(originally published 09/22/1997)
The New Generation of Small Jets: Issues and Opportunities
The Bombardier CRJ200 and Embraer 145 are two examples of a new generation of cost-effective 50-seat jets now entering service in regional and mainline markets. The small jet's market acceptance is as high, or higher than, narrowbody jets now service. Capable of being used to initiate high-frequency service in markets formerly served by turboprops or under-served with low frequency, traditional jet service, the "regional jets" have proven to be extremely popular among same-day return, high-yield business travelers. The same travelers who formerly avoided turboprop service due to their slow speed (and resulting short business day at destination), turbulent "in-the-weather" cruise and perceived lower level of safety seek out small jet service.
Who would fly these small jets -- American Eagle regional partner carriers' or American Airlines' pilots was one of the primary issues heard before the three-member, elite Presidential Emergency Board 233 - Allied Pilots Association (APA) v. American Airlines (AA), formed after White House intervention to block a legal job action by American Airlines pilots.
By understanding how contract rates are transformed to actual costs and using a creative approach to problem solving, Mann & Company devised a small jet cockpit pay structure that made an APA-flown 50-70 seat jet competitive with other regional carrier operators, while maintaining the mandated AA benefits structure. Far from a "B Scale" or "C Scale", the aptly-named Small Jet Initiative/Supplement offered the regional industry's first-ever "A Scale" contract with competitive costs.
Members of the Presidential Emergency Board agreed that APA's costs were in-line with regional competition. Based on prior bargaining history, the PEB found in favor of American Eagle regional pilots flying AMR's small jets. As predicted by Mann & Company's fleet planning forecast, AMR ordered a mix of 42 50-seat and 25 70-seat jets from Embraer and Bombardier, optioning an additional 25 of each type, in June 1997.
In related industry developments, United Airlines pilots are on record as "owning" small jet flying but appear to have relented so as to permit regional partner Atlantic Coast Airlines to operate Bombardier CRJ200 jets in United Express colors. USAirways, in contract discussions with its ALPA-represented pilots and other employees, postured to divert investment in a record order for an "all-Airbus" fleet, in favor of small jets for its owned and affiliated USAirways Express operators, and appears to have settled for a small number of Express-operated small jets. Delta Connection carrier Comair, among the most aggressive operators of the Bombardier jet, expects to reach "all jet" status by Year-end 2000. Atlantic Southeast Airlines, also partnering Delta, may be the next substantial regional carrier to reach this milestone. Mann & Company predicts that the small jet issue will play out over the next five years as the fleet expands in numbers and across numerous major airline systems, and as "regional jet" flying is shown to be replacement for mainline jets.
R.W. Mann & Company served as primary airline economics, fleet planning and route strategy analyst and witness for the Allied Pilots Association,before the Presidential Emergency Board. Mann & Company has studied the small jet issue in-depth, from both revenue and cost perspectives, and sees a substantially larger market for these aircraft in US and rest-of-world markets than is generally forecast elsewhere.