Arrival of the mega-regionals in Europe.

Profile picture for user rdc1000

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19 years 9 months

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The concept finally arrives here in Europe.
Former Jetmagic execs to set up new European regional feeder Kerry Ezard, London (06Jan06, 16:28 GMT, 583 words) A new regional feeder carrier that aims to develop the capacity purchase agreement (CPA) concept in Europe is currently being developed by the former chief operating officer of now-defunct Irish airline Jetmagic, in conjunction with ExpressJet Airlines of the USA. ExpressJet Europe plans to offer regional feeder services to airlines throughout Europe using a fleet of 70- to 120-seat aircraft, and is seeking to sign up its first customer before ordering its aircraft and applying for an air operator certificate (AOC), the proposed carrier’s managing director Jochen Schnadt tells ATI. The start-up has the financial backing it needs, including a 49% stake held by US feeder ExpressJet, but fleet decisions will depend on the needs of its future customers, he adds. Although no aircraft type has been selected, Schnadt hints strongly that Embraer-family aircraft will likely be the preferred choice. “Ideally, we want to operate a homogenous fleet and Embraer is the most versatile option,” he says. However, he does not rule out the possibility of the Bombardier CRJ200, despite the fact that “there are not huge opportunities for 50-seat aircraft in Europe”. “We are having ongoing talks with manufacturers and the leading leasing companies, and we have excellent relations with GECAS [GE Commercial Aviation Service],” says Schnadt. He adds that ExpressJet Europe will acquire its fleet through a combination of purchase and lease agreements. “A third option would be to sublease aircraft from one of our customers, and we would have no problem with that.” The proposed carrier is “talking to a number of companies” about providing feeder services under CPAs and “discussions are at different stages”, says Schnadt, although he declines to disclose the identity of those airlines. “We have made progress with quite a few, but it won’t happen overnight.” ExpressJet Europe hopes to sign its first feeder contract “within six to nine months” and operations are not expected to begin until “the end of 2006 or into 2007”. Schnadt was formerly chief operating officer of Jetmagic and he is not the only former executive from the carrier to put his weight behind ExpressJet Europe. The defunct Cork-based regional operator’s former CEO, Barry Perrott, will be the proposed CPA provider’s executive chairman. The carrier’s executives will also include former British World Airlines CEO Robert Sturman, who will serve as chief operating officer. Terry Liddiard, who was previously a Jetmagic board member and interim CEO, and former Business Air CEO Ian Woodley, are both non-executive directors of ExpressJet Europe. The CPA concept is common in the USA, where major airlines contract out large portions of their regional feeder operations to providers such as ExpressJet and Mesa Air Group. However, the model has not yet taken hold in Europe, although this is something ExpressJet Europe is seeking to change. “We are at the point now where regional European operations are a money drain,” suggests Schnadt, adding that European majors in the past have “bought regional partners for the wrong reasons and they have become money drainers”. He adds: “We can help by coming in with cost structures similar to the low-cost carriers. The bigger we get and the bigger our economies of scale become, the lower the cost to our customers.” ExpressJet Europe is also considering purchasing an existing European regional carrier to use as an “operational platform” for its CPA model, says Schnadt. “Part of our strategy is looking at the possibility to acquire existing operators that fit strategically with our model.” He does not disclose which carriers are under consideration. Source: Air Transport Intelligence news
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Interesting idea that would be good to see catch on
Profile picture for user Whiskey Delta

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We (ExpressJet) just had 69 airplanes pulled from our Capacity Purchase Agreement by CO. We have first rights to those 69 airplanes, the only stipulation is that we can not fly them for CO or in/out of their 3 US hubs if we decide to keep them. One possible rumor is that we'd operate those as a part of this new European operation. We must figure out what we are going to do with those 69 airplanes, or if we want them at all, in the next 6-9 months. As you can see from the article that matches up with the time frame they quoted for the European operations. 2006 is already looking to be an interesting year.
Profile picture for user Spence_CWL

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er, have to say i'm a little confused! CPA?
Profile picture for user DashQ

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Capacity purchase agreement (CPA). Does this mean that the regional airline would recieve its revenue on the basis of the capacity it provides to the airline it is feeding, and not on the basis of number of passengers flown? So a similar agreement to a wet-lease charter?
Profile picture for user Whiskey Delta

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16 years 5 months

Posts: 2,513

Capacity purchase agreement (CPA). Does this mean that the regional airline would recieve its revenue on the basis of the capacity it provides to the airline it is feeding, and not on the basis of number of passengers flown? So a similar agreement to a wet-lease charter?
We operate under a CPA with CO. CO pays a flat hourly rate for our airplanes. In other words, they bought all our seats at a fixed rate for the 5 year span of the CPA. Our profits are capped at 10% so anything above the hourly rate + 10% profit margin CO pockets the extra. We get paid no matter how many folks are flying in the back so we do everything we can not to cancel a flight. It's a rather moot point though as we seem to always be in an oversold situation at the gate. Obviously it's great for the regional partner as you have a guaranteed income for the life of the CPA. As long as the passenger loads are reasonable it's good business for the parent carrier. There are obviously downsides for both sides. The parent company is locked into a fix expense that can hurt during tough economic times as you can't shop around for a lower cost operator/feeder. The regional partner operates how/where/when the parent company wants them to. It plays havoc on crew scheduling/hiring/staffing. CO deciding to withdraw 69 airplanes from our CPA could be just a political move in order to get a rate adjustment or could not be. Obviously rumors are a plenty right now.
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Thats interesting, Thanks WD.

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14 years 11 months

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This sounds very interesting. Any idea wher ethe airlines HQ would be or would that depend on what airline(s) they fly for

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13 years 10 months

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There base is rumoured to be Cork, intresting development, lets see how is gets on as I think 69 regional jets woudl be a lot of capacity for one or two of the majors in Europe as they already all have there regional arms.
Profile picture for user bmi-star

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I'm always a supporter of regional operations, so i'm very interested to see the outcome of this!

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14 years 4 months

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WIth BA Connect starting to off load its BAe aircraft and keeping its 145's, they could be a potential customer. What do you think? Lee