Big Carriers, Commuter Lines Team Up and Alter the Industry : NEW LINKUPS IN THE SKY

Capt. Clark Sheppard stood at the bottom of the wobbly steps of the Brazilian-made Embraer turboprop one recent afternoon, helping passengers board Flight 3305 from Burbank to Fresno.

When all six passengers were aboard, he jumped onto the 19-seat aircraft himself, pulled up the stairs and strapped himself into the cockpit seat next to co-pilot Bill Schroeder, who had been preparing for takeoff.

“Good afternoon, ladies and gentlemen, welcome aboard United Express Flight 3305,” he announced through his microphone. “Our flying time to Fresno will be one hour and 10 minutes; we will be flying at an altitude of 10,000 feet. Please fasten your safety belts and put your carry-on luggage under your seat. There will be no smoking.”

Welcome to the world of regional airlines. As this illustration shows, it is a world in which your pilot might check you in at the boarding gate, carry your luggage or double as flight attendant.

It is also a world where you might be a bit confused about which airline you are flying on. Is it American, United, Delta or TWA? No. It is Wings West, WestAir, SkyWest or Resort Commuter--all independent carriers that have marketing agreements with their big brothers and most often carry some variation of the larger lines’ names on their planes.

It is a phenomenon that has changed the face of the commuter airline industry. And it is not peculiar to the Golden State.

Throughout the nation, increasing numbers of relatively small commuter airlines are affiliating with major carriers, feeding passengers to each other at major hub airports through joint pricing, ticketing and computer-reservation arrangements. There are 52 such agreements now, up from only one when U.S. airlines were deregulated nine years ago, according to Airline Economics, a Washington consulting firm.

Until the start of 1986, there were virtually no such linkups in California. The commuter lines remain under independent ownership but, except for Delta Airlines’ affiliates, which still use their own names and colors, they paint the bigger carriers’ colors on their planes. Their pilots wear the same uniforms, they use the same terminals and share baggage handling and other services. Even the stationery of the commuter line resembles that of its larger partner.

The major airlines also share their two-letter computer codes (American Airlines’ is AA, for example) with their regional partners. This results in a better computer display for the commuter lines on the screens of travel agents--who book 75% of all travel--giving the smaller carriers a substantial marketing advantage over regionals that do not have a major partner.

The names the commuters are using on their planes--American Eagle, United Express or Trans World Express, for example--cause many travelers to confuse them with their bigger affiliates.

“The regionals’ corporate identity has disappeared in favor of the unified big-carrier imagery,” said Edward J. Starkman, airline analyst with New York brokerage of Paine Webber. “The average passenger neither understands nor cares that these feeder flights are operated by predominantly independent carriers. If it quacks like a duck and walks like a duck, the uninitiated assume it is a duck.”

The trend results from airline deregulation in 1978.

It was then that the airlines were given permission to fly to any U.S. destination and to start or cancel service on any route. If a route was a money loser, the thinking went, why serve it? Use your big jets on routes where you can make money.

When the major airlines were allowed to drop out of any markets they wished, someone had to fill the void so smaller communities would continue to have air service. Enter the commuter lines, which are able to make money by flying smaller planes--more fuel-efficient, propeller-driven planes--and by serving communities that once had no service because jets could not afford to serve them. In the process, they grab some passengers from buses and automobiles.

14 Daily Flights

Aside from the benefits to passengers, the increase in flight frequencies has helped communities lure new industries. Though many small to middle-sized cities lost their one or two daily jet flights, they have gotten instead much more flight frequency, albeit with smaller, turboprop planes.

For example, officials of SkyWest, which was a Western Airlines commuter line for a year before Delta and Western merged last year and since then has flown as Delta Connection, recall that Pocatello, Ida., had just two flights daily in 1981. SkyWest, which is headquartered in St. George, Utah, now serves the community with 14 daily flights.

Some cities want commuter service so badly that they give very attractive inducements to the carriers. Paso Robles recently encouraged SkyWest, which was founded in 1972 and has had 12 straight years of profit, to build a maintenance facility there, thus increasing the likelihood of continued flight service to the city. In return, Paso Robles provided land and a building on favorable terms and it has waived landing fees.

Some critics charge that the airlines’ practice of writing tickets through to a destination using the large carrier’s code, even though part of the trip will be via an affiliated commuter line, is misrepresentation. The officials of commuters argue, on the other hand, that business executives and other people who fly frequently understand the arrangement. The commuter operators add that, for their operations, it has been the only means of survival.

The recent history of the commuter airline industry proves the point.

Survivors Are Few

Airline observers say that there have been at least 30 small commuter airlines established in California since deregulation but there is only a handful of survivors.

The names of the others are all but forgotten: Imperial Airlines, Air Pacific, Golden West, Golden Gate, Far West, Sunaire and Sierra Pacific. Now, only a few remain and almost all of them have a connection with a major carrier.

Such an affiliation seems to be a business must. “It’s like a game of musical chairs,” said MarkMorro, president of Orange County-based Resort Commuter, which has been flying as a Trans World Airways affiliate since last October using the name Trans World Express. “If you do not have a seat with a major carrier, you are not going to stay in the game.”

