• New E190s delayed due to Japan Tsunami
• They have the ability to firm up the rest of the E190 orders but would prefer to be in a better cash position
• E170s start leaving the fleet this week
• MKE seems to be the big loser as before. I bet RJET is super happy they bought F9 otherwise Midwest might have gone under anyway
• No firm plans for the remaining Q400s (5 owned)
• I get the feeling they would prefer to rid themselves of all of the small E-Jets (below 190).
• Will be implementing cost saving procedures to lower fuel burn (no further details)
• 30% of people that book at FrontierAirlines.com choose Classic or Classic Plus

Overall the call wasn't as upbeat as usual but did not seem grim. The results, while not good, were better than last year and it is easy to point at the price of fuel as the main issue.

There wasn't much upbeat news for MKE in the conference call today.

Perhaps the most noteworthy news was that Frontier expects to shrink it's year-over-year capacity in MKE during Q3 and Q4 by 15% to 20% (for those interested, this was stated during the Q&A session with the analyst from Raymond James). It will be interesting to see what gets cut.

Republic expects competitive capacity in MKE to decline by 4% to 6% during Q3.

With all the cuts at MKE by F9 and more to come. I guess maybe to save money they should swap gates with AirTran and let the new Southwest have all of concourse D. Sorry for being so doom and gloom here.

Also forgot, they will be retrofitting all of the A319s to have 2 more seats (to match the ex-mexicana birds). This is another reason that capacity outlook looks relatively flat system wide.

Huh? I'm sure Airtran can't have been making much money in MKE either. Now that WN owns them and is ready to look at the books I would hope they bring some rationality to the MKE market.

Seems like MKE is where practically all capacity reductions are heading. The rationale appears to be to, for every route that would be flown by a plane going out of the branded fleet, remove that route from MKE's lineup entirely. The nice thing about that is that DEN appears safe for now; I just checked DEN-SAT weekdays in the fall, and what is currently flown by an E70 will receive an E90.

Speaking of E90s, any idea of whether they're going to keep going with the 99-passenger config on them? The last time I flew an E90 the front seats were Midwest Signature (I'm guessing; never flew YX pre-RJET but the plane was still in YX colors), and were as such without a doubt more comfy than Stretch on an A319.

Side note: just watch RJET E70s get WiFi on Delta before it reaches Frontier E90s...grr...

Was the seating in the E190 1x2? If so those were the ex-US Airway E190's Republic received a few years ago.

Has wifi been rolled out yet? Last I knew it was supposed to have been finally introduced in January or February of this year.

Yeah, seating was 1x2. However I haven't seen a seat map that wasn't 1x2 at the front of an E90 on F9. Maybe it has something to do with not wanting to have another FA in the plane? Because SeatGuru says that YX 717s were also 99-passenger, thanks to ten rows of 2x2 seating and 33-36" pitch for the whole plane. Also from SeatGuru, there is a single-class E90 config but it actually has fewer seats than the 2-class one ???

Re: WiFi, Aircell says no planes have been outfitted yet, and there wasn't any WiFi on the E70 on my SFO-DEN flight a month ago.

At least for Q3, that level of year-over-year cuts is already in the schedule.

Generally when industry people talk about capacity, they talk about available seat miles. Looking at August 2011 versus August 2010, ASM�s at Milwaukee are down 22.9% year over year. The reduction of long-haul west coast flying is a huge portion of this.

I took the weekly flights last August and compared them to the weekly flights scheduled this August.

2010 weekly ASM�s
30.7 million

2011 weekly ASM�s
23.7 million

All of that reduction is accounted for in these six dropped or reduced markets:
-2.38m LAX (10x/week fewer 319)
-1.51m SFO (6x/week fewer 319)
-1.14m SAN (7x/week 319 replaced by 3x/week 190)
-0.71m ATL (6x/week fewer E170 and 12x/week fewer ERJ)
-0.68m RDU (13x/week fewer E170)
-0.57m TPA (7x/week fewer E170)

All of the other additions and reductions year-over-year net to zero ASM�s.

The 22.9% August reduction is probably right about what July will see. As things currently stand, September year-over-year looks to be off about 13.1% in ASM�s. (That's because last September had seasonal drop-offs to the west coast...this September there's very little west coast for a seasonal drop-off.) That would put the 3rd quarter ASM�s down in Milwaukee between 19% and 20% with the current schedule.

Before this past weekend�s cuts, August ASM�s were already planned to be down about 13%. When summer was originally loaded a couple months back (including 7x SAN Airbus ) Milwaukee ASM�s were looking to be down about 4% year over year.

