European regional airlines and consolidation

[Trolle]

Hey Everyone,

I am wondering if anyone foresees consolidation in the regional market like what happened in the US. It is interesting that "regionals" like Skywest and Mesa are franchising to numerous majors but nothing like that is happening in Europe. I use "regional" loosely because these airlines are making quite a bit of money and cover extensive areas, not really regionals anymore.

Why doesn't SAS Commuter fly for Finnair or CityLink do some feed for Air France? I know they are owned by the major carriers but it could bring in some money to the operation.

If you can't steal the other's passengers to your own airline, why not make money off the feed?

[Lite]

PRIDE!

I am sure that Finnair would not want to put its passengers on SAS Commuter, where you're offering your passengers to a rival's flights.

[In trim]

In terms of European de-regulation, we are well behind the USA, and also there is not the same level of slot constraints in the USA as in Europe, so there is a much greater use of small (Beech 1900, J31, etc.) aircraft to small destinations than there is in Europe......therefore a greater incentive to outsource via franchising.

Personally I think Europe will come full circle......a few years ago, Swissair 'regional' routes were operated by Crossair, Sabena by DAT, BA by Brymon, CityFlyer, Manx, etc. For a variety of reasons these airlines have ended up being integrated / merged.

Costs will rise, it will become uneconomical for the bigger carrier to operate the regional routes it has absorbed, and the outsourcing/franchising argument will gain strength again.

As an example, look at BA. It merged/integrated much of the franchise operation, and has since pulled off many of the (formally profitable) regional routes. Regional aircraft have been disposed of (to the likes of Eastern), and there is no longer a 'BA' presence in many airports.

In a year or two there may well be a very strong argument for code-sharing (or franchising?) on some of these routes operated by the likes of Eastern, if there is the opportunity to enhance the level of feed traffic through the likes of MAN.....and offer the benefits of through-check-in, etc.

I'm not saying this WILL happen.....much will depend on the marketing and brand philosophy.....do BA want (again) to be associated with 'small' regional aircraft? That will be a key factor. But I guarantee those kind of discussions will take place in Waterside with a view to increasing feed and reducing cost!!

[Trolle]

Those are good points. Europe has always tended to follow in the footsteps of the U.S. since they were deregulated fully 15 years after the U.S. It is interesting to note that European majors have tended to integrate their regional carriers, just as the Americans did a number of years ago. But, as you say, costs and other issues arise and these regionals are being divested (i.e. Express Jet from Continental and supposedly Pinnacle from Northwest).

In the U.S. franchising is big and many majors utilize the option. What is interesting though is that many regionals franchise to many majors. I can only find limited occurances of this in Europe, Citylink for Lufthansa and Air France (since absorbed wholly by Lufthansa) and another regional in France doing something similar.

One thing Europe did not experience as the U.S. did after deregulation was the locating of hubs from coast to coast. UAL from SFO to JFK and Delta from SLC to JFK. Therefore the regionals can specialize in their areas. Maybe if we see Air France open a Scandinavian hub and Finnair open an Italian hub similar franchises will occur.

Maybe SAS and Lufthansa will get together and put their regionals together, since they are in the STAR alliance. Of course, SAS, just as European regionals, are weary of giving to much control over to an alliance; they still want to stay independent to a certain extent.

Very interesting how things will play out, maybe Europe has reached its limit to following the Americans and will find an alternative solution.