As of the 2Q18, here is where we stood with the US airline industry in-service fleet.

The top four accounted for 79% of the fleet.  That is concentrated and clearly points to industry followers needing to be au fait with oligopoly economics to understand the industry’s behavior. For example, competing oligopolists prefer non-price competition in order to avoid price wars.

Among the US regionals, there is a similar, if more skewed profile. One airline accounted for over one-third of the fleet. For comparison purposes, there were 2.3 mainline passenger jets for every regional jet in US service.  That demonstrates the heft of the US regional jet market.

As the US Regional Airline Association reported in its 2017 report, its members accounted for 42% of all US departures.  In short, the US regional airline business is huge.  SkyWest has a fleet size nearly the same as Southwest.

This industry is also concentrated, where the top five accounted for 82% of the fleet.  These regionals operate in a tightly controlled market, where the majors get to dictate the terms.  This means the regional airlines have the tightest margins.

The RAA notes in its report “major prepare to hire the equivalent of the entire regional airline pilot workforce within the next three years alone, in order to keep pace with retirements and growing demand“. Why? Because among the regionals the pilot shortage is felt most acutely.  Regional pilots jump at the opportunity to fly bigger jets at mainline carriers. So there is a regular turnover and near constant training.

The second chart is especially handy for those attending the RAA’s annual conference next week for a perspective.


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