Back to the August numbers. I listed the six biggest ASM reductions year over year. Here are the six biggest increases:

+0.56m Denver
+0.47m Hartford
+0.44m Washington
+0.32m San Antonio
+0.17m Boston
+0.08m LaGuardia

So�I don�t think that the comment that Q3 and Q4 will be down about 15%-20% in MKE means there are more cuts coming for July/August/September. And that makes some sense, considering that they just loaded what is expected to be the final summer schedule. That�s no assurance that there won�t be additional September trims, but they are needed to meet the �MKE down 15%-20% year over year� guidance.

I�ll work on the Q4 numbers to see how things look.

From the looks of the currently-loaded winter schedule, Q4 looks about 10%-11% lower than last year.

Here are some things which would potentially bring that into the 15%-20% range:

(1) Switch A319 to E190 to BOS/LGA/DCA

or

(2) Drop either MKE-LAS or MKE-PHX

or

(3) Drop BDL, EWR, and cut PHL from 3x to 2x

or

(4) Drop SAT and reduce DEN by one Airbus

or

(5) Drop SDF, ATW, CLE, DAY, IND, GRB, FNT, and reduce 1x from DSM, OMA, CMH and GRR


Those are only possibilities, they are not suggestions or likely plans...just an illustration at the level of additional cuts that would put Q4 solidly into the 15%-20% year-over-year range.

How much longer before Frontier is sold?

Remember, it was on the USA Today list of likely to disappear companies.

While this is all speculation, we do know that a big portion of the small ERJ flying will be removed from the branded operations later this year. If the plan is to transition primarily to E190/Airbus aircraft, it would seem that some of the weaker MKE spokes such as SDF, ATW, and CLE could well be in danger of being cut.

If some of the ERJ capacity needs to be allocated to the EAS flying, it might not leave a lot left for other spokes.

We do know that in the current environment of high oil prices and low fares none of the E135/E145/E170 flying is profitable. The question is what stations contribute enough to the overall network to avoid the chopping block even though the XXX-MKE segment is a guaranteed money loser?

Part of that is where crew/mx bases are. SDF/GRR/CLE all have F9 flying.

I'm not sure that all E135/E145/E170 flying is losing money in the current environment, although that could be true. And a further question is what (if any) routes make money at $100 oil, at $85 oil, etc.


Other than the EAS flying, there are a few relatively-distinct segments of the RJ flying.

(1) Long haul
(2) Significant point-to-point with high fare
(3) Significant point-to-point with low fare
(4) Short hop feeder with some local traffic
(5) Short hop feeder with little local traffic


I think the viability of each segment is different.

(1) Loan haul flying
The RJ�s are less efficient on longer hauls, and while these are mostly high-fare markets, they would be better served with Ejets. RDU had the weakest fares (EWR/BDL/PHL/RDU) and as such is being pulled. These markets � at least PHL and EWR � are not good uses of RJ�s.

(2) and (3) Significant point-to-point
These are generally the 300-450 mile business markets like Columbus, Nashville, Pittsburgh, Omaha, etc. They have good local traffic, but the difference is fare level. A market like Columbus, where business travelers generally pay in the $160-$250 range each way, are much more sustainable than a market like Pittsburgh, where business travelers tend to pay $80-$150. Skywest is the culprit here, and although they are further cutting back (down to three aircraft by 6/1) the fare levels in these markets do not come close to supporting RJ service at $110 oil. I�ve heard that Skywest is was going to announce the end of FL* several weeks back but is holding on in hopes of figuring out a way to get their foot in the door with Southwest.

(4) Short hop feeder with some local traffic
These are markets like Flint, Minneapolis, and Grand Rapids which are primarily feeder traffic but include fair local traffic. The local traffic, especially when the fare is high, can make these markets perform better than one might think.

(5) Short hop feeder markets with no local traffic
These are markets like Madison and Green Bay, where virtually all traffic is connecting feed. The shortness of these markets means less aircraft time and fuel burned than longer routes (although a good chunk of fuel is used for takeoff/landing, so a 200 mile route does not use twice the fuel of a 100 mile route) but since everybody is a connection, only a portion (perhaps 1/3) of the total fare paid is allocated to the short ERJ hop.

Regarding the RJ�s, I think it�s worthwhile to note what was cut and what was (so far) not cut. They have an ample supply of RJ�s, and while one could argue that some cuts elsewhere in the Frontier system are due to all the E170�s leaving, the RJ cuts are essentially them parking aircraft.

MKE-RDU was cut�a long haul RJ route which eats a lot of aircraft time, is quite a bit longer than the optimally-efficient RJ stage length, and suffers from weak yields.

