 50 seat jets didn’t make much money. Some are already saying that this won’t work this time around, but this is a totally different model. This will work out just fine for AirTran, though SkyWest might not be as thrilled.

Before, it was a capacity purchase agreement which meant that AirTran bought the seats to resell under their own name and Air Wisconsin received a guaranteed profit. Now, it’s a prorate agreement. SkyWest is flying these routes at its own risk and AirTran gets to share in the revenue. So SkyWest has a big burden here while AirTran has none.

If you listen to the AirTran pilots, this is the end of the world. Their press release says “Outsourcing: Bad for Business.” Hmm, not so sure about that. They do say that AirTran passengers expect to be flown on AirTran planes and that means XM Radio, wireless internet, and business class. Hmm, maybe, but they aren’t going to get that from Milwaukee to these cities.

Granted, Pittsburgh, Indy, and St Louis have mainline service from AirTran right now, so this tells me that those flights are really weak. It’s either a 50 seater that has a shot at making money or no service at all. I’d say it’s good for business with that perspective.

I suppose it’s AirTran’s fault that the pilots are responding this way. Back when they discontinued JetConnect, AirTran said they “could operate the Boeing 717 more efficiently than the Canadair regional jets in short-haul markets.” They may have thought that sounded good at the time, but now the AirTran pilots want them to stand by that statement.

Unfortunately for the pilots, that’s just not true. When AirTran started JetConnect, they served three cities – Pensacola, Greensboro, and Savannah. Only Pensacola is still served by AirTran today. I guess those 717s didn’t work out as well as they hoped on those lighter routes.

In my mind, this comes down to just a couple of things. SkyWest has a bunch of 50 seaters lying around and is desperate to find a home for them. AirTran wants to continue to put the squeeze on Midwest in Milwaukee. Combine the two and, voila, you have a plan.

Will this work? If I had to place bets, I’d guess no, but hey, I’ve been wrong before. If I’m AirTran, I love this deal since I have absolutely no risk and I get to strengthen my network out of Milwaukee. If I’m SkyWest, well, it’s the best I can get right now, and that’s scary.

[Updated 11/5 @ 809s to clarify that this won't be sold under the SkyWest code]

We could have paid about $380 to fly United out of LAX via Denver, but it was worth the extra money to fly out of my home airport and to avoid having to fly all the way to Denver and then back to Jackson Hole.

The trip itself was fantastic, though it was spent mostly on regional jets. Flying into Jackson Hole is a real trip (here’s the video of our landing at left) – it’s the only commercial airport in the US within a national park (so I’m told), and it makes for a beautiful arrival. Jackson Hole itself is an incredible place. I can’t believe I’ve never been before, and I can’t wait to return again.

There is nothing like a pre-7a departure to really get things going in the morning. Seriously, I like early flights, and since our 645a flight was out of Long Beach, we didn’t even bother leaving home until 550a. After parking, it took us about 15 minutes before we were through security and waiting to board.

Once boarded, we were ready to go on-time but the captain, apparently unfamiliar with Long Beach, came on to tell us that the airport didn’t open for flights until 7a, so we would sit at the gate for 10 minutes. Nice scheduling work, Delta. When we did push back, the US Airways and Alaska early flights had beat us to the punch so we didn’t get airborne until a few minutes after 7.

It was my favorite kind of day to fly. We punched through the low marine layer and burst into brilliant sunshine quickly. Then the captain pointed the nose toward Salt Lake and we were off. The air was very still and I drifted in and out of sleep as we sped over the desert floor.

The flight attendants handed out peanuts, biscoff cookies, and drinks and they made a couple of passes for refills. Soon, we were descending into a sunny Salt Lake. We had a great view of the lake (at left) and then we looped around and landed from the north at ghetto Terminal E.

We had walked all the way back to the main gate area where we found it was time to board our connection after just a few minutes. They took our boarding passes and told us to walk to door 21, all the way back where we had landed earlier. Terminal E has a cramped central gate area. Once they take your boarding pass, you walk down very long, spartan hallways (at left) with a couple dozen doors leading to different aircraft. It’s really not fun.

We were originally on a 757 at 1120a but when I looked the other day, I noticed they now had a regional jet going at 1040a. I called Delta and since there was a schedule change, they moved us for free and gave us the only two seats left together – exit row.

