Some 30 U.S. airports risk losing their last regional airline flights unless they take “critical steps” to better balance revenue, cost and compensation rates, according to a report published earlier this year by San Diego-based aviation consultancy Innovation Analysis Group (IAG). The group advises small- and medium-sized airports to institute so-called “pay to play” strategies, under which they might share part of their profits with airlines in return for some guaranteed level of service. If small airports and the communities they serve fail to recognize the new model, according to the report, they risk sharing the fate of the 10 scheduled-service airports that lost their regional jet service entirely between 2006 and 2010.
The report asserts that airport managers need to understand more clearly the evolving economics associated with the governing system of contemporary RJ operations–the “Capacity Purchase Agreement” (CPA). While such agreements have historically generated profit margins for the regional airlines that have far exceeded those of their major counterparts, the network carriers have gradually managed to “level the playing field” as each contract expires or becomes amendable. Some have even returned to old-style pro-rate agreements, under which the regional partners assume virtually all the risk for the flying.
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