The end of Mesa has finally arrived, and lucky for the airline, it was the rosier situation that prevailed. Instead of failing outright, Mesa has now been bought. No doubt many a United customer is now celebrating this turn of events. Republic is the winner, and that means that outside of wholly-owned regionals, there are really only two major regional carriers of note left: SkyWest and Republic. That leaves just one more smaller airline’s fate to be determined: GoJet.
Republic flies (or will, after deliveries) around 250 Embraer 170/175 aircraft for American, Delta, and United. Mesa is now down to flying a mere 60 Embraer 175s which are owned by United. Despite Republic operating about 80 percent of the total fleet, Republic will own at least 88 percent of the combined company. Mesa can get to 12 percent at best, but it may be as low as 6 percent. As part of this deal, Republic will pay off all Mesa’s debts. (At least it’ll pay the monetary ones. There are probably spiritual debts which can never be redeemed.)
United has helped make this happen by signing a new 10-year agreement to have the new Republic fly those Embraer 175s for the airline. This had to have been a requirement for Republic to even consider any sort of merger.
Will this get approved by the feds? Consider this bit of a shadiness… Republic CEO Bryan Bedford is the current nominee to head the Federal Aviation Administration (FAA). You think his boss at Department or Transportation (DOT) or friends at Department of Justice (DOJ) are going to stop this? I can’t imagine that happening. Besides, there isn’t much objectionable here anyway.
What this means is that SkyWest and Republic are left standing as the only independent regional airlines of consequence. And to illustrate this, we can look at the evolution of the regional partners of the big three US airlines.
American Eagle Regionals
Let’s start with American which arguably has the most complicated situation. Here is a look at monthly departures by regional carrier for American, including US Airways and America West:
Data via Cirium
There have been so many airlines flying for American over the years, it is exceedingly hard to keep track. Mesa was kicked to the curb a couple years ago, but Air Wisconsin has just finished flying for the airline. That means this has gotten much less complex. There are the three wholly-owned subsidiaries:
- Envoy flying Embraer family 65-76 seaters primarily out of Chicago/O’Hare, Dallas/Fort Worth, Miami, and Phoenix
- Piedmont flying Embraer 50-seaters primarily out of Charlotte and Philadelphia
- PSA flying CRJ family 65-76 seaters primarily out of Philadelphia and Washington/National
In addition, there are the two independents:
- Republic flying Embraer family 65-76 seaters primarily out of Chicago/O’Hare, the New York airports, and Washington/National
- SkyWest flying CRJ and Embraer family 65-76 seaters primarily out of Chicago/O’Hare, Dallas/Fort Worth, Los Angeles, and Phoenix
If there is any more work to be done here, it’s only for American to consider consolidating any of its wholly-owneds into a single airline. But that may not really be necessary.
Delta Connection Regionals
Next up, we have Delta. Delta was the first to rationalize its regional partners, and really, it was never quite as complex anyway, especially before Northwest came in. Here’s a look at Delta’s journey.
Data via Cirium
Today, Delta has its one wholly-owned regional:
- Endeavor flying CRJ family 70-76 seaters primarily out of Atlanta, Detroit, Minneapolis/St Paul, and the New York airports
It then has the same two independents as American chugging away doing the work elsewhere:
- Republic flying Embraer family 70-76 seaters primarily out of Boston and the New York airports
- SkyWest flying CRJ and Embraer family 70-76 seaters primarily out of Detroit, Los Angeles, Minneapolis/St Paul, Salt Lake City, and Seattle
Delta has no more work to do here regarding consolidation.
United Express Regionals
Lastly, we come to United. I said American’s structure was complex, but United hasn’t been much better. It is now, however, finally getting into a more sensible place.
