The Regional Airline Dilemma

THE REGIONAL AIRLINE DILEMMA

by Clint White

The aviation industry has seen vast changes over the last 10 years. Everything from security issues, fuel prices and often draconian cost controls, these have been difficult times, especially for the regional airline industry.

Now the “Regionals” are facing their own dilemma, a labor shortage. The imposition of the 1500 hour rule and other requirements has more than one regional struggling to fill its cockpits with pilots. As recently as Monday, some signing bonus are now nearly $15,000 and at least one Regional has declared bankruptcy, but the issues are deeper than just regulations and will harbor perhaps a new era in how the Regionals operate.

As a recent FORBES article pointed out when talking about the Republic Airlines bankruptcy. It's a bit of misnomer to call these entities “Regional Airlines”. When is the last time you bought a ticket specifically on Republic or Endeavor? The answer is, you can't. These companies operate as subsidiaries of the larger carriers and their struggles are the result of some following reasons.

1. The Regionals Operate Under Strict Contracts With The Majors: Basically the major airlines decide where and when they need capacity. The also are very conscious of the seat-per-mile cost for each route. For the first time perhaps in the industries history, airlines are very reluctant to add any new capacity. On the contrary, many are cutting capacity during the slow months. Since the majors impose such tight cost controls, it is difficult for the Regionals to just raise salaries arbitrarily since they don't compete directly that way. That's why you see signing bonuses rather than increases in pay, other then when they negotiate with their unions. Airlines are more than happy to give up on unprofitable routes and abandon certain areas all together than to have a regional serve that area. This has driven an increasing amount of traffic to the “hub” cities more the main lines operate rather than to the smaller airports of the Regionals.
2. Airlines are quickly moving away from the Regional Jet model: Ten or 15 years ago RJ’s were all the rage. They replaced the Saab and other prop planes the regionals were using. It was thought that these 50 seat planes would be more efficient and faster, but even with falling fuel prices, the airlines have quickly found it is MUCH more efficient (and profitable) to pack more people in to larger aircraft. Models like the 737 in all its forms have become the mainstay of airlines for longer and longer routes and for the shorter ones as well. There is little reason to expect that this will not continue. The RJs are simply not large enough and profitable at a time of strict capacity controls and the fleet with likely continue to shrink. We have already seen even on the larger side the elimination of most 4 engine aircraft for even the longest routes.
3. Less young people are entering the industry: With the long hours, lower pay and great responsibility that comes with being a Regional pilot (no to mention the training costs), aspiring pilots are being lured away to industries that simply pay better with less responsibility or sacrifice. The new generation simply doesn't want to be working long hours for low pay in the “hope” of that mainline job. Many pilots became discouraged during the recession years when they were “stuck” in the Regionals by a perfect storm of a bad economy and a rising retirement age. Now that those pressures are decreased there is simply less of a “pool” of pilots for the Regionals to hire, while others have moved on to other careers.
4. Flying Has Become More International: Many ERJ pilots are now being lured away with much higher pay by overseas airlines (especially China). For the young and single, it is very tempting to spend a few years overseas at a much higher pay rate for a foreign airline where growth has been rapid. Whether that will continue will be a function of how healthy overseas economies remain.

This is not to say that the Regionals will be disappearing any time soon. For those pilots willing to make the sacrifice it is a GREAT time to be hired by a Regional. I can't tell you how many times I have gotten either emails for post cards advertising pilot fairs for the Regionals. For those with the time it can be a great segway to a flight career. Keep in mind that this “shortage” of pilot flows up and unless oil spikes or the economy tanks it is likely the majors will also be hunting for cockpit crew soon. So if you are applying for a Regional your chances are about as good as they have ever been.

Are you a Regional airplane pilot or want to be one? What are your thoughts? How do you see the state of the industry?