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Nimble Regional Airline Builds on Its Small Size

By Jenalia Moreno
Washington Post Staff Writer
Monday, April 18, 2005; Page E01

Inside the Manassas headquarters of regional carrier Colgan Air Inc., there are no reservation agents who sell tickets to passengers. The family-owned operation doesn't run an advertising department to devise catchy slogans. And the airline doesn't employ celebrity chefs to plan meals for its flights.

Instead, this small airline's two-story corporate office is crowded with crew schedulers, flight dispatchers and recruiters who are busy hiring more than 300 people to handle a quickly expanding business.

Manassas-based Colgan Air Inc. has found success as a regional carrier for US Airways and Continental Airlines. (Sarah L. Voisin -- The Washington Post)

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While many major airlines are slashing jobs and shrinking their fleet, small regional airlines like Colgan are experiencing a growth spurt, taking advantage of their more nimble size to pick up business that the larger airlines cannot afford to handle.

"As the majors shrink down a little bit, that's good for the regionals," said Michael J. Colgan, president of Colgan Air, which recently signed a deal with Continental Airlines Inc. to service a dozen cities in Texas, Arkansas and Louisiana.

Major airlines have been struggling since the Sept. 11, 2001, terrorist attacks. US Airways Group Inc. and United Airlines parent UAL Corp. are in Chapter 11 bankruptcy protection, and Delta Air Lines Inc. has been flirting with it. Employees at Continental recently took a pay cut. Northwest Airlines Corp. says it needs to shave $1.1 billion from its labor costs.

Colgan also flagged for a while, but it and other regional airlines have bounced back. Utah-based SkyWest Inc., for example, which provides regional service for United and Delta, increased its workforce by more than 25 percent last year, adding 1,815 jobs. According to the Regional Airline Association, its members carried 19 percent more passengers during the first nine months of 2004 than in the comparable period in 2003, the most recent figures available. Colgan's total passenger miles for 2004 increased about 30 percent, to 132 million.

Much of the growth is the result of troubled major airlines having to turn to regional airlines for help in serving small airports. Major carriers need to offer flights to these communities to feed traffic to their larger hub airports. But in this era of cost-cutting, major airlines don't want to risk sending their large planes to small places like San Angelo, Tex., or Scranton, Pa., and flying them with empty seats, so they are turning more routes over to the regionals.

Fuel costs are a major issue. The bigger the aircraft, the more fuel it needs. If an airline cannot fill its seats with paying customers, it is wasting fuel. The smallest jet in Continental's fleet carries 37 passengers, while the smallest aircraft in Colgan's fleet is the 19-passenger Beechcraft 1900.

"We can't serve the smallest markets in a cost-effective way ourselves," said Dave Messing, a spokesman for Houston-based Continental.

Contributing to Colgan's growth is the new feeder service that the regional began offering last month for Continental. By the end of June, the airline, owned by Virginia state Sen. Charles J. Colgan and his family, will fly between Houston and nine Texas towns as well as Texarkana, Ark., and Monroe, La.

Until recently, the airline had operated exclusively as a partner for US Airways in the northeast, flying to cities like Altoona, Pa.; Bar Harbor, Maine; and Charlottesville, Va.

Colgan does not offer its own routes, and it does not fly out of its home base at Manassas Regional Airport because the airport is not certified by the Federal Aviation Administration to handle commercial passenger traffic. Colgan does fly from Dulles International Airport and Reagan National Airport to cities in Virginia, West Virginia and Pennsylvania for US Airways.

This is the airline's second incarnation.

Back in 1965, Charles Colgan and a group of 16 investors launched Colgan Airways Corp., which sold fuel and airplanes and offered flight lessons. In 1970, the company was transformed into a commuter service.

By 1986, its nine airplanes flew to a dozen cities out of Dulles and National and employed 165 people. That's when Colgan sold the airline to the now-defunct Presidential Airlines.

"Biggest mistake of my life," said Colgan, who said he was disappointed when Presidential laid off his former employees.

In 1991, Charles Colgan and Michael Colgan, father and son, started another Colgan Air with just one airplane and 15 employees. It flew its own routes for six years.

Then in 1997, Colgan Air partnered with Continental. Two years later, its contract with Continental was up and officials instead signed an agreement with US Airways because the Arlington-based airline offered it more opportunity to grow, said Michael Colgan.

The renewed partnership with Continental means Colgan will employ about 1,000 people by year's end. The company also plans to add 10 Saab 340 planes to its current fleet of 35 turboprops and add a hangar at the Manassas airport to have more room for maintenance.

"The reason that the regional airlines have succeeded is that our costs are appropriate for the market right now," said Deborah McElroy, president of the D.C.-based Regional Airline Association.

Besides the regionals using smaller planes that require less fuel, their labor costs are often less as well, she noted. Since commercial pilots are paid partially based on the size of the aircraft they fly, regional pilots earn less, McElroy said.

The starting pay for pilots at Colgan is about $14,400, said Kit Darby, president and publisher of Atlanta-based Aviation Information Resources Inc., which provides career information to pilots. Once pilots become captains at Colgan, they can earn $33,600 a year, he said.

By comparison, the average starting salary for a pilot working at a major airline is about $36,672, Darby said. Once a pilot reaches the rank of captain at a major airline, the salary rises to about $150,000, he said.

Despite the lower salaries at the regionals, "that's where the jobs are," Darby said. "It's really a booming segment."

Also, Colgan is not unionized, unlike Continental and US Airways, another factor in keeping labor costs down. Some regionals, however, do have unions.

Regional airlines can also cut costs by not hiring reservation agents, although that expense is often factored into the agreements with the major-airline partners.

Colgan also hires very few ticket agents since it does not operate many airport check-in counters. And, like many carriers that fly short distances, Colgan feeds its passengers only pretzels.

"All they have to do is get a flight from A to B when Continental says so," said Michael Boyd of the Evergreen, Colo.-based Boyd Group. "Regional airlines are really in the business of leasing airplanes and crew to major airlines."

Some passengers may not even notice whether the airplane or crew is operated by a regional airline.

Colgan's passengers purchase their tickets from the major carrier. They fly aboard jets labeled Continental Connection or US Airways Express. Colgan pilots wear uniforms decorated with the Continental Connection or US Airways Express logo. Passenger tickets will say either Continental Connection or US Airways Express but note that Colgan Air operates the flight.

Frequent customers, like those who fly routinely to Nantucket, Mass., often take note that they are flying aboard Colgan planes and even are on a first-name basis with some Colgan employees, said Mary Finnigan, vice president of administration for the airline. The airline is best known for its year-round service to this Massachusetts island. In fact, inside the airline's Manassas office hangs a bumper sticker that reads, "Fog happens -- Nantucket."

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