Data via Cirium
At United, there are no wholly-owned subsidiaries, because it’s not allowed per the pilot deal. Instead, there is one minority-owned partner:
- CommuteAir flying Embraer 50-seaters primarily out of Houston/Intercontinental and Washington/Dulles
Then there are three independents:
- GoJet flying CRJ-550s primarily out of Chicago/O’Hare and Newark
- Republic flying Embraer family 70-76 seaters primarily out of Chicago/O’Hare, Newark, and Washington/Dulles, but now with Mesa it will double its presence at Dulles and add a Houston/Intercontinental base
- SkyWest flying CRJ and Embraer family 70-76 seaters primarily out of Chicago/O’Hare, Denver, Houston/Intercontinental, Los Angeles, and San Francisco
United is now down to four carriers, but there is probably one too many. GoJet is the remains of the old Trans States. It has a small niche, and it is really just waiting for something to happen. It would fit with SkyWest in the sense that it flies CRJ-550s, but its network is more oriented toward Republic’s part of the country.
The divide is pretty remarkable. SkyWest is a western and central airline while Republic is very much an eastern one.
Data via Cirium
There’s no question that SkyWest is the clear market leader, but Republic has long been a number two. It always had an ace — it holds a lot of those slots at congested northeast airports itself, so the big airlines weren’t ever going to walk away. But now, it’s clear that Republic and Mesa together cement the airline’s position even further.
One thing that you can see in all of those charts is that the number of regional flights are declining. As regional wages rise and shrink the advantage of outsourcing to them, the big airlines have rethought how to serve smaller markets. We have basically reached a steady state in the regional industry with just that one deal left to be done.
34 comments on “And Then There Were Two(ish): Republic Swallows Mesa’s Remains”
PHL is PSA’s 4th largest hub this summer. Seems weird to mention it over CLT.
Yeah, I was curious why CLT didn’t come up for PSA.
How long until Skywest & Republic start merger talks?
No way that gets approved without some big concessions.
If you go from two to one, what is there to concede?
Slots Republic currently holds in the slot-controlled NE airports would be the most likely concession. It could be structured as a transfer contingent on a competitor (airline-owned lift provider, GoJet – if it’s still around – new start-up, etc.) requesting them, or as a transfer to the marketing airline for reassignment or upgrade to mainline.
Isn’t Skywest still non-union? That’s something I doubt they’d want to put at risk.
JT8D – Yes, but when they bought ASA and ExpressJet, those were union shops that they ran separately. They wouldn’t want to do it again, but they have a way to do it.
We can start from changing Republic’s name to SkyEast before combining them into Sky
I see “Republic CEO Bryan Bedford is the current nominee to head the Federal Aviation Administration (FAA)” and I see the WSJ headlines “Trump considers tariffs exemptions for some businesses” and i foresee nothing stopping only Republic from doing whatever it wants without government oversight for several years…
‘Besides, there isn’t much objectionable here anyway.’
If the above is true, then why is the section below even necessary?
‘Will this get approved by the feds? Consider this bit of a shadiness… ’
Every administration is filled with folks from different industries that favor one way or another.
I propose renaming this site to the CrankyTDSFlier. That would appease several of the rabid posters over the last week for sure.
No one is taking the bait, sorry!
Surprised Mesa lasted this long. Orenstein was toxic.
He sure is, as I’ve posted here before, I was interviewing for a manager job at Mesa. During the interview they asked if I was OK with having JO screaming at me on a regular basis.
Glad that I didn’t get the job, they probably saw the incredulous look on my face when they said that…
For the sake of the good customers and employees of Republic i hope Orenstein dose t replace BB.
The press release states that Republic’s management will be in control. This is Republic buying Mesa.
Why did ExpressJet drop off in your chart in ~2010? They were flying for UAL all the way through 2020…
WHS – Because in 2010 they were bought by SkyWest. This is looking primarily at holding companies.
I’m wondering if Scott Kirby wasn’t the main driver, or at least a big factor in putting this deal together. United owns a stake in both Mesa and Republic. Given the lack of available new 50 seat aircraft, and the overall industry tendency to upgauge fleets, I have to wonder if there won’t be some changes in regional scope clauses in the not-too-distant future.
Like Social Security, scope clauses are almost impossible to claw back once unleashed. Mainline pilot unions will ensure that the only way scope clauses get adjusted is when they no longer have a reason to want them. So basically never as long as there is a need for regionals staffed with pilots flying for significantly less money than mainline.
