Feeder Airlines Get a Lift From Links to the Majors

The four passengers climb the rickety steps to board the 19-passenger DeHavilland SKOL Twin Otter. “Good morning, y’all,” First Officer Craig Lyne says over the intercom, already competing with the turboprop engines. “Welcome abroad Eastern Metro Express flight 1373H. . . . “

Moments later, the small commuter airliner takes off. Just an hour later, in Longview, Tex., co-pilot Lyne greets six new passengers as they climb the same rickety steps into the same aircraft. “Welcome aboard American Eagle flight 1860. . . . ,” he says.

Same plane, same crew, but a different airline?

If you’re confused, you’re not alone. The plane is actually operated by the same commuter airline, called Metro Airlines. But it uses different names on different flights because of agreements with American and Eastern airlines to share passengers--and names.

Metro is an example of a growing, and often confusing, phenomenon sweeping the airline industry. A dazzling number of smaller commuter airlines are affiliating with major carriers, feeding passengers to each other at major hub airports through joint pricing, ticketing and computer-reservation arrangements.

According to Airline Economics Inc., a Washington-based consulting firm, there are 46 such deals in existence currently, double a year ago and up from only one when the airlines were deregulated seven years ago.

Such arrangements--while sparking complaints of misrepresentation by passengers and unfair competition by some airlines which don’t participate--are vastly profitable to those airlines that do take part. For big carriers such as American, Eastern, United and Continental, such linkages feed additional passengers into their flights without the need of servicing smaller markets themselves.

Smaller carriers similarly gain extra business from the major carriers. They also gain from the prestige of having bigger airlines on their flight schedules, and get a range of services from their bigger partners, including reservations, gates, ticket counters, baggage and fueling services. The smaller carriers also are included in the bigger airlines’ frequent-flier programs.

“It has become a matter of survival,” says David Ewing, vice president for service planning at Air Midwest, a commuter carrier based in Wichita, Kan. “If you don’t have these agreements, you’re not going to make it.”

“The smaller airlines are getting passenger flow they never dreamed existed until these deals sprung up,” says Timothy Pettee, airline analyst with L. F. Rothschild, Unterberg, Tobin. “The larger airline opens up doors for the smaller airline.”

Such deals are a major reason for commuter airlines becoming the fastest-growing segment of the nation’s airline industry. Commuter airlines--also called regional airlines by some analysts--this year are operating an estimated 2,100 airplanes, double the number they flew a decade ago, Prudential-Bache Securities airline analyst Helane Becker says. She estimates that they will carry 35.2 million passengers in 1985 and 45.8 million by next year. In 1981, they carried just 15 million people.

All told, about 200 regional carriers serve many of the cities which once were served by the big airlines. The major carriers have pulled out of the smaller markets because under deregulation the government stopped the subsidies they got for operating unprofitable routes. As the larger airlines concentrate on longer, densely traveled routes, the commuter airlines fill in the gaps.

In Los Angeles, United Airlines has a marketing partnership with Carlsbad-based Imperial Airlines, under which Imperial feeds traffic to United’s hub at Los Angeles International Airport. Almost every big city airport, from Atlanta to Dallas to Pittsburgh, has similar arrangements.

Revenues under such arrangements are divided according to what proportion of the total distance each airline flew the passenger. The small carrier also generally pays the bigger carrier a per-passenger fee. Though all carriers declined to give specifics for competitive reasons, the fees are usually between $2 and $4 per passenger, according to one airline official.

Putting aside the services the bigger airlines provide to the commuter carrier, the real commodity they are selling is their computer designation.

Most of the agreements allow the smaller carrier to use the bigger airline’s two-digit designator codes which list airlines and flights in the Official Airline Guide and on computerized reservations systems. For example, the designator code for American Airlines is AA, United Airlines is UA, Eastern Airlines is EA and Delta Air Lines is DL.

These computerized designations result in a decided competitive advantage especially for the smaller airline.

Because the commuter airline uses the major airline’s designator code, it appears much higher on both the computer and in the OAG than it normally would. That is because airlines tend to list their own flights first in their computer systems.

Also, the small airlines can share gate space with their bigger partners. Consequently, passengers don’t have to walk far to make connections.

