Taking Flight, Independently

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Silver Airways became an independent regional airline, flying to underserved locales. Today, the company focuses on key markets throughout all of Florida and the Bahamas.

Over the last 10 to 15 years, hundreds of smaller regional airports have lost commercial air traffic. This is, in part, due to the tragic events of September 11th. But an unrelated realization is what actually drove major airlines to stop flying to these regional hubs.

In short, the money wasn’t there.

It’s an unfortunate fact of the industry: smaller hubs cannot support the larger aircraft on which major airlines tend to make a profit.

After deregulation, most U.S. airlines weren’t making a consistent profit. This changed in the last decade: major players began identifying where exactly they were losing money. Small airports were just not part of a sustainable growth model for profit.

But what didn’t work for major airlines was the opportunity Silver Airways needed.

Silver Airways, owned by Versa Capital Management, LLC, was founded as a regional carrier under United Airlines—as nearly all regional airlines begin. But the leaders within Silver knew there were options in this marketplace that weren’t being explored.

“This business model was an opportunity to create something unique: to allow the management and ownership of the airline to capitalize on a market where major carriers have withdrawn,” said Sami Teittinen, the CEO and President of Silver Airways.

As major airlines learned what it would take to make a profit—and implemented new strategies to do so—regional airlines under major carriers were still stuck in a rut. Only able to make a fixed margin, local carriers weren’t making money either, even as the major airlines began to profit.

Silver became an independent regional airline in 2013. United Airlines was its first mainline carrier relationship, one that has been integral to the airline’s success.

“The difference now is that United doesn’t mind Silver having multiple relationships,” Teittinen said.

An independent regional airline is a big win for major carriers. Silver Airways providing connecting flights, and first and last legs of short-haul trips doesn’t cost big airlines anything. The cities that Silver flies to in Florida and the Bahamas wouldn’t be on United’s flight map if it weren’t for an airline like Silver.

It obviously benefits Silver Airways, too. The airline can continue building its commercial platform: instead of being locked into one carrier and fixed margins, Silver now has a much better earning potential. Just as importantly, Silver has much better flexibility in terms of network and fleet designs, and overall strategy.

To facilitate this, however, the business had to grow from around 200 employees to over 700 in a very short amount of time.

Up for consideration before the airline could officially launch as an independent: reservation systems, IT infrastructure, gates and other airport facilities, such as ticket counters, maintenance facilities, and hundreds of other components. A website, negotiations for interline ticketing and codeshare agreements with multiple carriers, and significant investments in corporate functions at its corporate office had to be made.Entire commercial teams, airport customer service and gate agents, airline revenue accounting teams as well as more pilots, and several other team members had to be hired.

Silver Airways’ salaries are on par with the major airlines, which is unusual for a regional. This has attracted top talent to the company, and employees are thriving under the ability to be a part of something bigger.

At major airlines, an IT employee is confined to a back office. At Silver, the head of IT not only runs IT, but also the call center, properties, and is currently in Orlando building a maintenance hangar.

At a large carrier, an MBA accounting employee would fulfill one position: a revenue accountant role, for example. At Silver, the same person can dabble in financial planning and analysis, and negotiate supply chain agreements.

“It’s our own brand, our own agents, our own gates in airports, our own ticket counters,” shared Teittinen. “When we were an express carrier, we didn’t need these components. Becoming independent changed everything overnight.”

When Silver Airways began flying under the independent flag, the entire U.S. and all of its smaller regional airports were considered opportunities. The strategy wasn’t as tight as it could have been, and when the commercial pilot shortage hit in 2014, things had to change.

“Regulations shifted. Previously, 250 flight hours were enough to become an airline pilot,” Teittinen said. “Today, 1,500 hours are required. The rest period rule changed too. These two factors gravely affected the pilot supply in the industry, as well as their utilization. This made us realize that Silver couldn’t support a fractured, U.S.-wide network of flights.”

The company shifted its attention back to its core network of Florida and the Bahamas and has seen real results with this move. Partnerships with Air Canada and codeshare agreements with JetBlue and Avianca, for example, are allowing more passengers to reach all of destinations throughout Florida, the Bahamas, and Cuba.

“It isn’t surprising that a lot of Canadians want to go to the Bahamas,” he said. “Before our agreement with Air Canada, passengers could only fly American [Airlines] into Miami—there was no easy connection to Fort Lauderdale to get to the Bahamas.

“Today, Silver is the first choice for Canadians to fly to the Bahamas on Expedia and other online travel agencies.”

Silver’s partnership with Emirates is coming soon and means that passengers from Dubai can now easily get to the islands as well.

At the end of the day, it’s important to understand what Silver Airways’ mission is. Traditional regional airlines only fly from point A to point B based on city pairs that the mainline carrier requires. Silver Airways is much more than that: it can do everything and anything that major airlines do but with a regional aircraft type and a more regional focus.

The most rewarding part of going independent? What the leaders have built at Silver Airways is highly scalable.

While its core strategy right now is focused on safe, reliable, customer-focused service in Florida, the Bahamas, and Cuba, the company is looking to expand its reach from its core Florida hubs further into the Caribbean and the Southeast U.S.

“It’s an evolution,” Teittinen said. “As we invest in bigger and better aircraft, we’ll be able to fly farther. Currently, our radius is about 300 miles and we’re looking to expand that to 600 in the next 12 to 18 months. For the foreseeable future our focus will be on Florida and deeper into the Caribbean.”

Silver Airways will fly to cities where major carriers aren’t willing and able to fly with their larger aircraft. Its limited competition in route structure and willingness to provide these services to second tier cities will serve its expansion plans well.

Next time you’re planning your vacation to Florida and the Caribbean, chances are your best deal will be Silver Airways.