Kirby sees a diminishing market for regional jets while holding out hope that roomier aircraft can create new markets to stimulate demand and solidify loyalty.
The future of regional jets is questionable according to the CEO of United Airlines.
Kirby had a conversation with the author of the Cranky Flier blog, who talked about a lot of topics. Kirby admitted in the 20-minute interview that he did.
There are fewer markets for regional airlines to work in. The break even load factor on a regional becomes 160% when a low cost carrier goes in and cuts prices in half. They are not going to work. There will be fewer and fewer markets.
He is correct. Budget carriers disrupt markets, which is why United fights so hard to keep budget carriers out of its territory. bread-and-butter routes become loss leaders when Frontier or Spirit compete head-to-head.
Regional carriers have higher operating costs per passenger despite the huge savings in labor.
Kirby is not predicting the end of regional jet service, but he does note that many markets will no longer support it in the future. The upside to that is that consumers will be able to find other options.
Kirby claims that the way to win customers in this battle is through building loyalty, not over price or schedule.
There will be fewer and fewer markets that look like regional markets. The reason we did the new jet was because it had plenty of room to spread out. We want customers that are flying United because they are loyal to the company, not just because of the schedule, but also because they believe in it.
The CRJ-550 is a clever way to satisfy United's scope clause which gives mainline pilots a veto over too many 70+ seat regional jets.
First class and economy plus seating.
In-flight entertainment is streamed.
It is possible to accommodate full-size carry-ons without gate checking.
United is taking delivery of 500 new jets in the next few years, many of which will replace regional jets, as it seeks to grow its mainline fleet.
Will such amenities inspire loyalty and move the needle on customers who are used to booking cheapest airlines? Kirby seems to think so, though it's not clear.
Conclusions.
Scott Kirby is betting on a new market in which more mainline jets and roomier regional jets will replace 50-seat jets that customers hate and that are the least efficient jets in the fleet. He sees the growth of budget carriers as a threat to traditional regional jet markets and believes that the answer is to offer a product that will build loyalty and bring back customers even if it is not the cheapest option.
Scott Kirby is on the social media platform,Instagram.