Salable Commodities

“Why this steamroller effect?” asks John P. Doty, manager of interline and industry affairs at Eastern Airlines. “The smaller carrier is realizing that the DL or EA is something that is recognized around the world. The bigger carriers realize that these designators are highly salable commodities. It brings the small carrier up on the first (computer) screen instead of the third or fourth screen and it thus gets sold first.”

Whitley W. Hawkins, Delta Airlines’ senior vice president of marketing, agrees that “the designator is critical as a marketing tool.”

But such arrangements have also sparked controversy.

Regionals which are not affiliated with bigger airlines or which have agreements which do not involve the use of dual designators feel they are being subjected to unfair competition. Some have shouted foul and, with little success, are trying to stop the practice. Others are simply giving up the fight and striking up their own deals with major airlines.

Some travelers and industry officials also complain that the arrangements constitute misrepresentations. When buying tickets and sometimes when changing planes, passengers frequently can’t tell which airline they’re flying.

Under some of the deals, the regional airlines are merging their identities with their bigger brothers. They are painting their planes to closely resemble their larger partners and, in some cases, they are taking on names very similar to the bigger trunk airlines, such as Eastern Metro Express, American Eagle, the Delta Connection and the Piedmont Commuter Airline. The magazine of the bigger airline is in the seat pocket of the planes of its smaller partner. If there are flight attendants, they wear the uniforms of the big carrier’s crews.

Passengers Unaware

Passengers often aren’t aware that they are flying on Chaparral Airlines (part of American Eagle) between Dallas and Abilene, or on Fischer Bros. Aviation (part of Allegheny Commuter System, affiliated with USAir) between Detroit and Battle Creek, Mich.

Consumer complaints also arise because of the vast differences in service levels between commuter lines and majors. The smaller aircraft are not as comfortable as the major airlines’ jet aircraft and don’t generally offer the same amenities. Cabins are often narrow and there is no in-flight service. The planes usually carry between 15 and 50 people and most are propeller driven and thus more economical for shorter flights from small communities into the big city hubs.

The passengers, thinking they have been ticketed on jets, are astounded when they must transfer to small puddle hoppers.

One recent traveler between Dulles International Airport and Newark, N.J., on American Eagle (it’s really an Air Virginia commuter flight) had a ticket which read American Airlines but discovered when he got to the airport that he would board an Air Virginia plane. With his ticket he was given an American Airlines complimentary inflight coupon which said he was entitled to a cocktail and a free movie.

“Pretty good on a flight that I couldn’t even go to the bathroom on or on which I wasn’t allowed to smoke,” he recalls.

Airline executives agree that passengers should know what airline they are flying and most maintain that every effort is being made to bring this about.

“We have done everything we can so that people are made aware of the fact that they are flying Metro Airlines or whatever. It is marked on the timetables and in the computers. Now there is no question that people have been deceived,” Doty of Eastern Airlines concedes.

But, he adds, they can be fooled only once. “There are a lot of businessmen who perhaps did not know the first time when they flew that 19-passenger plane. But they certainly knew the next time and we have a lot of repeat business. Sure we have had complaints but they are usually from one-time vacation travelers--the little old lady who has to climb up a ladder to get to her seat.”

Not All Agree

But not every airline executive agrees that it is all that necessary to inform the travelers.

Robert A. Jenkins, vice president of commuter activities at USAir, which under the Allegheny banner operates the largest number of regionals--eight in all--says “we don’t identify each commuter airline. We go to some means to show the people that they are not flying Chautauqua Airlines or Air Kentucky.

“It is analogous to Holiday Inns, which are owned independently by many different entities. You don’t normally know who owns the Holiday Inn you are staying in or who owns the Kentucky Fried Chicken where you’re shopping.” (Allegheny planes do have a plate inside the entrance way identifying the actual owner.)

Clearly the deals are beneficial to the airlines. Scott C. Gibson, Continental Airlines’ director of airline planning, says the extra traffic from its arrangements with three commuter lines results in more than $20 million in added revenues annually on a systemwide basis. He adds that this is mostly profit since Continental doesn’t require extra equipment nor does it have any additional major expenses.

Continental has arrangements with Pioneer Airlines, which operates 21 flights daily in and out of Denver; Royale Airlines, which operates 11 daily flights through Houston, and Fort Worth Airlines.

