Regional airlines on growth track, but fail to reassure investors CHICAGO (AP) =97 Shares of regional airlines have tumbled along with the= rest=20 of the turbulent sector, but there's reason to think that some of them=20 could continue to fly in clear skies. Holding companies for the leading=20 regional carriers, including Atlantic Coast Airlines Holdings, Mesa Air=20 Group and SkyWest look to be on track for healthy revenue and earnings=20 growth this year, even though the major U.S. airlines are losing money.=20 These regional carriers, and more than 10 other public and private=20 competitors, get most of their income from fees the major airlines pay them= =20 for each flight. A common code share arrangement would have the regional=20 carrier serve smaller cities with the major carrier paying a flat rate to=20 set schedules and fares and handle ticket sales. Atlantic Coast and SkyWest= =20 work with UAL's United Airlines, flying United Express. Mesa, which works=20 with US Airways, signed an agreement last week to begin flying for United=20 as well. And Atlantic Coast and SkyWest also fly under the Delta Connection= =20 flag for Delta Air Lines. Investors have sold off shares of regional=20 carriers out of concern major carriers could change their fee agreements,=20 cutting into regional airlines' margins. Atlantic Coast closed Wednesday at= =20 $6.19, far from its 52-week high of $29.28 hit in March 2002, SkyWest=20 shares traded at $9.24, way below the 52-week high of $26.45 reached in=20 March 2002, and Mesa traded at $3.35, down from a 52-week high of $11.74=20 reached in April 2002. Shrinking air traffic has slowed revenue at the major airlines, but=20 regionals, which collect a set fee no matter how full =97 or empty =97 the= =20 plane is, have fared better. Because they also have lower labor costs, the= =20 regionals as a group have turned a profit during the biggest air industry=20 slump in history. A majority of analysts polled by Thomson First Call rate= =20 the three regional airlines a "strong buy" or "buy." Margins at regionals=20 may be lower, "but we see new agreements with majors maintaining=20 satisfactory returns," analyst Glenn Engel at Goldman Sachs wrote in a=20 recent report. If even profit growth slows, regional airline stocks are=20 "woefully underpriced," he said. Engel has "outperform" ratings on Atlantic= =20 Coast and SkyWest. Two of the nation's biggest airlines =97 United and US=20 Airways =97 are in Chapter 11 bankruptcy. With the court's help, they are=20 leading the way toward a broad cost restructuring by all the major=20 airlines. Fees to regional airlines will likely be trimmed, and regional=20 airlines will need to cut costs to maintain profit margins. But regional=20 airlines will nevertheless play a strong part in industry restructuring,=20 bringing growth opportunities, said analyst Susan Donofrio at Deutsche Bank= =20 Securities. She has a "buy" rating on Atlantic Coast. "We continue to think= =20 that United is going to use Atlantic Coast as part of its recovery=20 solution," Donofrio wrote in a report on Jan. 29. A spokesman for United=20 Airlines said the company doesn't comment on its fee contracts with=20 regional airlines. United is now in negotiations with its regional partners. *************************************************** The owner of Roger's Trinbago Site/TnTisland.com Roj (Roger James) escape email mailto:ejames@escape.ca Trinbago site: www.tntisland.com Carib Brass Ctn site www.tntisland.com/caribbeanbrassconnection/ Steel Expressions www.mts.net/~ejames/se/ Site of the Week: http://www.dbombo.net/muddyangels/ TnT Webdirectory: http://search.co.tt *********************************************************