Buddy System in the Sky

By Gordon M. Henry

When the airline industry was deregulated in 1978, American, Delta, United and other major carriers abandoned many unprofitable routes serving smaller cities. Into the void flew a fleet of plucky commuter lines. Relying largely on twin-engine turboprops, the regional airlines, including Atlantic Southeast, Air Wisconsin and Ransome, began turning profits in markets where bigger airlines and their larger planes had lost money.

Now regional and major lines are getting together in new ventures that fly under names like American Eagle and Republic Express. Last week an agreement creating Eastern Air Midwest Express went into effect. Air Midwest ticket holders now board planes in Topeka, Wichita and Des Moines that bear the name Eastern Air Midwest Express. At Kansas City they transfer to an Eastern flight going to another destination. When returning to the smaller cities, they fly Eastern to Kansas City and then transfer to an Eastern Air Midwest Express plane. In this way Eastern does business in towns in Kansas and Iowa that it does not serve directly. Customers can also benefit from the arrangement because fares are often reduced when small-town fliers buy one ticket instead of two.

This buddy system is now flying high. Of the top 25 regional lines, 19 have signed agreements with a major carrier. Most of the 48 existing partnerships have been made in the past two years. Among the combinations: Texas-based Chaparral and American united as American Eagle in Dallas-Fort Worth, and Michigan-based Simmons combined with Republic as the Republic Express in Detroit and Minneapolis.

The two airlines in the agreements work closely together, but they remain separate. Their air-terminal gates are simply located near each other to make transfers easier, and flight schedules are coordinated. But staff and planes are not joined, and the airlines usually do not share profits or losses. In some cases, the feeder sports a new logo, and its flight attendants wear uniforms that match those of the larger partner.

The airlines, however, share one key asset: a two-letter code that identifies each airline on flight-reservation computer terminals. Regional lines use the code that identifies their big brothers. For example, Air Midwest's flight from Wichita to Kansas City is labeled EA, rather than AM, on travel agents' computer screens. That is important because the major carriers' codes get priority display in reservation systems and are therefore booked first.

Although ridership on the regionals is up since the advent of deregulation, the number of airlines has been falling because of mergers and bankruptcies. In 1984, 26.1 million people flew on them, and one industry watcher believes that by the end of 1986 the number will grow to 45.8 million. Still, 29 of the 208 commuter lines went out of business between 1978 and 1984. An additional 50 are expected to fail before the end of the decade.

Regional airlines hope that the hookups with the more prestigious carriers will help them survive. Revenues at Atlantic Southeast, which has headquarters in Atlanta, increased from $23 million in 1983 to $44 million in 1984 after it signed an agreement with Delta. Atlantic South east expects to do about $75 million in business this year. Boasts Vice Presi dent John Beiser: "The relationship with Delta allowed us to post the highest operating profit margin in the industry last year."

With reporting by Lee Griggs/Chicago