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The three major American airlines (American, United, and Delta) all have regional brands. These brands are actually operated by other airlines (ie: SkyWest). Air Canada has a similar regional brand called Air Canada Express.

Obviously, these flights are important for getting passengers to the airline's hubs. It also seems obvious that this type of flying is quite profitable because there are a number of regional airlines that are flying for these carriers. Why don't the big airlines just fly these routes themselves? Why have they all chosen the path of outsourcing?

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This article breaks it down super nicely, and has most of the info you are looking for. The key quote from my reading of it is

The simple answer is that using regional airlines saves major airlines money compared to them operating a flight themselves. Where do the cost savings come from? For one, employees are paid significantly less.

There are also some serious union and historical reasons for the setup, regional airlines code sharing with majors is in some regards a way to skirt around union negotiations

The first reason is that it would likely eliminate the cost advantage. Most major carriers have negotiated with their unions that flights with fewer than “X” number of seats will be operated by regional airlines. You can bet that if the regional airlines became part of the major airline (even if a separate division), the major carriers’ unions would be fighting for significantly better pay for those crews.

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Historically another reason the major carriers have contracted out to regional carriers is because it allows them to share some risk. Keep in mind that historically airlines are ridiculously unprofitable (though that has changed recently). So leased planes were almost a liability rather than an asset, given that they were losing money with just about each flight.

Here is another interesting paper on the subject and good info here.

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  • $\begingroup$ Sorry for this late response, but thanks for the answer. I never considered this angle. $\endgroup$ – Sam Creamer Jun 25 at 20:27

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