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THE PRESENT ENVIRONMENT 42 Selected U.S. carriers with international routes may do somewhat better because capacity is, to some extent, subject to bilateral agreements with other countries. Although discounting is severe on selected routes, the international carriers are taking some steps to improve yields rather than expand market penetration. If, as the panel postulates, a few strong carriers survive the competitive struggle created by deregulation, they could again serve as launch customers for new aircraft. In the near future the broad base of healthy airlines demanding new equipment, which the domestic industry has provided in the past, will probably not exist. Lacking such a platform to launch new aircraft models, U.S. manufacturers would have to depend more than they have in the past on financially stronger non-U.S. airline customers for initial orders. This change would undoubtedly alter the nature of competition from foreign manufacturers. If the foreign manufacturer is a multinational consortium with a good product the aggregate marketing power than can be brought to bear can be daunting. It is not evident to the panel that the implications of deregulation of the airlines for the health and competitive status of the U.S. civil aircraft manufacturing industry have heretofore received adequate attention. It is important for future evaluations of the effect of deregulation to include this additional dimension. Regional Airlines The regional airline segment of the domestic airline industry is made up of approximately 245 carriers, serving regional areas with low traffic density and short route segments that are not economically attractive for the larger national and major carriers. In addition, these regional carriers often provide service to various connecting hubs in cooperation with the major airlines. The number of entries and exits from this segment is greater than that of the larger carriers. Unfortunately, comprehensive financial data on regional airlines are not available. Most are not publicly-owned, and the few that are public have gone so only in the last three years. Members of the financial community have told the panel that typically the regional carriers are weak financially. Uneven earnings and cash flow, combined with weak balance sheets, do not provide a credible basis for supporting borrowings from conventional sources of financing for purchasing new aircraft (much less for supporting long-term commitments for developing new aircraft). Consequently, the burden of providing financing
