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SkyWest, Inc. (SKYW), Republic Airways Holdings Inc. (RJET): What Do Airlines Actually Do? Part Two: Regional Flights

Many travelers have never heard of the names SkyWest, Inc. (NASDAQ:SKYW), Republic Airways Holdings Inc. (NASDAQ:RJET), or Pinnacle Airlines. Yet, chances are that if you regularly fly on regional flights you have flown on these airlines, or one of many similar regional carriers, at one time or another.

Different airline, same colors

Travelers who don’t realize that their regional flight is operated by a separate carrier are not alone. While it does say in small print on airline websites and boarding passes which airline actually operates the flight, the flights are booked through the main carrier’s website, the boarding passes say the main carrier’s name, and the plane has the main carrier’s colors.

Example

Take, for instance, Delta Air Lines, Inc. (NYSE:DAL) Flight 5368. It departs from Cincinnati, Ohio at a nice and early 6:45 am and arrives in Detroit, Michigan about an hour later. The flight is booked as a Delta flight and the plane will have Delta colors, but the flight itself is operated by ExpressJet, now part of SkyWest, Inc. (NASDAQ:SKYW).

But why would an airline such as Delta Air Lines, Inc. (NYSE:DAL) be interested in this arrangement? Well look where the flight is going to. The flight leaves what is becoming a shrinking Cincinnati hub, and arrives at Delta’s Detroit hub (a hub acquired in the Northwest Airlines merger from 2008). At this point, the passengers have entered Delta’s main network and can board a Delta flight (actually flown by Delta) to most other destinations served by the airline.

As an interesting note, Delta Air Lines, Inc. (NYSE:DAL) is planning to return to the regional airline business after having shuttered its regional subsidiary Comair several years ago. Delta will be acquiring bankrupt Pinnacle Airlines (which plans to change its name to Endeavor Air) putting Delta back in this business once again.

Regional mergers

In the past several years, major airlines have gone through a major merger trend with Delta Air Lines, Inc. (NYSE:DAL) and Northwest merging, United and Continental merging, and US Airways Group, Inc. (NYSE:LCC) and American Airlines seeking DOJ approval to finalize their merger agreement. While the major carriers complete their mergers, regional carriers have been on a buying spree too.

In 2010, SkyWest, Inc. (NASDAQ:SKYW) acquired ExpressJet and merged ExpressJet into SkyWest subsidiary Atlantic Southeast Airlines. But other mergers have not been as successful. The same year, Pinnacle Airlines tried to expand by acquiring Mesaba Aviation in a bid that eventually led to Pinnacle’s bankruptcy. Minnpost reported that the carriers did not integrate fast enough and lost too much money by not realizing synergies.

During all of this, Republic Airways Holdings Inc. (NASDAQ:RJET) snapped up Midwest Airlines and Frontier Airlines. Since then there have been questions as to what Republic will do with Frontier with numerous rumors surfacing about Republic trying to sell the airline. But Republic does control a host of regional airlines including Chautauqua, Republic Airlines, and Shuttle America along with what it calls its branded airline, Frontier.

A lot of airlines

Often times a Delta Air Lines, Inc. (NYSE:DAL) flight is not just a Delta flight and a United flight is not just a United flight. Regional airlines like SkyWest, Inc. (NASDAQ:SKYW), Republic, and Pinnacle often fly these flights for major carriers using planes painted in the major carrier’s colors as part of a feeding system to get passengers into a major carrier’s network. Despite a shrinking number of major carriers, investors still have a choice between traditional legacy airlines, rivals like Southwest and JetBlue, foreign airlines, and airlines operating regional flights nationwide.

Alexander MacLennan owns shares of Delta Air Lines. This article is not an endorsement to buy or sell any security and does not constitute professional investment advice. Always do your own due diligence before buying or selling any security.The Motley Fool has no position in any of the stocks mentioned.

The article What Do Airlines Actually Do? Part Two: Regional Flights originally appeared on Fool.com.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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