DGhost, The true 50-seaters can’t go away soon enough! The exception may be the CRJ550, but I’ve never seen one of them in DEN and we still get a LOT of the 200s flying for SkyWest. :-(
The key principle which CF notes is that the regional airline sector in the US is shrinking and will continue to shrink. Labor costs aren’t going back down; having fewer players makes it much harder to play one operator against another to get lower costs.
While fuel prices are low and may stay low based on macroeconomic factors, there are no new-generation powered regional jets in the US airline fleet – which means their fuel costs relative to mainline aircraft will continue to deteriorate as carriers take on more and more new generation powered mainline aircraft.
Hundreds more regional jets will simply run out of life in the next few years because it will cost too much to overhaul them.
Consolidation is simply the reality in the regional airline sector that will likely spread to the mainline sector for other reasons.
Republic and SkyWest are two good large independents to supply the wholly owned regionals at AA, AS and DL.
CF- I got that “Sapiens” book you mentioned earlier this week. Thanks for the tip!
Patrick – Nice! It’s a good read, but it does get a little overly depressing at certain points toward the end. Still, it’s a lot to think about.
What sort of consolidated maintenance, corporate, etc. facilities could be seen from this? Is one brand operated more leanly from a mid-level corporate standpoint as opposed to the other?
Probably almost the entire of the Mesa management will be let go in this. Republic would then, over time, fold the ex-Mesa aircraft into whatever maintenance, etc, system and contracts they have. So, most of the Mesa overhead disappears.
Mesa pilot rates actually seem higher than those of Republic. Not sure what will happen there – how will Mesa be merged into the Republic seniority list, etc. Though, absent the pay issue, my guess is the Mesa pilots would be happy to be at Republic, with greater job security.
Wasn’t American Eagle’s operation nearly entirely operated by Eagle (the airline) itself until around 2014? They had the Executive Air-operated American Eagle-branded ATR-72 operation out of the SJU hub, and they had the American Connection branded-operation operated by Chautauqua Airlines (and maybe a few others like Trans States) inherited from TWA, initially operated out of STL but then moved to ORD when the STL hub closed. But otherwise, before 2014, isn’t *all* of the complexity in American Eagle’s history in fact US Airways Express (or whatever US called their regional branding)?
Alex – Yes, yes it is. The US Express thing was wild.
Before the 2000s consolidation, it seems like “Express” was the most common name for regional networks (United Express, Frontier JetExpress, Midwest Express, US Airways Express, etc). Now, it’s just United.
I do find “Express” interesting in that in rail and public transit, express usually means fewer stops and faster. For example, in that context, United Express would be more like a supersonic flight that’s nonstop from SFO to FRA vs a “normal” jet that stops in Chicago and London in-between.
Interesting point about the “Express” branding normally meaning fewer stops & faster, while in airlines it traditionally meant a flight between a smaller airport and a hub (often with the pax connecting at the hub), though that may have been somewhat diluted in practice in the past 3-10 years.
However, I guess if one considers that without the “Express” flight, the alternative might be to drive from smaller airport to the hub (which some people still do, especially on shorter routes and if they get stranded at the hub during IRROPs), the flight is “Express” in that sense.. All relative I guess, but fun callout.
SkyWest does plenty of 50 seat flying not reflected here.
HT: me, in a seat on one.
Stvr – Well, sort of. A lot of that flying is “prorate” flying which means that SkyWest takes on the risk as opposed to the capacity purchase agreements that cover the rest of the flying. So it’s kind of in a different bucket. But yes, SkyWest does fly a lot of CRJ-200s in United’s colors.
Any chance we can have an article soon discussing prorated flying?
Sadly I think I missed cranky’s window before going on vacay but I thought I’d throw this out there anyway. There was a period of time in the 90s when it seemed like many more of the regional carriers were wholly (or at least mostly) owned subsidiaries of the actual airline. Delta did this in a big way with Comair and ASA as did American with Eagle. It also doesn’t seem like these regional carriers are worth very much on the open market because their potential profits are capped by their contracts and it’s just a low margin business. As such I don’t understand why the airlines wouldn’t just scoop them up as subsidiaries and eliminate a lot of the headaches of dealing with often unreliable third parties (Atlantic Coast airlines rings a bell, Mesa and others).