United Airlines CEO Scott Kirby sees a diminishing market for regional jets while holding out hope that roomier aircraft can create new markets to stimulate demand and solidify loyalty.
The Questionable Future Of Regional Jets According To United Airlines CEO
Kirby recently had an interesting conversation with Brett Snyder, who writes the Cranky Flier blog, touching on a wide range of topics. My biggest takeaway from the 20-minute interview was this admission from Kirby:
“There are fewer and fewer markets for which regional airlines are going to work. Because as soon as a low cost carrier goes in and cuts the prices in half, the break even load factor on a regional becomes 160%. They’re just not going to work. So there’s going to be fewer and fewer markets.”
He’s right. Budget carriers, particularly so-called ultra-low-cost carriers, disrupt markets, which is why United fights so hard to keep budget carriers off its turf (like Frontier Airlines in Newark and Washington Dulles). When Spirit or Frontier start competing head-to-head against legacies, bread-and-butter routes suddenly become loss leaders.
This is compounded by regional carriers, which have higher operating costs per passenger despite the huge savings in labor versus mainline staff.
While Kirby is certainly not predicting the cessation of utilizing regional jets, he critically notes that many markets will simply no longer support regional jet service in the future. The upside to that, at least in theory, is that consumers will have other options which forced regionals to suspend service.
But interestingly, Kirby claims the way to win customers in this battle is not over price and not even necessarily over schedule or connectivity, but through building loyalty:
“There are going to be fewer and fewer markets that look like a traditional regional market. It’s the reason we did the 550 [CRJ-550, United’s luxury new regional jet with plenty of room to spread out]. What we want is customers that are flying United because they have loyalty to United, not just because of schedule but product and because they believe in it.”
United’s CRJ-550, a clever way to satisfy United’s scope clause which gives United’s mainline pilots a veto over too many 70+ seat regional jets, seeks to further that loyalty goal by offering:
- First class + Economy Plus (extra legroom economy) seating
- Streaming in-flight-entertainment
- Ability to accommodate full-size carry-ons without gate checking
United is also taking delivery of 500 new jets in the years ahead, many of which will replace regional jets as United seeks to grow its mainline fleet.
Will such amenities inspire loyalty and move the needle on customers typically only accustomed to booking whatever airline is cheapest? Kirby seems to think so, though that remains to be seen.
CONCLUSION
United CEO Scott Kirby is betting on a new market in which more mainline jets and roomier regional jets will replace 50-seat jets that customers hate and that are the least efficient jets in the fleet. He sees the growth of budget carriers as a threat to traditional regional jet markets and believes the answer is offering a product to consumers that will build loyalty and bring them back to United, even if it is not the cheapest option.
image: scottkirby / Instagram
I fly for C5 and guess what !? We have the highest Net Promoter score of all regional airlines and all we have is 50 seaters.. does everyone hate them or just the arrogance on these boards? I think the people of Minot, ND..Cody, Wy amongst other small towns love our jet service. It proven in our service scores as well. Our net promoter score doesn’t just beat out the 76-seat only regionals, we beat out mainline average NPS as well.
Speaking for myself only, I don’t mind flying regionals and often find the service friendlier. This isn’t so much the focus, though. Kirby is arguing the 50-seat regional jet is not sustainable when budget carriers enter the market due to its higher built-in costs. How do you respond to that?
This has nothing to do with satisfaction and everything to do with cost… RJs are just not sustainable moving forward.
I doubt C5 has the highest NPS, C5 is nothing more than Transtates reincarnated, broken planes. What I find funny is UA is going to do a refresh on the aircraft that they own and is flown by C5 but here you have Kirby talking about their demise. Don’t worry all you C5 folks, they will be around for a very long time as no one can come close to doing the job for what UAL will pay. If you really want to look at how CommuteAir does at UAL look at their OT performance on any given day, simply pathetic
SMR,
I doubt C5 has the highest NPS out of all the uax carriers. C5 is nothing more than Transtates 2.0 broken airplanes….inop app’s like I have never seen. If we really wanted to see how great you are take alook at the OT performance on any given day, it’s usually a tie between C5 & G7 on who’s the worst. 2 items…..Kirby is on record saying the regionals are on the way out, then is on CNBC talking about a refresh on those old workhorses….contradicting right? as a stakeholder I would question way the money is being spent to do this if their days are numbered
A few disconnected thoughts here.
High cost airlines like United need to earn a revenue premium, that’s why Kirby focuses on loyalty. He can fill incremental seats at low fares but not all his seats or a route isn’t viable.
Markets that only support smaller regional jets aren’t usually high up on the list for ultra low cost carriers.
And United certainly needs to serve many smaller cities with limited traffic using regional jets in order to feed long haul flights which also have limited low cost competition. Once they’re doing it for feed, of course, the marginal cost of selling seats in an O/D market gets much lower.
Kirby has talked in the past about how non-stop markets used to be a legacy carrier’s bread and butter, but that now connecting markets are often better because even though they may face legacy carrier competition on those routes they tend not to face low cost carrier competition.
The net cost of the cRJ550 vs CRJ700 is one flight attendant but the lost revenue opportunity us 26 tickets. It’s just a union driven inefficiency that can’t work long term.
20 seats – United’s (Mesa’s) CRJ-700’s we’re 70 seaters, vs the GoJet 50 seat CRJ-550’s.
But yeah, valid point Sir.
