“They’re cash-flow machines,” analyst Ray Neidl, of Calyon Securities, told The Associated Press about regional airlines, in a Tuesday story. Although not all regionals are doing well, Mesa doubled its profit over the last fiscal year, Skywest profits are up 41 percent and Republic is up by 63 percent. Many of the regional carriers operate under contracts with major airlines, which guarantee minimum revenues and pay some costs, and the regionals don’t have the expensive union contracts and pension obligations of the majors. “We have a good business model … we’re cost effective,” Mesa CEO Jonathan Ornstein told the AP. For the first six months of 2005, U.S. regional airlines carried 73.1 million passengers, flew 31.53 billion revenue passenger miles, and completed 2.6 million departures, according to the Regional Airline Association. Regional airline revenue passenger miles totaled 17.07 billion during April – June 2005, a 20-percent increase over the same period in 2004, the association reported last month.
The Upside Of The Downside — Regionals Flourish
Key Takeaways:
- Regional airlines are described as "cash-flow machines" and are experiencing significant profit growth, with companies like Mesa, Skywest, and Republic reporting substantial increases.
- Their successful business model relies on contracts with major airlines that guarantee minimum revenues and cover some operating costs.
- Regional carriers benefit from lower operating expenses compared to major airlines, specifically lacking their expensive union contracts and pension obligations.
- The U.S. regional airline sector showed strong growth in early 2005, carrying 73.1 million passengers and increasing revenue passenger miles by 20% over the previous year.
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