Jazz Adds Boeing 757s as Regional Airlines Think Bigger

(MoneyWatch)  The regional airline business sucks. Margins are low and competition is great. For regionals, survival is a matter of making your proposal as cheap as possible for bigger, branded airlines and hoping that you win the bid and (maybe) make a little money on it. This awful setup has led regionals to look closer at diversification. We saw Republic do it with its purchase of Midwest and Frontier. Now, Jazz is taking a different path. They're looking to go big in a new way.

If you're not familiar with Jazz, it's because they fly north of the border. Jazz used to be owned by Air Canada but they, like everything else at that airline, were spun off into a separate company. They still fly as Air Canada Jazz, but it sounds like Jazz is itching to get into a new niche. Now they're planning on getting into the scheduled charter game, and I think this is a smart move.

Starting this November, Jazz will operate at least six 757s for Thomas Cook. But wait, Thomas Cook already flies 757s, right? Yes, but this is different. See, Thomas Cook's flying operations are focused on Europe these days, and this deal is for Candada. Thomas Cook had a deal to put people on SkyService into 2011, but SkyService shut down last week. Oops. Thomas Cook had to do something. Fortunately, they were already in talks with Jazz for service beyond 2011 so they were just able to accelerate things.

The way this works is great. The planes are actually going to be leased from Thomas Cook to run flights from Canada to sun spots during the Canadian winter. Doesn't Thomas Cook need those planes for its European operations? No, because this is counter-seasonal flying. European air travel is huge in the summer, so Thomas Cook needs its whole fleet over there. But during the winter, those planes would either sit on the ground or be leased out to other carriers. This way they keep flying for Thomas Cook where demand is higher.

So why go with Jazz instead of an established operator of large aircraft? I have no doubt Jazz was hungry and bid low. Nearly all of their flying is for Air Canada, and it's always good to diversify a little just to make sure you don't get caught with your pants down. Besides, they already have operational expertise running an airline in Canada, and they have people at airports all over the country.

This is a good deal for both airlines, and it's creative thinking on the part of Jazz.

[Photo via Flickr user abdallahh]