United Airlines' Experiment With Spacious 50-Seat Jets Is Likely to Fail -- Eventually
Earlier this year, United Airlines (NASDAQ: UAL) became the launch customer, in conjunction with regional partner GoJet Airlines, for the CRJ-550, a 50-seat derivative of the CRJ-700 regional jet. The CRJ-550 provides an innovative workaround for pilot scope clauses -- which limit many airlines' usage of large regional jets -- while offering a vastly superior customer experience compared with other 50-seat jets.
On Sunday, United put its first 10 CRJ-550s into service. This highly touted new aircraft type will help United catch up to American Airlines (NASDAQ: AAL) and Delta Air Lines (NYSE: DAL) in terms of offering first-class and extra-legroom seats to business travelers in smaller markets. However, in the long run, the CRJ-550's higher unit costs will probably come back to bite United.
The three major U.S. network carriers use regional jets operated by a variety of regional airlines to connect smaller markets to their hubs. Meanwhile, the carriers' mainline jets are primarily used for flights from the hubs to other big cities. This approach keeps trip costs down in smaller markets, since regional airlines pay employees less, while enabling American, Delta, and United to offer customers comprehensive route networks.
Source Fool.com
