I linked to the press release announcing the Delta and Silver Airways would be entering into a codeshare arrangement on Friday, but I decided this was worth a broader post. On the surface, this may not look like much more than an updating of the previous Delta/Seaborne deal, but if Delta is smart, there should be something broader brewing here.
Silver is a small operator in Florida that has plans to get bigger. It flies under its own brand and code and has for years. This particular brand has been around only since 2011, but it operated for more than two decades under the name Gulfstream International prior to the name change. In 2018 it bought out Seaborne in the Caribbean and began a slow integration.
Silver was primarily a Saab 340 operator, now with 21 of the 34-seaters in the fleet. Seaborne has another 4 Saab 340s along with a couple Twin Otters. Take a look at the current network, including Seaborne at the bottom.
Silver’s business model has always been goofy. It tries to fly on routes that have good local demand it can sell under its own name. But it also has a long-standing codeshare with United as well as more recent ones with American and JetBlue, among others. Further it has interline agreements with Alaska, Delta, and a few international carriers. Despite an historically poor operational performance record, Silver has served an important role connecting Florida communities (and now the Caribbean) to the outside world.
Part of the operational issues can be blamed on the aging Saab fleet. In 2017, Silver looked to rectify that with a big order for 20 ATR turboprops and options for 30 more. The first ATR arrived on property earlier this year.
Silver’s initial plan is to take on 16 of the 46-seat ATR-42s with 4 of the 70-seat ATR-72s. That means even if Silver wanted to replace all 25 of its Saabs with these ATRs, it would still have 20 percent more seats in its fleet than it has today. But Silver doesn’t appear to want to stop there. It wants to fly more airplanes and exercise at least some of those 30 orders.
This is not going to be an easy task. It has tried to venture into more distant markets like Huntsville, and it has the ability to try to re-shape the Caribbean operation, but ultimately Silver is looking to bring on a lot of capacity here. It’s not clear there’s an easy place to put that and make money.
Enter Delta. Remember that Delta has recently won LATAM’s favor and the two will enter into a joint venture. Delta has long had a large presence in Florida, but LATAM’s most important market, Miami, is a virtual blank spot. Outside of its hubs and focus cities, Delta only serves Havana alongside a couple of Saturday-only seasonal flights on regionals to places like Columbus and Washington/National. Delta has pledged that it will build up Miami to support LATAM, and that requires basically building from scratch.
This is where the potential for this Delta/Silver codeshare turns interesting. On the surface, this looks like nothing more than a minor footnote. Delta used to codeshare with Seaborne in the Caribbean, and now it has been able to transfer that over to Silver. But Delta needs to build up in Florida to keep its promise to LATAM, and Silver needs to find a way to productively use its new airplanes. This could be a win-win for both sides.
Let’s get the nagging question out of the way first. Wouldn’t Delta’s scope clause with its pilots prohibit the airline codesharing domestically with Silver, especially on those 70-seat ATR-72s? No. Turboprops aren’t an issue, and there is no violation of the scope clause. Moving on…
The hard part about building up Miami — besides the 800 pound gorilla with an eagle on the tail being ready to pounce on any move Delta makes — is that Miami is a really expensive airport. It costs about $20 per enplanement (CPE) to operate from Miami. That might not mean much on a long, expensive flight, but on a short hop it’s a killer. Plus, the fewer seats you have onboard, the less you can spread around your other costs. A 34-seat Saab is awful, a 46-seat ATR-42 is mildly better.
But those 70-seat ATR-72s… well, that’s an interesting airplane. That could be a very good airplane to fly into Miami. Use those planes to fly to a variety of mid-size nearby cities, and you might be able to make a go of it. It’ll certainly be cheaper than having a regional jet with about the same number of seats flying it. The ATR is a slow airplane, so it can’t go too far without driving people crazy, but Florida, the Bahamas, Cuba, and parts of some southern states are fair game.
Let’s also remember that LATAM flies to Orlando, and Delta has been historically strong there. This could be another weapon to help build up connectivity there.
I should be clear not to overstate this. This can’t be Delta’s primary vehicle to build up Florida, but it’s a nice relationship on the periphery that can help both airlines achieve their goals.