Air Transport World

End of the RJ revolution? (Regional News).(regional jet)(Brief Article)

The ability of US Major airlines to achieve significantly lower labor costs spells bad news for the fast-growing Regional airline segment of the market as well as the future for 35/50-seat regional jets, says JP Morgan equity analyst Jamie Baker.

"We believe the RJ revolution is drawing to a close," Baker said. He noted that mainline labor unit costs rose 37% from 1994 versus just 8% at the Regionals. This, in his view, was the primary driver for the rapid growth of the Regional sector. In effect, Major airlines outsourced routes that no longer could be flown profitably given higher labor costs and declining revenue. Now, "with mainline labor expenses expected to fall by 20%-30% over the next two years and with Regional pay unlikely to match, the marginal appeal of continued Regional growth is quickly diminishing. …

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