Regional airlines were supposed to find profits flying small planes on short routes. That strategy might have worked – except that the high cost of fuel followed by the steep drop in business travel during the recession changed everything. According to a Businessweek article, these airlines are overloaded with 50 seat regional jets which are no longer able to deliver profits.
Operators in this position have a couple of different options. Some such as Republic Airways have tried to become large quickly by purchasing competitors. Other operators are trying to continue their contracts and associations with legacy carriers. For example, SkyWest is flying some routes under its own banner and other routes under the AirTran Airways banners. Increased competition and tight profit margins mean that large carriers are only signing short-term (2–3 year) rather than traditional (10–15 year) contracts with regional carriers. Analysts expect turmoil in the industry to continue until the 50-seat jets reach the end of their economic life and are replaced with more financially viable 84 or 100 seat aircraft.
In the meantime, operators of all sizes will be increasing their marketing expenditures. Factors driving these increases range from announcing new partnerships to small independents trying to win market share from competitors.[Source: Bachman, Justin. Regional airlines: Scrambling for New Strategies, Businessweek, 12.07.09]