The seven largest regional airlines continue to maintain the most profitable operating margins in the airline industry, according to first quarter 2004 industry figures released June 14 by the Department of Transportation (DOT).

The regionals reported the highest domestic operating profit margin of all carrier groups - 11.3 percent - as margins of the seven largest carriers in each category - network, low-cost and regional carriers - proceeded to decline for the third quarter in a row.

Overall, the 21 carriers tracked by the DOT in the first quarter saw their operating margin fall to a 5.8 percent loss compared to a 3.5 percent loss in fourth quarter 2003.

Regional carriers also led the industry in highest revenue per seat mile, highest cost per seat mile and highest revenue yield.

The group of regional airlines topped the industry with a 11.3 percent operating profit, above the seven low-cost carriers' 1.8 percent profit and the network carriers' 9.9 percent loss.

American Eagle [AMR] led the regional carriers with a 16.3 percent profit.

Overall, DOT said the seven regionals amassed a profit of $201.7 million in the first quarter.

The future should remain stable for regionals, said Ray Neidl, an analyst with Blaylock and Partners. The low-cost and network carriers face lasting weak yields due to higher fuel costs and the lack of pricing power on passenger fares, he said.

Neidl said network carriers, except perhaps American Airlines [AMR], are unlikely to return to profitability this year despite strong passenger traffic figures. Low-cost and network carriers continue to aggressively price selected competitive routes to retain market share, which keeps yields extremely thin. ?