United Express Embraer 175

ANALYSIS: Regional pilot woes could speed fleet changes at United

United Express Embraer 175

United Airlines could speed up the shift to large regional jets and small mainline aircraft from 50-seat regional jets if the pilot shortage at regional carriers gets worse in the coming years.

The Chicago-based carrier removed 30-seat Embraer EMB-120 Brasilia turboprops from its feeder fleet during the first half of 2015 and is on-track to remove 130 50-seat jets by the end of the year in part due to pilot staffing difficulties at its regional partners, says Brian Znotins, vice-president of network at United, at the Jefferies Industrials Conference on 12 August.

“We have regional carriers struggling to staff airplanes,” he says. “We’ve eliminated 30-seat props from our flying as a result of these shortages and small cities are seeing reduced or lost service as a result.”

This is the first time that a United executive has directly connected the regional fleet upgauging, which began at Delta Air Lines in 2013, to the growing pilot shortage at regional carriers. Previously, the shift to larger gauge aircraft has largely been described as a part of an effort to improve efficiency due to the poor per-seat economics of 50-seat jets.

US mainline carriers have replaced 50-seat regional jets with 76-seat models and new small mainline narrowbodies. United is adding Embraer 175s to its regional fleet and has inked a lease deal for up to 25 Airbus A319s and bought four used Boeing 737-700s for its mainline fleet as part of this effort.

However, these comments were all made before Republic Airways – one of the regional carriers hit hardest by the pilot shortage – announced in July that it would make schedule and fleet reductions as a result of pilot issues through the middle of 2016.

“Until we resolve our labor dispute, our operational and financial results will continue to be materially affected,” said Bryan Bedford, chief executive of the Indianapolis-based regional carrier, during a quarterly earnings call earlier in August. “And because of this we are working with our codeshare partners and other key stakeholders to adjust our fleet plans and level of operations.”

The issues are the result of new flight and duty regulations and changes in minimum hour requirements for commercial pilots that the US Federal Aviation Administration implemented in late 2013 and early 2014. Republic removed 27 Embraer ERJ-140 and ERJ-145 aircraft as a result of these regulations in 2014.

In addition, the airline is embroiled in a long-standing labour dispute with the International Brotherhood of Teamsters that exacerbates its hiring and retention issues.

“There is a national pilot shortage,” said Matt Koscal, vice-president of human resources at Republic, during the call. “It was created by Congress and Congress must address it soon.”

Republic operated 61 Bombardier Q400 and Embraer 170 aircraft for United at the end of June and is scheduled to take delivery of the first of 55 E175s for the mainline carrier this quarter.

United has declined to comment on the status of the E175 deliveries since Republic disclosed its pilot staffing issues and Znotins did not mention it directly in his comments at the Jefferies conference.

“If you go to the… extreme, when the pilot supply doesn’t get any better and you start seeing regionals unable to fly their schedules, that would drive even more of a shift to mainline as mainline is more attractive to pilots than regional carriers are,” says Znotins at the conference.

This shift would not necessarily be a financial drag to United. Znotins and other executives are quick to mention passenger preference for E175s and mainline aircraft, their lower per-seat costs than 50-seat jets and the opportunity to generate additional ancillary revenues when discussing the regional fleet shift.

Small cities will bear the brunt of the regional pilot shortage, says Znotins. Many would lose some air service while a few would lose all air service, he adds.

McClellen-Palomar airport in Carlsbad, California – about halfway between San Diego and Orange County – lost its last remaining air service to Los Angeles International airport when United removed the Brasilias from its regional fleet earlier this year.

“Really I think this boils down to what we expect the pilot supply to be in the next five to 10 years,” says Znotins.

SkyWest Airlines, which operated the Brasilias for United, has said repeatedly that is does not face pilot retention or hiring issues. The Utah-based regional carrier continues to operate 72 Bombardier CRJ200s, 70 Bombardier CRJ700s and 35 E175s for the mainline carrier, its fleet plan from the end of June shows.

“We’ve not been surprised, we’re exercising discipline and we’re keeping up with our staffing,” said SkyWest executives in July. Pilots at the airline have since ratified a new labour agreement that will give them regional industry leading compensation and work rules, which will likely make the carrier more attractive to pilots.

ANALYSIS: Regional pilot woes could speed fleet changes at United

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