Contour Airlines Capitalizes on the Changing Outline of the Essential Air Service Market

Aerospace & Defense Contour Airlines Capitalizes on the Changing Outline of the Essential Air Service Market Eric Tegler Contributor Opinions expressed by Forbes Contributors are their own. Following New! Follow this author to stay notified about their latest stories. Got it! Oct 10, 2022, 08:30am EDT | New! Click on the conversation bubble to join the conversation Got it! Share to Facebook Share to Twitter Share to Linkedin Regional carrier, Contour Airlines, recently accomplished it’s largest expansion ever with the .

. . [+] introduction of service in seven markets across the eastern U.

S Monique B – Tripadvisor When regional carrier SkyWest cut 30 routes from small cities last March, Contour Airlines CEO, Matt Chaifetz, saw an opportunity too rare to pass up. Contour bid for and was awarded six new Essential Air Service routes by the Department of Transportation, instantly gaining market share it might have taken years to build. Often forgotten, the federal Essential Air Service (EAS) program constitutes a $300 million-plus annual market, subsidizing airlines to serve approximately 150 communities across the country that otherwise would not enjoy scheduled air service.

SkyWest has long been a major carrier in the EAS market but its withdrawal opened an opportunity that Contour was well positioned to take advantage of. “There’s never been an opportunity like this within the Essential Air Services space where one carrier has prompted an RFP for so many communities that want continued service,” Chaifetz affirms. He and his team at the small Smyrna, Tennessee-based airline recognized the opportunity as a “limited window to really increase market share,” Chaifetz says.

Accordingly, they bid on as many of the EAS routes SkyWest was abandoning as they felt they could handle and still execute at the high level for which Contour has become known . The DOT DOT contract awards will see Contour expand to seven new routes by year’s end including; MORE FOR YOU They Inherited Billions Upon Billions: Meet America’s Richest Heirs The Next Big Things In EdTech How Businesses Can Leverage Social Media And Build Their Brands On TikTok Altoona, PA to Philadelphia Fort Leonard Wood, MO to Nashville and Dallas (DFW) Cape Girardeau, MO to Nashville Lewisburg, WV to Charlotte Shenandoah Valley/Staunton, VA to Charlotte Clarksburg, WV to Charlotte Paducah, KY to Charlotte Once up and running the new routes will form part of 26 markets across the country served by Contour, 17 of which are EAS-subsidized. As an American Airlines interline partner, Contour offers travelers the ability to ticket from their originating airport and through a connecting hub to American destinations.

When it pulled out from dozens of markets earlier this year Utah-based SkyWest cited the broader contraction of the U. S. regional airline sector which has seen similar carriers like CommutAir and Cape Air chop service to a number of destinations.

The contraction has taken place despite a surge in demand for flights to smaller cities for which some observers credit the remote work revolution accelerated by the Pandemic. Most regionals cite the problem of recruiting and retaining enough pilots as a major factor in their service cuts. A shortage of pilots now seeing both higher wages and increased opportunity to move up from regional carriers to major airlines is acute.

But Contour has been successful in attracting and keeping pilots Chaifetz says, thanks partly to its status as a Part 135 carrier. Contour does not operate under the FAA Part 121 certificate that regularly scheduled airlines are subject to. The Part 135 certificate that it flies under is for “charter-type services”.

That allows it to hire pilots with lower minimum flight hours experience than Part 121 airlines and to recruit pilots older than 65, the mandatory retirement age for pilots at major carriers. As a result, Contour enjoys a highly experienced core of older pilots complimented by those just starting their air transport careers. It also helps Chaifetz says that Contour offers its pilots home-basing, paying for their transport to the airline’s operating bases from which they fly.

He adds that in some of the small markets in which Contour operates (Tupelo, MS or Macon, GA), it’s “the only game in town” for pilots who want to live in less dense, slower-paced places. The airline also pays at the same scales as its larger regional counterparts. Complying with charter-type Part 135 regulations requires Contour to actually take seats out of the jets it operates (12 Embraer ERJ-135 and 10 ERJ-140s now being delivered) which usually fly with 40-50 passengers.

Contour configures its airplanes with just 30 seats, making for a roomier cabin but less revenue. It’s a model at odds with a sector in which larger regional jets with 75 or more seats are favored in view of high unit operating costs (fuel, pilot wages, maintenance). Contour customers routinely note the extra breathing room but Chaifetz acknowledges it’s a tough way to do business.