But those that survive are thriving. Between 50% and 65% of the regionals’ traffic consists of connecting passengers. For big carriers like American and United, the linkages feed additional passengers into their flight system without the need to serve smaller markets themselves. It is estimated that San Luis Obispo-based Wings West, which since last summer has been flying as American Eagle, will contribute between $40 million and $50 million worth of connecting passengers a year to American Airlines’ long-haul flights to and from the West Coast.

The way the California commuter lines compete has changed since they developed their links with the major carriers. It all depends on the service patterns of the bigger airlines.

“We get as much business as the percentage of traffic our major (airline) has,” Resort Commuter’s Morro said. “We are not going to put a TWA passenger on an American Eagle flight. The computer won’t allow it.” TWA, he said, has 4.9% of the traffic at Los Angeles International and that is about Trans World Express’ share of the Los Angeles market.

Strong Competition

Despite its relatively small percentage of the market, the partnership has been lucrative. Morro said Resort was carrying 1,000 passengers a month before its affiliation with TWA, a figure that has risen to 7,000 and is still growing.

The commuters compete strongly in many markets--because the majors are all vying for feeder traffic from every community. On one recent day at San Luis Obispo, United Express, American Eagle and SkyWest flights all left for Los Angeles within a short time of each other.

San Luis Obispo never had jet service and once had only a couple of small-airline flights daily. With three regionals now serving the city, there are now 18 flights a day.

“Our passengers are business travelers. Before they were driving. Now they can fly almost anytime they want,” said Carl Albert, chairman and president of Wings West, an American Airlines affiliate. “And that is what they’re doing. We are not carving up the pie; adding frequency adds passengers.”

Before its linkup with United, Fresno-based WestAir operated two flights a day into Santa Rosa, north of San Francisco. Figuring that there were many more customers out there, it boosted that number to eight. The result: Two months after it quadrupled its service, the number of Santa Rosa passengers it carried jumped from 400 monthly to 4,000.

Wings West had a modest beginning in 1981. Launched with an investment of $25,000, it operated scheduled flights between Santa Monica and the Mammoth Mountain ski area with seven nine-passenger planes. It now has about 40 planes and is adding more. It serves 25 California cities and carries about 75,000 passengers a month.

“The growth had been because there were markets that were not being served anymore after deregulation,” Albert said. “They needed service, (but) the primary reason for our growth is . . . our partnership with American Airlines.”

When the partnership went into effect last summer, American’s decision to abandon some routes was a major benefit to Wings West. As a result, the commuter line was able to take over American’s routes from Burbank to San Francisco, San Jose and Oakland.

“We just waltzed into a brand new market which we did not have to open,” Albert said. “We are able to operate it profitably with 50-seat aircraft when AirCal (now taken over by American) and American could not, using larger jets. We could do it for less money and less cost.”

Albert notes that on July 1, Wings West began service to four cities that it had not previously served. All were profitable from the first day, he said, something highly unusual in the industry. “We weren’t a small unknown commuter named Wings West,” he said. “All of a sudden, we were a well-known, well-respected marketable name (American Eagle). I don’t believe that we could have opened some of those cities and have been immediately profitable without their name on the side of the plane.”

The commuters say that they can make more money on these routes than the big airlines could even though their aircraft--mostly 19-seaters--actually cost more per seat-mile to operate. (A seat-mile is one seat, occupied or vacant, flown one mile.)

SkyWest, for example, says that its average cost is 17 cents per seat-mile but that it can dip below 10 cents a mile on longer flights, such as the 500-mile Salt Lake City-Palm Springs trip that it just inaugurated. The major airlines’ seat-mile costs are much lower--7 to 8 cents--because they make long flights with relatively few landings and takeoffs. The commuter lines’ average flight lasts only 45 minutes.

“But if you only have 20% of your plane full,” as was often the case on the jets operating in California, “you are going to lose a lot of money,” said Eric D. Christensen, a SkyWest official. SkyWest, he said, flies its planes 43% full on average and has a break-even load factor of 40%. Wings West’s load factors have run between 45% and 48% in recent months. The figures, observers say, are typical of California regional airlines.

There are other savings benefits that accrue to the smaller carriers from their alliances with the majors. Wings West, for instance, says it saves at least $60,000 a month on salaries of the reservations agents it no longer needs and a like amount on telephone charges on incoming reservations calls. American handles all of its reservations.

Insurance Savings

The smaller airline says it even saves more than $600,000 annually in liability insurance premiums because it gets lower rates as a result of its connection with American. WestAir had 78 employees in 1978. Today the number has grown to about 1,000. When it became affiliated with United on July 1, 1986, it operated no flights in and out of Los Angeles International. Today, it has 55 daily.

“We are down there in support of our partner, United Airlines,” Timothy P. Flynn, its president, said. “We started an expansion program in January . . . “ and the airline now has more than 40 planes. United, he said, has “made it convenient for us to get the facilities” at Los Angeles International.

Flynn said the major airlines have given the commuters an opportunity to prosper because they have pulled out of so many local markets. He cites as examples United’s dropping service between Bakersfield and San Francisco and Monterey and San Francisco on Oct. 31. WestAir, already serving those cities, increased its frequency.

“Passengers are accustomed to the United product and we can deliver it to San Francisco,” he said. “And it lets UAL deploy its assets (elsewhere). They can use their planes for longer hauls. It is foolish to fly a 737 or 727 from Arcata to San Francisco. We increase business while they still get the passengers for the long haul.”