Predicts Big Increase

Air Midwest predicts an increase of 50% to 100% in passenger traffic on some of the markets on which it will affiliate with a major carrier. The Allegheny Commuter airlines of USAir carry about 200,000 passengers a month, of which about 45% fly on the parent company’s planes.

American Airlines says its connecting passenger revenues will be up by 150% this year as a result of its arrangements with commuter airlines. It requires them to operate planes with at least 15 passengers and they must be turboprop. The ground personnel of commuter airlines affiliated with American must attend American training courses, says Rick Nelson, director of American Eagle.

Such profits mean that the number of such informal consolidations are likely to continue to grow rapidly. And apparently it’s a trend that is just beginning.

United Airlines, which has had joint arrangements with a number of smaller carriers for some time, has just begun agreements which include the linked computer codes. United, which strongly opposed such dual designator deals because they allegedly fooled the traveling public, jumped on the bandwagon recently.

Since the summer, it has launched dual designator arrangements with Air Wisconsin in Chicago, Horizon Air in Seattle and WestAir in Chico, Calif. Three more contracts are about to be signed and, according to John R. Zeeman, executive vice president for marketing and planning, before long 10 carriers will have joined the United fold.

United and several other carriers did an about-face because of competition.

Changed Attitude

“We thought it was clearly a deceptive practice,” Zeeman says. “It is not that we don’t think certain regionals aren’t good airlines. We thought the consumer ought to know which airline he is flying.”

The executive complains that United took its case to the now defunct Civil Aeronautics Board. Before it went out of existence at the end of last year, the CAB subsequently proposed a rule which would have prohibited airlines that have entered into such joint agreements from sharing their designator codes without informing consumers ahead of time.

The proposed rule never spelled out how the consumer would be informed and never took effect and is still pending before the Transportation Department.

But United got tired of waiting. “We finally got to the point,” Zeeman recalls, “where we said we are losing market share, we are losing revenues as a result of other people doing this. Enough is enough is enough. We’ll do it too.”

Ironically, of the 12 independent regional carriers that joined in petitioning the CAB in opposition, most are now part of such arrangements with large carriers.

New affiliations are being agreed upon almost daily. Air Midwest begins its first feeder relationship on Oct. 1 with Ozark Airlines. It will provide 50 daily flights into Ozark’s St. Louis hub from nine cities in that area.

More Service Planned

Just a month later it will begin service in and out of Kansas City for Eastern Airlines. And next April, when American Airlines opens its new Nashville hub, Air Midwest will serve it with 40 flights initially, eventually increasing to 100.

“We were slow to get started,” says Ewing, the Air Midwest vice president for service planning, “but now we have expanded rapidly.”

In a sense, Air Midwest will be carved up into three separate airlines. One will be painted with the green Ozark color motif, the other with the American Airlines red and blue and the third with the silver and blue of Eastern.

Each will wear that respective airline’s color motif and names because, as Ewing puts it, “we are just as proud of ourselves as they are of themselves.”

Air Midwest was one of the carriers which had hoped to go it alone and had been one of the chief opponents of dual designators. “We always thought it was deceitful,” Ewing says. “So we held out on this thing clear to the end.”

Metro Airlines has arrangements with Eastern to fly into its Atlanta hub (it will soon sell its Houston Eastern operations to Royale Airlines) and with American to fly in the Dallas area. According to J. L. Seaborn, Metro’s president, since its agreement went into effect with American last November, its traffic has increased “dramatically by 25%.” To do so it has taken on the American colors “as our planes needed painting.”

Given Up Identity

“We have given up our identity as Metro Airlines,” Seaborn says. “But we’ve done it for the bottom line. We’re a public company and this is best for our shareholders.”

Seaborn says that sharing the bigger airlines’ computer position has encouraged travel agents to talk their customers into flying instead of driving the length of the hop made by the commuter line. In the old days, he says, the agents told customers that they did not know who the commuter airline was and would rent them a Hertz car instead.

“Now the agent says, ‘The passenger won’t be hassled all over the airport, he will have an easy time making his connection. If it (the commuter airline) is good enough for Eastern and American it is good enough for my customers.”