Viable business models continue to evade US regional airlines

Consolidation in the US regional airline industry has failed to mirror the success achieved by the country's network carriers after the latest round of mergers were completed between Delta-Northwest and United-Continental. The tie-ups in the regional sector have only intensified cost pressures at the consolidating carriers, which have left them searching for a viable long-term business model. In the short term, some of those airlines are attempting to work with their major partners to ease the cost inflation, but it is far from certain if legacy airlines intend to show any sympathy to their feeder partners.

The two largest US regional operators, SkyWest and Republic Airways Holdings, bled a combined USD150 million in losses in 2011 as they endured pain from their attempts to stabilise their business in an uncertain regional marketplace. SkyWest faced a reality check in meeting financial milestones it aimed to achieve through its acquisition of ExpressJet while Republic spent the majority of 2011 wringing USD120 million of costs from its low-cost subsidiary Frontier Airlines. Pinnacle Airlines, in the midst of its own internal restructuring, has pushed back the release of its 2011 financial results.