When we boarded, I remembered why I didn’t like the exit row. The legroom was great but the cushion was hard, it was much louder than up front, and most importantly, the window was offset. On a flight like this, you want the window for the beautiful scenery.

We lifted off to the south and came around over the lake before heading northeast on this very short flight. There was no service onboard since it was only half an hour, and it seemed like just as we finished climbing, we were heading back down.

The view coming in was beautiful. We came in from the south and then circled around through the canyons surrounded by snow-topped mountains before landing from the north. A short taxi in and we were on our way for a fun weekend.

Jackson Hole is absolutely amazing, and I had no idea how spectacular the Grand Tetons were until I saw them jutting into the clear blue sky. We ended up taking a couple of day trips with Taylor at Jackson Hole Eco Tour Adventures. I can’t say enough about how much better our trip was when armed with his vast knowledge of the area. One hike off the beaten path took us to this place, at right. It was unreal.

Most of the time we were there, the weather was great, but Friday evening a storm came roaring down the mountain. There were sustained 50+ kt winds, hail, and a lot of trees coming down. I can’t describe how amazing it was to see the power of nature in this place. I’m looking forward to going back one day.

We arrived at the airport an hour ahead of our flight, boarding passes in hand. We had about a 10 minute wait at security but soon enough we were through to the fairly cramped holding area. It probably was made a lot worse thanks to two 757s loading up, including ours.

This was our only mainline jet of the entire trip, and it pulled up right on time, if not looking a little in need of paint. We were more than happy to board, though many people were watching the soccer finals until they absolutely had to go.

There’s nothing like boarding a big jet from stairs, and the 757 is one big jet when looking up from the ramp. As we boarded I noticed a wifi sticker at the door, my very first wifi aircraft. This plane had the nice blue leather seats but they were dirty. There weren’t any TVs, but I didn’t care for such a short flight.

We took off like a rocket and zig-zagged our way out of the valley. As soon as that 10,000 foot chime went off, I decided to play around with the wifi. That didn’t get very far. By the time I had connected my BlackBerry to the network, we were at cruise. I went to the sign up page and it took me a couple of tries to register a new account. Just as that happened, I got to the last page where you have to pay $7.95 to use a mobile device, and the flight attendant announced we had begun our initial descent. I wasn’t about to waste my money just so I could send a quick Tweet from 30,000 feet, but at least I was able to see that the system does, in fact, work.

Soon enough the Great Salt Lake appeared on the right and we landed after coming around to the north. We got off and remembered how nice Salt Lake City airport can be when flying in on big jets before we had to head down to the dungeon that is SkyWest Terminal E. It was a very crowded day down there with constant PA announcements for a ton of oversold flights looking for volunteers. Ours was not one of them, and after a few minutes, it was time to board.

It was a full flight, and we pushed back only a couple minutes late. The captain was talkative and said that it would be a little bumpy at first but it would smooth out quickly. He was right. We took off to the north, had a couple bounces, and then we were on our way. The single flight attendant did one service and then asked if anyone needed refills on her way back up the aisle.

Soon, we passed just southeast of Vegas and had a great view of the Strip. We came in over the High Desert, went south, came west over Orange County and then over Huntington Beach on our way in.

We landed on time and so ended a long stretch of traveling – 24 flights in the last three months. My goal is not to touch an airplane during the month of July.

Airlines Respond to H1N1 Influenza A Differently
Reactions around the world to the “swine” flu have been very different depending upon the region. See what everyone is up to.

Continental Shows Weak Numbers, Easter Benefit
Continental’s April numbers looked better than March, but remember the Easter shift before getting too excited.

Frontier Shows April Traffic and Revenue Weakness
April wasn’t a great month for Frontier. It’s hard to draw conclusions just based on this month, but I’ll certainly be paying more attention as we move into the summer peak.

SkyWest Starts At-Risk CRJ Flying for United
Looks like SkyWest is doing what it has to do to place CRJs back into service. And now that means prorate flying.

April 2009 Airline Traffic Numbers
Traffic numbers are out for April and they weren’t too bad.

Then Horizon came along and decided to introduce a 25th anniversary scheme that once again brought out the streamers. True, the colors were a bit different, but it was basically the same thing. (This one came from the Alaskair.com site.)

Now, SkyWest has come along and decided to roll out a 35th anniversary plane. Thanks to AirlinersGallery.com, we have an early look at the bird.

It’s the same friggin’ thing! Come on, you guys can do better than this, can’t you?