The US regional airline industry is one of the hottest segments in the aviation industry. US regionals have experienced phenomenal growth in the last 10 years, not only in terms of capacity but financially as well. This year the industry held its annual gathering at the Regional Airline Association convention in Phoenix on May 10-12.
The event traditionally attracts the major players in the regional world and this year was no exception. This year's convention featured 62 member airlines and 385 associate members. The RAA as a trade association represents not only the US regional airlines but industry manufacturers and suppliers as well. More than 200 booths featuring 176 exhibitors filled the Phoenix Civic Plaza alongside special member sessions being held to discuss the legislative and operational issues most affecting the industry.
There were no major orders announcements at this year's RAA; nor were new regional jet families to unveil as at last year's event. But there was much going on behind the scenes to indicate that there will be big things to come from this industry, which will surely be in the headlines at Paris next month.
We did see the debut of two new regional jets - both in the 30-seat category. Embraer demonstrated its ERJ-135, which began a demo tour of the US and Canada after RAA. This ERJ-135 will be part of the flying display in Paris next month. Fairchild's 328JET (prototype 4) took media members on a scenic flight to Sedona on Tuesday after making its first public debut at Fairchild headquarters a few days prior. Launch customer Skyways will begin taking deliveries in July.
The conference kicked off with announcements from Fairchild Aerospace, which announced an ambitious backlog estimate of $10 billion by year's end. Fairchild two weeks ago signed a $1.6 billion order with Lufthansa CityLine for 60 firm and 60 optioned 728JETs. Chairman Carl Albert told AWN to expect a major order announcement in their regional jet family - most likely the 728JET - at the Paris Air Show next month. (See related story from RAA '99)
Notably absent were Embraer chief executive Mauricio Botelho and his counterpart at Bombardier Aerospace, Michael Graff, who both sent senior staff members in their place. One could only assume these rival company leaders were busy working on appeals to the WTO, which surely has not heard the last from the two manufactuers. (See related story from RAA '99)
British Aerospace and Saab were on hand, but neither had much to share about furthering the alliance between the two companies. BAe owns a 35% stake in Saab, but both remain hesitant to join their asset management divisions. BAe Asset Management - Turboprops executive vice president Stephen O'Sullivan acknowledged that a considerable amount of synergies exist between the two companies, but Saab Aircraft Leasing president Michael Magnusson said that BAe is not the only company they are talking to as far as alliances are concerned. Magnusson said synergies must exist both on the leasing side and with customer support. Saab is known for its high satisfaction ratings in providing customer support.
The engine manufacturers also took the opportunity to update on pending orders and program status. Like the airframe makers, they too have shared in the recent successes of the regional market. GE seemed poised to take the engine prize for the recently unveiled, but not yet launched, ERJ-170/190 family with its CF34-8E, yet another derivative of its successful CF34 turbofan family. This announcement will likely come at the Paris Air Show. Rolls-Royce expects its RR Allison AC3007A to be certified for the ERJ-135 by the FAA in July.
And of course the stars of the RAA are always the airlines themselves. The US regional airlines carried 71.1 million passengers in 1998, up 7% from the year before. Thanks largely to the entrance of the regional jet, this market is the fastest growing segment in the aviation industry and will occupy a position of increasing importance, said George Bagley, RAA chairman and chief executive of Horizon Air.
In the last 20 years (1978-1998), revenue passenger miles have grown from 1.36 billion to 17.42 billion for US regional carriers. This number is projected to increase to 29 billion in 2003.
Since the introduction of the regional jet in 1993, when Comair began service with the Canadiar Regional Jet, the regional airline landscape has changed dramatically. The number of daily departures has increased from 160 in 1993 to 1,804 in 1999. The average stage length has increased from 216 miles in 1993 to 392 miles in 1999.
"The affect of the regional jet over the next 10 years will be astounding," Bagley said.
Most forecasts continue to predict major growth trends for the regional industry, with the regional jet being the dominant growth factor. This year regional jets will account for more than 50% of the total regional industry capacity, according to PaineWebber analyst Sam Buttrick. Next year the percentage will climb to 60%.
Wall Street continues to favor the regionals, Buttrick said. Profit growth in the regional sector has more than doubled, and regional airline shares have often outperformed those of the majors. The introduction of the 35- and 69-seat jets will continue to drive above average sector growth, said Buttrick.
Four areas of concern for the regional industry, as outlined by Bagley, are a constrained air traffic control system, airport capacity limitations, noise sensitivity issues, and precision approach capability needs at regional airports. The RAA has also come out against the passenger bill of rights currently under consideration in the US Congress as well as passenger facility charges.
