In part one in our series I talked about the historical aspects of integration of rail passenger services and part two I went over how code sharing works at the airlines. Today I will discuss the regional airlines and how they work.
With the onslaught of low fare carriers the so called “legacy†carriers started feel pressure to become more efficient and lower their operating cost. One of the ways that the carriers become more efficient is by spinning off marginal lines to regional carriers that had a lower cost structure and could fly smaller more efficient planes.
Actually regional carriers are nothing new. SkyWest one of the larger regional carriers first started flying flights for Delta predecessor Western Airlines in 1985 as Western Express.
So how does the agreement work? Let’s look at the way the arrangement works between Delta and SkyWest Airlines since SkyWest is based in the Intermountain West. SkyWest flies hundred of flights with its planes carrying the colors of the Delta Connection. Delta handles all the route planning, scheduling, marketing and ticketing while SkyWest operates the actual planes. Delta then guarantees to SkyWest a certain amount of revenue (seats) will be sold on that plane.
Delta benefits from this agreement by spinning off marginal routes that it cannot provide economically. In addition instead of loosing a market that provides connecting passengers, Delta stays in those markets and still benefits from the connecting passengers and is able to reduce its cost.
SkyWest benefits from the agreement by having a major guaranteed revenue source but does not have to provide the high overhead for a reservation center, marketing, ticket sales, and planning.
I have simplified the actual agreements to keep it simple. However, you can clearly see how both carriers have benefited from the agreements.
Next week I will discuss what our rail system should look like.
Part 1: Poor Integration History
Part 2: The Airlines-Code Sharing
Part 3: The Airlines-The Regional Carriers
Part 4: How it can be applied to rail passenger service
Part 5: Integration of Schedules
Part 6: The California Thruway: It Can Work
Part 7: The Politics that holds us back
John Dornoff is a principal in the Dornoff Consulting Group.
