While the traffic slump that beset the U.S. airline industry as a result of September 11 certainly manifested itself in fourth-quarter financial results across sector lines, an ability to adapt quickly to changing market conditions mitigated the damage to the regional airline business, which showed remarkable resilience in the face of potentially devastating losses. In fact, the three independently owned, publicly traded regional airlines to release their results by press time all escaped the quarter with a relatively sound financial base, while all of the “big six” major airlines registered losses in the hundreds of millions and, in the case of US Airways, more than $1 billion.
Traditionally, regionals have weathered economic squalls with such risk-avoidance mechanisms as fixed-fee code-share contracts, designed to limit their exposure to traffic fluctuations. During this most recent crisis, however, capacity reductions meant fewer departures, and fewer departures mean less revenue. Fortunately for regionals flying RJs, another phenomenon took hold: as major airlines parked single-aisle airplanes in the hundreds to effect an industrywide 20-percent drop in capacity, their regional airline affiliates used smaller, more cost-effective jets to fly routes that may have otherwise lost service altogether. As a result, revenue declines did not approach the level suffered by the mainline carriers, which in most cases failed to extract service rate concessions from their regional partners.
