This is an archived article that was published on sltrib.com in 2008, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
As Delta Air Lines pulls down its domestic capacity this year, a noteworthy share of the cuts will come from smaller jets flown by regional partners such as SkyWest Airlines.
The move to scale back capacity as much as 5 percent is motivated by high fuel prices and worries that the softening economy will reduce demand for airplane seats.
To scale back, Delta will remove the equivalent of 10 wide-body jets from its fleet and cut the equivalent of 35 regional jets by returning some leased aircraft, selling others and reducing the number of times it flies still more.
"If I had to translate the 5 percent reduction, that translates into a 12 percent to 15 percent reduction on the regional side," said Don Bornhorst, senior vice president of Delta Connection, a coalition of eight regional airlines operating under contracts with Delta to fly feeder routes for the carrier.
The cuts aren't targeted at any single Delta Connection carrier. But a month after Delta President Ed Bastian announced plans in December to boost international flying while cutting domestic capacity, the airline ended flights from its Salt Lake City hub to six cities in the Midwest and South. Those routes were operated for Delta by St. George-based SkyWest.
Delta also trimmed one flight a day to another 12 airports in the United States and Canada, including Washington Dulles in Virginia and Vancouver International in British Columbia. SkyWest also operates those runs.
Delta insists, however, that SkyWest won't bear the brunt of the capacity reductions. "It's not geared toward the regional airlines," Bornhorst said. "It's geared toward smaller aircraft."
Most of the regional jets Delta will sideline are 50-seat aircraft, a plane that analyst Michael Boyd says is being economically marginalized by fuel prices, which are 56 percent higher than a year ago. Fuel is usually an airline's biggest expense.
"Most . . . agreements [between airlines and regional carriers] provide for fuel costs to be a pure pass-through to the major carrier, and that means the majors are eating a lot of red ink. A lot of R.J. mission applications that once provided adequate revenue generation are now net drains on major airline systems. They cannot but move quickly to restructure the fleets of R.J.s they're leasing in," Boyd said recently.
Delta has the biggest number of regional aircraft in the U.S. airline industry, either by contracting with regional carriers or in its own fleet. The carrier owns or leases 132 Bombardier jets, including 107 CRJ100s and 200s, which are 50-passenger jets. SkyWest contributes another 56 50-seaters. Other airlines contribute more.
"I love them," said Bornhorst, who was president of Delta's regional jet-heavy subsidiary Comair. "But what makes the proposition difficult, it's a highly sensitive unit-cost aircraft."
Bornhorst comes to that view by adding together the cost of owning a small jet, crew costs and fuel expenses, then dividing that total by the number of seats. So when fuel prices skyrocket, jets able to carry only limited numbers of passengers come under pressure. The only recourse is to remove them from service or raise ticket prices, something Bornhorst said isn't easy to do.
SkyWest doesn't fly only for Delta. United Airlines is another big customer, and last year, the airline began flying for Midwest Airlines as Midwest Connect out of its hubs in Milwaukee and Kansas City.
Even so, a quarter of SkyWest's entire fleet of 218 Bombardiers are 50-seat planes assigned to fly for Delta. So far, capacity cuts largely have been in the frequencies of some less-lucrative routes. SkyWest President Russell Childs concedes smaller regional jets aren't as fuel-efficient as the airline's 70- and 90-seat jets. But there are still plenty of destinations where CRJ200 planes still make money.
"Some of the sweet markets [ski destinations such as Aspen, Colo.] that we serve out of Salt Lake, the value has always been there and we have not seen a reduction in those key markets yet, and I doubt that there will be," Childs said.
In any event, Delta won't be able to unilaterally ground any SkyWest aircraft. Childs said contracts with Delta guarantee the number of aircraft SkyWest will operate.
"Contractually, we certainly have an obligation with Delta to fly the number or 50-seat, 70-seat, 76-seat and 90-seat aircraft that we have. To the extent that Delta wishes to take aircraft out of our fleet, there is a contractual issue there," Childs said.
To minimize capacity loss, Delta has asked its regional carriers to adopt fuel-saving procedures such as working out the right balance of cruise speeds, altitudes and crew hours. The procedure, called "cost-index flying," is expected to cut Delta's fuel use as much as 5 percent, Bornhorst said.
The regionals are also using auxiliary electrical units instead of onboard engines to provide lights and start-up power for planes preparing to fly. Auxiliary units save less than 1 percent, "but the pennies add up. In the fuel world, every dollar counts in this arena," Bornhorst said.
Acknowledging the fuel problems that small regional jets pose, Bombardier has stopped manufacturing 50-seat jets and is boosting production of larger CRJ700, 900 and 1000 jets, which cost less to fly on a per-seat basis.
"There is clearly a migration toward the larger jets. It addresses their needs, whether it's economics or routes," Bombardier spokesman John Arnoney said.
Childs said SkyWest will accommodate the appetite Delta and United have for bigger jets on its regional routes. SkyWest has 22 jets on order, 18 of which will fly for United as part of a plan that allows United Express to retire 23 30-seat turboprop aircraft that will be replaced with 66-seat jets.
SkyWest will also swap four 50-seat planes it flies for Delta for the same number of jets configured with 76 seats. The first jets will be delivered late this year.
SkyWest also is looking for ways to grow in size. The company historically has gotten bigger by winning new flying contracts from other airlines.
But in 2005, it bought Atlantic Southeast Airlines from Delta. More acquisitions are not out of the question, Childs said.
"I don't know if there is a regional carrier that is better prepared than SkyWest," Childs said.
The CRJ200
Why airlines love them
* There are still plenty of destinations where CRJ200 planes make money, such as ski resorts.
* A quarter of SkyWest's entire fleet of 218 Bombardiers are 50-seat planes assigned to fly for Delta.
Why they pose a challenge
* Smaller jets are less cost-efficient when considering crew costs and fuel expenses, then dividing that total by the number of seats. So when fuel prices skyrocket, jets able to carry only limited numbers of passengers come under pressure.