Essay on Regional Cutbacks are the New Norm

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Regional Cutbacks are the New Norm
Alton George
Middle Tennessee State University

Regional Cutbacks are the New Norm Regional airlines are the workhorses of the airline industry. They operate the smaller aircrafts; normally 50 passenger jets the CRJ and ERJ, and fly the smaller routes. This in turn yields them smaller profits. This unfortunately is not the business model most legacy carriers wish to operate under any longer. These carriers are at such a lost with the smaller markets they serve, around 500 U.S. communities, that they are ready to sever ties totally and focus on more sensible bigger markets. The problem seems to lie where problems always start, rising costs. The regional carrier service is governed by capacity purchase agreements with major carriers who then reimburse the regionals for their labor, fuel, and other costs. Though, the aging planes these regionals utilize are becoming more costly to repair and are not fuel efficient. These developments have made it near impossible for regionals to cut a profit and sent many into bankruptcy. Delta’s regional, Comair, will file bankruptcy later this month joining Pinnacle and American Eagle who fly routes for carriers United and US Airways. Delta also plans to phase out its regional 50 seat jets from 350 to 125 or less in the next few years. Industry analyst Mike Boyd has stated that he expects every 50 seat jet to be obsolete by 2016 (Jones, 2012). So the question becomes what will happen to these smaller communities after their regional service is gone? These smaller communities that need and expect this regional service will likely have to settle for less frequency and in some cases passengers will be forced to drive a little further to get the service they expect. One of the most frustrated cities facing this problem is Cincinnati. Six years ago it offered more than 600 flights a day and now that number is a mediocre 120. Also, not only has the Atlanta based carrier, Delta, dropped down to operating out of one terminal as compared to three previously, but they’ve also cut back to one direct flight to Europe as opposed to five in 2005 (Jacobs, 2012). Chiquita, a major banana distributor based in Cincinnati, has shifted more than 300 workers from Cincinnati to Charlotte, where landings and departures rose 2% in the last two years due to regional service cuts. Cincinnati has also experienced a drop in total flights which where 161,912 in 2011 compared to 496,366 in 2005. If those statistics were not alarming enough, the airport has served just over 7 million passengers last year whereas in 2005 that number was at 22.8 million (Jacobs, 2012). Cincinnati is not the only airport affected by this recent downturn in the industry unfortunately. Flights are down across the board at many southeastern airports for the first four months of this year. Augusta, GA experienced an 11% drop in departures. In Hattisburg, MS departures fell 12% and in Sioux City, Iowa departures fell an incredible 33% (Jacobs, 2012). Memphis airport has experienced a drop in departures from 250 a day in 2010 to just 185 this year. Meaning theses passengers have to connect at bigger hubs like Atlanta. This drop at Memphis has forced the airport to reach out to low-cost carriers such as Jetblue, Southwest, and Spirit for service (Jones, 2012). The drop in departures at these airports has increased departures at major airports however. Major hubs have experienced an increase in flights due to air carrier’s response to the economy. These hubs are the new money lines for airlines due to their size and accessibility. The airlines see these hubs as opportunities to take bigger, more efficient airplanes on longer routes. This creates more time the passenger spends with the airline increasing the profitability possibility of that passenger. The major hubs who are gaining are the usual suspects. La Guardia in New York and Atlanta have both seen a 2% increase in departures. Also, San Francisco