Wholly Owned Regional Carriers

Old Dec 10, 17, 5:20 pm
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Wholly Owned Regional Carriers

American used to own the entirety of its regional operation, Eagle; Northwest owned Compass; Delta owned Comair. Continental had ExpressJet. American still has a few wholey owned regionals. Alaska has Horizon. Given consolidation has largely run its course at the mainline level, why doesn’t United think about bringing a leading express operator in-house? This would have the benefit of potentially easier pilot recruitment (i.e. start at a Regional with a clear path to mainline), and it would allow United to better control the customer experience. This subsidiary would still have to compete for the flying, just like Samsung semiconductor has to bid for a place in Samsung electronics’ phones.

Skywest is likely too big and works with everyone but bringing regional flying back under the United umbrella seems it would make more sense than not from an operations perspective.

What do you all think?
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Old Dec 10, 17, 5:39 pm
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I think that only United can determine if it makes business sense. Thus far, they haven't. I don't see it making a whit of difference to the consumer.
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Old Dec 10, 17, 6:28 pm
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A lot of the reasons not to own region / express carriers has been related to the lower cost / salary structures of regionals which would be hard to have in a single company with unified labor contracts. Possiblily owned by the holding company but still operated by a seperate legal entity, as a many of the European and Asia carriers do might be an approach if that does not creat too big of a labor issue.

and in the news, from the United planning $3B share repurchase thread
Originally Posted by entropy View Post
and now there's word that they're looking at buying back ExpressJet after they sold it off years ago to pad their coffers
https://seekingalpha.com/news/331729...=45#email_link
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Old Dec 10, 17, 10:36 pm
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Originally Posted by mahasamatman View Post
I don't see it making a whit of difference to the consumer.
This. I'm not sure what difference it would make to a customer, and I'm not sure it would really be any better control of the customer experience. In terms of employees, it's really a mixed bag - generally all are at least average, but I've seen great crew members/employees of SkyWest, GoJet, etc. and terrible UA ones (and vv.). Maybe there are benefits or disadvantages to UA itself, but I don't think customers would know either way (nor care).
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Old Dec 11, 17, 6:03 am
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Originally Posted by WineCountryUA View Post
A lot of the reasons not to own region / express carriers has been related to the lower cost / salary structures of regionals which would be hard to have in a single company with unified labor contracts.
Has this ever really proven to be an issue? They're not really a single company - it is a wholly own subsidiary - so no single contract. And the history of those positions with separate labor agreements suggests the airlines figured it out well enough.

CO sold off ExpressJet and its Copa stakes to keep union pensions funded. It treated them as financial investments and used the positions to raise cash when necessary.
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Old Dec 11, 17, 7:07 am
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I think ten years of mainline/express transactions have proven that carriers reject the OP's suggestion.

smb12 mentions CO selling off ExpressJet.

Delta sold Mesaba and Compass, and wound down Comair.

Alaska had Horizon as its sole express carrier and added SkyWest.

Carriers control the customer experience through brand standards, contract negotiation, and contract enforcement. Is the OP familiar with how few Marriott-family and Hilton-family hotels are actually owned by Marriott or Hilton?

It seems that AA/DL/UA like having multiple carriers to bid for flying. OP should check a good dictionary - I recommend Oxford American - for the definitions of whipsaw.
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Old Dec 11, 17, 9:36 am
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Regionals don't seem like a very good business to own these days, tough economics.
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Old Dec 11, 17, 10:51 am
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Originally Posted by sbm12 View Post
Has this ever really proven to be an issue? They're not really a single company - it is a wholly own subsidiary - so no single contract. And the history of those positions with separate labor agreements suggests the airlines figured it out well enough. ....
As I mentioned
Originally Posted by WineCountryUA View Post
..... Possibly owned by the holding company but still operated by a separate legal entity, as a many of the European and Asia carriers do might be an approach if that does not create too big of a labor issue. .....
But it still creates the potential for labor unrest -- as the LH pilots have pushed back at these separate subsidiaries.
Granted there is discontent with the present situation but a wholly own subsidiary will likely increase the tension.
Originally Posted by mduell View Post
Regionals don't seem like a very good business to own these days, tough economics.
This is, by far, the biggest barrier. Unclear if there would be financial benefits integrating these regionals. Having multiple regionals to bid against each other seems a better financial situation.
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Old Dec 11, 17, 2:56 pm
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There is an industry pilot shortage, so pilots are able to be a little picky with where they work. With AA regional airlines (PSA, Envoy, Piedmont), pilots are able to eventually move from the lower paying regional carriers to the higher paying mainline parent company over time, making those regional carriers more attractive for prospective pilots. Additionally, airlines can cut costs by owning a regional airline. UA can afford to purchase more fuel efficient planes and some company positions and jobs can be shared between UA mainline and UA regional.
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Old Dec 11, 17, 6:18 pm
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Full Circle

United fully owned Air Wisconsin from 1991 to 1993.
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Old Dec 14, 17, 5:32 am
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United owns a large stake in Commutair.
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Old Dec 14, 17, 6:02 am
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Majors are back in the game of investing their ample free cash in regionals due to relatively low valuations and the need to ensure: a) reliable feeder networks for the mainline systems and b) flow of pilots to fill new-hire classes.

Guaranteed interviews and flow-through are good incentives for new pilots who often find themselves in the position of choosing between several offers from different regional carriers.
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