Analysis: Will regional airlines be more affected by the current crisis than mainline carriers?
There is strong evidence to suggest that regional airlines will be more greatly affected by the crisis than mainline carriers, because these smaller airlines have a smaller balance sheet than mainline carriers.
That means less cash at hand, fewer assets to sell and limited access to credit. Regional airlines are often small, privately owned companies. Some are family run.
The regional carriers that will be most affected by the crisis are the ones that are relying mostly on regular passenger transport (RPT), rather than charter work, and airlines that lease rather than own aircraft.
RPT business has largely disappeared whereas there is still some charter business, especially charter services paid for by government or government agencies, such as medevac and border surveillance work.
Airlines that own their aircraft outright, with no borrowings attached, can afford to park the aircraft, but if the airline is leasing the aircraft it will still need to pay the lease.
Mainline carriers, being such high-profile enterprises employing many more thousands of workers, are adept at getting government bail-outs. Mainline carriers have much bigger cash-flows and usually have a lot more assets that they own. It means banks and other entities have a lot more to gain financially from bankrolling big mainline carriers.
Regional carriers, being much smaller and under-resourced, are often forgotten.
Governments should intervene and assist regional airlines. Without regional aviation many communities will have little or no air service.
Aviation is so critical to local economic development, as many people and other businesses rely on regional air services.
Picture credit: Skippers Aviation
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