Must be 26 in Oasis seating
He’s spot on, which is why I root for the quick demise of any start-up LCC or ULCC. As someone who lives in a small market city, my biggest fear is that AA, UA and DL pull-out their regional hub connection flights because the LCCs and ULCCs have ruined the market. Then, all I’m left with are crappy airlines that cater to the people from the other side of town and fly to places like the FL panhandle, Orlando and Vegas that do me no good. Oh, and I then get the pleasure of a 2+ hour drive to ORD or IND.
If I were running my city’s regional airport business development initiatives – and I should be – we’d be making it clear that ULCCs are not welcome and would be working with UA, AA and DL to add regional jet service to hubs and major business centers.
There will always be a market for smaller jets to serve secondary markets. You don’t usually fly a 737 between Kansas City and Garden City KS or Durango Colorado and DFW or…… While United may figure out a way not to use regional jets their pricing and loyalty model are the sole reason LCC’s are able to exist.
Here are just some of the cities I fly to day in and day out… Were have no low cost competitors or very little and fares are high, flights are full.
Grand Junction, CO
Cody, WY
Casper, WY
Dikinson, ND
Durango, CO
Flagstaff, AZ
Lincoln, NE
Helena, MT
Any many more.. I do not see Frontier, Spirit or SWA.. some of them just fly once per week. We also just started a multi-million dollar refurb project. Not really sure 50 seaters will be going away any time so soon.
They won’t. Not to airports likes these.
Back to props then.
A lot of those cities are essential air service routes that the tax payers are paying for the empty seats.
None of those cities are EAS…: not even close to close.
Politicians should not be allowed mandate that airlines serve unprofitable regional airports. This would allow subsidies to be reduced.
Competition and matket forces are good for the flying public and for the airline industry.
I bet Scott Kirby is actually scared of the JSX model. Premium high margin customers willing to pay for time savings. United gets squeezed in the middle domestically. JSX takes the high end and ULCC takes the low end.
JAX has a great business model at the expense of the people. They won’t be able to retain pilots and that will be their demise unless they start charging and paying more.
I like how he dismisses regional jets while promoting…a regional jet. The CR550 is a modified CR7, with most (or all?) being owned by SkyWest, a regional airline, and being flown by GoJet, a regional airline. Sure Scott. Regionals are obsolete. Says the CEO of a company that has 900+ mile routes on the CRJ-200.
Follow the money. The CARES act allowed The big Carriers to make a raw deal with regionals. United got millions from Cares for contracting with Skywest. The contract only has to be three years. United can pull out prior to the three years with any regional for basically any reason they can find. Those regional airports that serve Skywest are obligated to receive and contract airport renovations for MILLIONS, hindering on SkyWest’s contract with United. United’s fleet for the regionals are majority of CRJ 200s. A dying fleet. No parts available as manufacture has shut its doors. They are all going to be expired in the next couple years. United still gets paid the kickback from the CARES. No matter what happens to the regionals, municipal airports, and hard working folks there. How about asking Kirby to comment on that?
Wow you so smart how you know all this
You must be a real socialist
The only way in which these comments would make sense is if they’re a reference to the longer regional jet routes that seem to have been prevalent in the US for a few years. If I understand it correctly, the idea was to charge a premium for a nonstop flight on routes that were too long for a turboprop and too thin for multiple daily flights on a 737/320. The nonstop premium is probably no longer a thing due to LCC competition, so these routes are likely to get the axe. I don’t see any threat to regional jets being used on shortish hub-and-spoke flights, which surely must be their primary raison d’etre
I’m glad LCCs are hurting business. The legacy carriers are dirtbags for continuing the dirtbag regional model. Regional CEOs are dirtbags and regional airlines shouldn’t exist period. It’s dishonest and the only reason they exist is for cheap labor. It drags down working conditions and wages for the entire industry. Underpaid and exhausted labor also leads to safety issues.
I could say lately I see lotta change in United and the last 53 bye have I fly with United four times that’s mean I’m happy even my son he travel a lot he always recommended United and even I’m thinking to open a counter charge I hope they keep the business as they doing it now they takeoff in time they arrive early or in time and no problem with luggage or carry-on snack and when you fly even short distance water for free which is some aligned the charger for it
I can hardly understand this run-on sentence. What ??
Is is not true that the crew is an order of magnitude less cost vs Mainline? Would be interesting to see 160% calculation.
Tell me LCC pay the employees better then the regional carriers?
Just another example of why we need to nationalize airlines and run them as the public service they are. Rep. Graves said at an A4A event three years ago that the airline system was the best mass transit system in the world. He was unintentionally correct…it is a mass transit system and for-profit service is clearly historically unrealistic. Small markets need service if we want to meet climate challenges…either by jet or by highspeed rail. Mainlining markets like Lincoln or Marquette is unrealistic.
Terrible idea. A nationalized airline would run about as well as a national postal service. Quit relying on government. It’s not safety net
This article is very confusing.
Are you writing about using regional jets as a vehicle on flights between major hubs, or are you writing about service to regional airports (which United has cut recently)?
Regional jets.
I’d settle for just the CRJ-200s to go away forever
Wow….so you are just now figuring out that putting 3/4 of your passengers on little tiny jets flown by pimple faced teenagers being paid 20k a year and forced to work schedules that mean they don’t sleep for days is a bad thing? Wow….you catch on quick now don’t you….
At regional airlines captains are still at least 23 years old.