Wednesday, July 29, 2015

The Regional Pilot Shortage is Real for Republic Airways

By: Seth Miller / Published July 29, 2015

Has the long-rumored “pilot shortage” finally come home to roost?


Republic Airlines operates a large Embraer E-175 fleet under the American Eagle brand. (Photo Credits: American Airlines)

It appears the answer is a resounding yes as Republic Airways Holdings – parent company of Shuttle America and Republic Airlines – has notified its partner airlines and investors that the regional operator will not be able to meet its contracted schedules over the next 12 months. The move comes as the carrier is fighting with its pilots’ union over renegotiating a labor agreement and also facing challenges in recruiting new pilots. And its obligations to mainline carriers have not decreased much recently. The news of the expected shortfall took an immediate hit on the company’s stock price (it has since recovered a bit), but the true impact may not be felt by passengers for a few weeks yet.


Republic Airlines stock price behavior after the announcement. (Source: Yahoo! Finance)


Republic operates 25 Bombardier Q400 NexGen Aircraft for United Express. Retirement has been set for September 2016. (Photo Credits: Wikimedia Commons)

In Q2 2015 the company reported a 4% decrease in block hours flown based mostly on pilot staffing issues. With more than 250 aircraft in operation for Delta, United Airlines and American Airlines/US Airways the potential pain is going to be significant. In theory some of the mainline operators could shift the regional jets to other operators, reducing the burden on Republic Airways, but it is unclear that much headroom exists at the other companies to staff the flights should such a shift occur. Only Delta has exposure on the 50-seat Embraer 145 jets; the others are all flying larger planes. American has more than 100 of the 70-seat ERJ family operating under the Republic umbrella; United has 44 and Delta has 30. The Q400 contract with United is already set to wind down in the next year or so, though Republic may want to accelerate that process. Some had expected Delta to cut that E45 flying from the books, freeing up more pilots for other operations; Delta has other plans, however, renewing/extending that agreement.

And so, in an era where the mainline operators are realizing significant profits, they may quickly find that their regional operations are even less reliable than before. Recently Republic Airways tried to give its pilots a raise, more than a year after the last round of negotiations with the union failed to reach an agreement. That raise was met with a lawsuit from the Union demanding that it be taken back; a unilateral change in contract terms is not permitted per federal law. Just throwing money at the problem is not necessarily a workable solution. And yet that really is the ultimate solution.

The problem the regional airline industry faces is not a shortage of employees. It is a shortage of employees willing to work for so little money. Training and certification costs have increased in recent years (to say nothing of general cost-of-living) and the salary numbers have not kept pace. The mainline companies push to keep the costs down, offering work to the lowest bidder. American recently went through a challenging phase with its Envoy regional subsidiary, pulling aircraft and block hours away from that group following a failed contract proposal. These troubles with Republic could, ironically, see some of the flying shift back to Envoy if operating capacity can be found.

Contracting work out to the lowest bidder is great, right up until that contractor can no longer deliver. And now the industry – and passengers – will feel that pinch.

IMGP2946Seth Miller is an contributor specialized in Loyalty Marketing, Connectivity and Passenger Experience and will drop everything if he gets an opportunity to go flying. Bit by the travel bug 30 years ago, Seth flies ~200,000 miles annually. Follow him on twitter at @WandrMe, or his site at The Wandering Aramean blog.

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The post The Regional Pilot Shortage is Real for Republic Airways appeared first on Airchive.

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