Contour Airlines CEO Matt Chaifetz, left, poses for a photo aboard a Contour ERJ-135 at the . . .

[+] Mid-Ohio Valley Regional Airport. Evan Bevins “I’m not going to lie. It’s very challenging for an airline with a cost-structure like SkyWest or any other regional airline built over the last several decades to compete with the cost structure we, as an upstart, have built our business around.

” Founded in 2016, Contour Airlines was built from the charter service (Contour Aviation) its parent company established in 1982. It operates chartered aircraft for a variety of clients including semi-scheduled services for BLADEone and XO . This alternate revenue-stream compliments and reinforces the cyclical scheduled service and EAS business that it does, giving Contour a path to profitability where others struggle.

“Our airline flying is not the most profitable thing we do,” Chaifetz acknowledges. “It does constitute a very significant portion of our business and the way I think about it is that the airline pays for our infrastructure – for our dispatchers, maintenance controllers, our crew schedulers. With that in place, our charter business can operate with much higher margins.

” The two-tiered model confers a higher degree of operational reliability for the charter side because Contour must have a robust infrastructure designed to support higher volume scheduled service than most charter firms. With it comes an airline mentality that’s often absent in charter operations. “That mentality comes from the fact that we’re tuned to fly regular and irregular schedules,” Chaifetz explains.

“We fly some of the leading names in music for their entire tours. ” He cites an example of recently flying a well-known band from Teterboro NJ to Toronto just five hours before they were scheduled to be on stage. With no room for delay, Contour can fall back on the maintenance/crew/aircraft positioning readiness planning and infrastructure developed for its airline side to pull off such missions.

Chaifetz says they do what it takes from flying spare parts to a down jet in a flight-school airplane to shuttling mechanics where needed in the middle of the night. In a smaller company, “It’s all hands on deck,” he affirms. The same applies to EAS despite the long-held perception that it is the AA minor-league of the industry.

With little attention from the majors, DOT EAS contracts have mostly been left to independents. “EAS flying was sort of bottom of the barrel in terms of opportunity within the airline space,” Chaifetz says. But in 2020, at least it provided Contour and others a barrel to play in.

“When COVID hit I was very happy we were a player in the EAS business. When everybody else’s revenue dropped by 90 to 95 percent in Apri-May of 2020, we were only down by about 30-35 percent because as long as we operate the flight, we get paid. ” As lockdowns began, the airline hesitantly went to DOT and asked if it should keep flying even though there were often zero passengers booked.

The Department’s response that EAS service was vital to keep America’s air transportation system moving was welcome news. One of 12 Embraer ERJ-135s Contour Airlines operates. Contour Airlines That doesn’t mean that an operator like Contour is perpetually guaranteed business.

Chaifetz points out that EAS doesn’t always go to the lowest bidder. The DOT takes relative subsidy differences between carriers into consideration, “But the most heavily weighted criterion is the opinion of the elected officials in the community served,” Chaifetz says. Feedback from passengers and officials including airport and municipal directors in the individual EAS markets is crucial and Chaifetz says the airline’s reputation helped it earn the contracts for new EAS routes it now holds.

Contour’s CEO offers the example of a recent renewal for service from Page, Arizona. When signing off on a continued lease for terminal space at Page Municipal Airport, the City clerk attested that she loved the airline, calling it the “best thing that ever happened to Page” according to Chaifetz. Contour’s growth has attracted the attention of other regional carriers as has its business model.

“After [SkyWest] announced the termination of these 30 markets, they announced they’d be forming a Part 135 airline to basically mimic our operating model. ” Chaifetz says. “They’re ultimately trying the same model that we’ve been using in the EAS space from day one.

” Matt Chaifetz seems to have been destined for an airline management career from day one as well. “If you had asked me what I wanted to do as a little kid, I would have told you I wanted to run an airline,” he says. His less than conventional career began with founding a back-end airline services company while still a teenager and led to stints with JetBlue Airways and the Jetstream Group.

Contour’s expansion has bolstered his enthusiasm. The company is now the ninth largest part 135 operator by hours flown he says. Five years ago, it wasn’t even in the top 25.

Growth has its own way of attracting people Chaifetz observes and Contour’s rapid acquisition of multiple new routes has put it on the map. “There’s been a lot over the last couple years to be excited about,” he concludes. Follow me on Twitter .

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