Monday Update – October 23, 2023

The Small Community Air Access Conundrum
It’s Not A Pilot Shortage.
It’s A Fleet Evaporation

Here’s a hard fact:

Too many small communities are banking on recruiting air service for which there won’t be any airliners.

Check it out. Do a media search for” small community air service.”

You’ll find lots of stories where small communities are being convinced that as soon as we get more pilots, air service will be flooding back. Yessir, the studies all show great traffic.” There are 22 bazillion passengers generated in our “catchment area” and all they need is an airplane to get on.” And the usual pablum: “Several airlines are interested… it’s just a matter of having the incentives ready!”

Sounds great. Only problem is that a lot of this is based on facts not in evidence. Or more correctly, airliners that won’t be in existence.

Yup, it sounds like bah-humbug, but it still means that the connective airline Santa Claus isn’t going to show up.

The pilots may be back, but they will be flying much larger airliners. The point that the media misses, and most consultant ASD schemes shamefully ignore, is that the entire category of airliners that once could economically access small community revenues is evaporating.

It’s no secret that 50-seat jets are becoming unable to deliver the financial goods. The average age of the roughly 300 still in USA service is over 20 years. That means maintenance expense heading northward. Pilot pay is now going up. The recent Air Wisconsin ALPA agreement delivers 38% higher compensation over the life of the contract. It won’t be the only one.

Then there’s fuel. When these machines entered service, the cost per gallon of jet-A, adjusted for inflation, was under a buck a gallon. Today it’s three to four times higher. The cost of launching a 50-seater is making the term “ROI” hard to find when the route analysis is done.

Okay, that’s not the end of the world, right? What about larger “small jets?” Be great if they were growing in number, but as for expansion to truly small local airports, the hard fact is that there essentially are none. The CRJ-700s and CRJ-900s are out of production – again, for economic reasons. The only jet airliner under 100 seats still in production is the Embraer E-175, which is at 76 seats.

Okay, lets do the fleet math. There are just over 300 50-seat ERJ/CRJ airliners in service. But the next-up in capacity – the E-175 – only has a trickle of firm orders – firm orders. Like, just under 50 units, spread across American, Delta and United. And this dearth of orders is again due to the march of economics. Even these larger small jets are being affected by the spike in operating costs.

So, there are 300 semi-economic 50-seaters that will be retired over the next 18 months, and other than these 50 or so E-175s, the next capacity step in roughly 120 seats.

Drop the hype. Chico and Topeka and Youngstown are going to have a hard time convincing a major carrier to apply a $70+ million A319 to a small local airport that is entirely unserved. Time to get real. A ULCC to ‘Vegas, maybe. But that is not air service access. Just impulse leisure service. The rest of the flying public are not going to be in the picture… nor at the local airport.

Conclusion: in the near-term future, the capacity floor for network branded service will be 76 seats. But these are already pretty much spoken for already. The next step up will be 120 or so seats. It is time that this be recognized and put into the planning mix. Again: too many communities are banking on recruiting air service for which there won’t be any airliners.

There are two messages here. The first is that a lot of small community air service at the local airport is simply not going work, regardless of the hype to the contrary. That means economic development is the new future.

The second is that the operators leasing lift to major carriers – the misnamed “regional airlines” – are facing a world where they are no longer viable. They are caged into operating airliners that have declining value to their major partners.

Any air service development plan that doesn’t consider this dynamic is like planning to be on the Titanic’s next Caribbean cruise.

Unfortunately, there’s a lot of that going on.


The “Amateur-Act Airlines” Saga Continues
Commercial Service v Air Access

Red Way Airlines.

Super idea! Nonstop day-of-week service to Nashville, Minneapolis/St.Paul, Austin, Atlanta. No question, this would be a slam-dunk at Lincoln, its planners decided.

Unfortunately, nobody seemed to ask the consumer, who had the option of much better air access options at not-so-distant Omaha. It took this grand Red Way idea just weeks to burn though close to three million dollars in seed money – mostly from public sources.

At least from a financial perspective, it was appropriately named.

Red Way was one more example of how “local service” can only survive if it is has travel-time and cost-effective advantages over alternatives. Just having flights at the local airport won’t cut it for consumers.

So, the whole Red Way shooting match went 86 in short order. Naturally. But this original airline amateur hour continues to affect Lincoln.

There seems to be several hundred consumers who months after this fiasco’s collapse are still due refunds. Incredibly, the amateur act management of the airline is supposedly claiming that Lincoln owes them something like $700K in promised subsidies, and when that comes, so will the refunds. In short, the airline is blaming the airport for consumers getting stiffed.

Oops. As with the marketing analyses, Red Way was also short on basic airline revenue accounting requirements. There is a core requirement for handling “unearned revenue.” This is the gelt paid by consumers and is required to remain in the till – and is not the “property” of the airline – until the flight is operated. It has to do with passenger-derived revenues, and is not dependent on any other sources of income, as Red Way is trying to claim.

The Red Way system was apparently founded on what appears to have been a Pollyanna assumption that if the plane parked itself at the gate, the passengers would come a runnin’. The concept of competition from well-served and nearby Omaha was ignored in the planning.

It was not ignored by the consumer.

This is a poster child for what is massively wrong with a lot of air service development programs. The assumption is that the goal is “commercial flights” instead of defined and planned air travel access. Red Way gave no such access, just point to point flights to a few destinations. The options at OMA – even with a drive time – had much more value to Lincoln consumers.

The soap opera continues as both the airport and the state of Nebraska do audits of Red Way.

Just A Reminder:

In our work, we rely on Cirium for aviation data.

The future is going to be very different, but that requires a strong understanding of the core dynamics and economics of all areas of the industry.

Capacity, tracking airline trends, projecting strategic shifts all demand market and aviation support. Cirium is our choice.