MKE-MSP lost the (planned) early morning MKE-MSP-MKE 5th trip, a trip that would have relied a lot on local traffic because it did not connect well with major F9 flights. MKE-MSP has low fares (although they are becoming much firmer than the FL* markets) and this RJ flight doesn�t seem worthwhile.

MKE-GRR did not lose the early-morning MKE-GRR-MKE trip, which is pretty similar in timing and in reliance on local traffic. Even though loads are not usually strong on this round-trip, it is mostly local traffic (especially MKE-GRR) and fares are high�often $200 or more each way.

MKE-MSN lost the 5:00pm MKE-MSN-MKE trip, even though loads have been good and would likely have been strong for summer. To a significant extent I think this is due to there being one line fewer of RJ flying and needing to cut something to make the schedule work out. But it�s noteworthy that what they chose to cut was the short-hop feeder flight from the bank�they could have instead cut a flight to STL, CLE, OMA, etc. from that bank to make the schedule �work�. But it was the short-hop with no local traffic they decided to cut.

Those two early-morning, local-traffic flights to MSP and GRR are especially interesting to me. In both cases, they could have easily accommodated keeping or pulling those flights with the same number of lines of flying they arrived at. Yet they deliberately decided to keep GRR but not start MSP. I see this as a sign that not all RJ flights are alike, and that not all discretionary RJ flying is doomed (at least not yet).


There are couple of reasons that favor at least some RJ flying staying:

(1) With the EAS markets, at least two lines of RJ flying have to stick around until at least mid-2013. (The hold-in waiver that Republic requested and received does not mean they can pull the plug on the EAS flying with 90 days notice�it means that when their contract expires the longest the DoT can force them to stay awaiting the next carrier to start is 90 days. Normally when your EAS contract expires you�re stuck still serving the market until the next award carrier can start service, and while you are eligible to re-negotiate rates for that �hold in� period, you�re still obligated to stay indefinitely.)

(2) Surplus RJ�s are in ample supply at Chautauqua. The performance of RJ flying doesn�t have to be good enough to justify acquiring and operating RJ�s, it has to be good enough to justify not parking the aircraft.

(3) When it comes to feeder traffic, the accounting for RJ viability is not a clear equation. It�s been said that for some major airline operations, the feeder RJ operations themselves lose money, but the traffic contribution to make mainline flights more profitable outweighs losses in the specific RJ feed segments anyway.


What I think is a reasonable best-case outcome:

--Long haul routes upgraded to EJet

--Main feed-producing RJ routes and key point-to-point RJ markets upgraded to Ejet on some or all flights. Best potential here for markets like MSP, OMA and DSM, with some potential at places like MSN, STL, PIT, CMH and GRR.

--Six to eight lines of E145 flying remaining.


Currently there are too many RJ markets where they sell a good amount of local fares but also fill seats when they have to with low-yield connections. Those low-yield connections are not good with the high costs of the RJ. If they upgrade those sorts of flights to E190, they can sell more low-yield connections and come close to breaking even on them with the lower costs of the E190, and make money on those same local passengers. That can work in a market like PHL, MSP or OMA, and can probably work for selected other flights to places like CMH and STL, especially if Frontier doesn�t face competition.

How likely this is to happen�well�I did call it a reasonable best-case outcome. I really don't think that the RJ's are doomed to lose money, although I can't say how much of their current flying makes money at current oil, at $90 oil, etc. But part of the RJ problem IMHO is that they are being used in ways where an EJet would be better. They dont have 12-15 lines of flying out of Milwaukee for which the RJ is the best fit, and some of their problems stem from this. That's not to say some smaller markets might not go...some are not working with the RJ and are not candidates for upgrade. But some of their RJ losses are likely in markets where the answer is upgrade, not dropping. Packing MKE-MSP ERJ's with connecting passengers is a good examlpe.

Bedford stated that none the E135/145/170 was profitable in the current environment.

I do agree with your view that just because the regional jet routes aren't making money doesn't mean they are all doomed. Some routes may still contribute positively to the network, some may be viable with oil at $90, etc.
However, Frontier's strategy is apparently to move towards a predominately E190/Airbus fleet. There are only so many MKE routes that can absorb a capacity increase like that, especially if fewer overall spokes from the hub remain. This is especially true if the hub remains lop-sided.

We shall see what news the coming weeks bring.

I have heard/read elsewhere that the WN pilot contract does not allow for any RJ flying at Southwest. I haven't looked at the contract, but I assume it's true.

I'm not a lawyer, but I guess it's possible that SkyWest can stick around for a while with FL until the two carriers are actually merged onto a single operating certificate.