“They seem to be hemorrhaging down there,” said one airline analyst in commenting on Jazz’s (JAZZ) optimistic results compared to its counterparts south of the border. Mesa (MESA), Pinnacle (PNCL) and Express Jet (XJT) all took significant hits in the quarter (see related stories) as did Horizon (ALK), although SkyWest’s (SKYW) net income was flat from the year-ago period. Related Story Republic’s net income was up significantly, although crew attrition, a common complaint, increased costs at least $11 million. Related Story
“Going forward, there is going to be more uncertainty for the regional airlines because U.S. growth will be limited until scope clause restrictions on the number and size of regional jets is further relaxed,” said Calyon Securities Analyst Ray Niedl. “This will probably not happen until various pilot contracts become amendable. For the foreseeable future we see the potential of higher-than-normal turnover of pilots at regional airlines as the legacy carriers lure away personnel with higher salaries.”
Niedl questioned current models for regional airlines. “They are now evolving into more risk but more potential reward, resulting in greater uncertainty regarding earnings,” he said. “The various regional airlines are now moving into more diversified operations (no two regionals will be the same in their business mix going forward). Under new contracts the regionals will generally be assuming ownership requirements that have both benefits and risks, more customers for a more diversified contract mix, possible high risk/reward independent flying at certain carriers, and possible movement into foreign operations with their potential growth but additional risk, and possible movement into non-flying operations such as maintenance.”