At annual show regionals look back to the future

 - October 16, 2006, 8:22 AM

It seems hard to reconcile the rather dark and anxious tone of this year’s Regional Airline Association convention with double-digit margins and record revenues. Listening to airline delegates speak at this year’s get-together, one got the distinct impression they knew something the rest of us didn’t. In fact, regional airlines have been waiting for the day the gravy train of guaranteed RJ profits derailed. Apparently, that day has arrived.

“Cost-plus agreements are done,” said Cape Air CEO Dan Wolf. A year ago such a statement would have sounded absurd. The foundation of the regional industry’s monumental growth sits on cost-plus code-share contracts. From all indications, however, the majors have begun to seriously reconsider the value such arrangements bring them.

During the general session’s keynote address Comair president Fred Buttrell said, “We’re coming full circle. The majors don’t want the risk anymore.”

Buttrell, president of an airline that proudly broadcast its transition to an all-jet fleet a few years ago, didn’t stop there. “Turboprops will make a comeback,” he said. “Those who stayed in turboprops are looking like heroes again.” Buttrell also noted a shift from a 50-seat regional jet “seller’s market” to a “buyer’s market,” as feed networks become saturated with small jets and major airlines look to add 70- and 90-seat RJs to perform more point-to-point flying.

Perhaps not coincidentally, Bombardier talked at length about the cost benefits of its Q Series turboprop line. Bombardier Regional Aircraft president Steve Ridolfi said that only supply chain bottlenecks have kept the company from raising turboprop production rates at the Toronto facility.

ATR and Saab Aircraft Leasing told similar stories. After its big sale of 30 ATR 72s to India’s Air Deccan earlier this year, ATR now carries a backlog of 55 airplanes. According to ATR senior vice president John Moore, the company expects to announce two more significant orders at this month’s Paris Air Show. Moore added that prices of used turboprops have held steady, as a shortage has developed.

Saab Aircraft Leasing president Michael Magnusson noted that the number of 50-seat turboprops advertised for sale or lease has dropped from 52 to 34 in the past year, while the number of 50-seat jets advertised rose from 13 a year ago to 36. So far this year Saab has placed 16 airplanes and has run out of Saab 340Bs.

Even Raytheon turned out for the turboprop pep rally in Cincinnati.  Raytheon Airline Aviation Services Mike Scheidt reported that the company placed 46 airplanes last year. Raytheon’s inventory now stands at its lowest level since January 2002.