Outsourcing the Future October 25th, 2014
Executive Summary:
The purpose of this letter is to reinforce upon APA the need to find partnership with management to preserve the Scope of flying performed by American Airlines pilots. We must approach Scope with a mentality that balances profitability, with recognition of social responsibility relative to destructive outsourcing trends. In the long-term, APA needs to remind membership continually that any further surrender of Scope will have harmful and lasting implications to our profession and negative strategic outcomes for American Airlines. We need to not only focus our efforts on our members, but on all industry stakeholders. APA may accomplish outreach through political action alliances engaging in social media campaign(s) targeting mainline, regional, and perspective pilots as well as passengers. Finally, we need to engage and challenge management to focus on the long-term strategic advantage of mainline flying. We should resist short-term financial gains based on accounting methods that may mask true outsourcing costs.
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A Picture of Outsourcing
425 US Airways East & West post-2005 hires were asked to name the longest routes they had ever flown for so-called regional airlines—these were their answers. Note that only one route depicted above is under 800nm using direct great circle routing. (See end of document for route analysis)
ATL-GGT, ATL-TUS, ATL-GJT, ATL-MTJ, ATL-ELP, ATL-SXM, ORD-NAS, ORD-GEG, ORD-YYC, IAH-NAS, IAH-ROC, ATL-YHZ, ATL-TUS, ATL-STX, ATL-KIN, ATL-ASE, EWR-OMA, EWR-OKC, EWR-YYT, EWR-MSP, DEN-YEG, DEN-MKE, DEN-PIT, DEN-ATL, DEN-MLI, DEN-CMH, DTW-MTY, IAD-COS, JFK-SAT, JFK-AUS, SFO-AUS, SFO-SAT, IAH-ISN, IAH-RSW, KIAH-YYZ, KIAH-YUL, IAH-PSP, IAH-BFL, IAH-BOI, IAH-YEG, IAH-SFO, IAH-ACY, IAH-YYZ, LAX-XNA, KLGA-KXNA, KLGA-KDFW, KLGA-KIAH, KLGA-KOMA, KLGA-KMCI, MEM-DEN, MEM-PHX, MIA-CMH, MIA-PIT, MIA-CLE, MIA-IND, MIA-STX, MSP-LAX, MSP-LAX, ORD-YQR, ORD-ASE, ORD-COS, ORD-LAX, ORD-YHZ, PHL-IAH, SLC-YUL
newAmerican Airlines Hub Structure
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Great Circle Mapper
October 25th, 2014
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“If each pilot makes his or her union decisions based on what’s best for the group [as well as] profession instead of self-interest, we will succeed."
Dear *redacted*,
As a new APA member, I am excited to do my part to support our union. APA has a proud legacy dating back and prior to its firm 1997 position that mainline pilots perform all regional jet flying. Sadly, ALPA established industry standards enabling Whitehouse action to reduce the scope of flying performed by APA pilots. Eventually, thousands of ALPA and APA mainline pilots were furloughed. ALPA continues a conflict of interest representing both regional and mainline pilots. I am pleased APA is answering membership concerns regarding the Scope of flying conducted by American pilots, but we need more feedback. The October 8th, 2014 BOD announcement informing Mr. Parker "that APA will not agree to any Scope concessions" is what I hope to be the beginning of a more rounded approach informing membership of Scope implications. We have an opportunity to partner with management in JCBA to find meaningful solutions to outsourcing. Let's put real action behind APA’s position on Scope and establish barriers to keep mainline flying “in the green.”
Informed membership is the best method to increase the value of Scope beyond management’s reach. Information is the best means to hold future generations of APA leadership accountable. I implore APA Board of Directors and National Officers as well as Negotiating, Scope, Government Affairs, and Communications Committees to demonstrate further resolve to retain the Scope of our flying using awareness methods that cement negative perceptions of Scope loss. We must persuade Regional pilots that relaxing Scope limits availability of mainline employment opportunity. Line pilot predispositions may best be shaped using basic economics that demonstrate how currency inflation is part of our union's key method of control over regional airline industry. APA must also demonstrate concepts such as how releasing Scope drives furloughs, decreases brand quality control, lowers margins of safety, drives greater unit carbon pollution, and increases air traffic congestion. Allow the history of outsourcing to guide us going forward, or it will continue to repeat itself.
APA should present outsourcing statistics in more meaningful ways than current aircraft seat and max gross operating weights limits. Suggested metrics includes data and charting methods that outline relative percentage and the net number of potential physically outsourced seats, air seat miles, and jobs. These figures should be further equated to Group I and Group II equivalency to demonstrate what could have been. The coming redesign of
About APA should include depositories of multimedia, news articles, and white papers concerning Scope. The APA website should further inform membership on the manufacturing and sales trends of ATR, Bombardier, Embraer, and Mitsubishi. APA may also contract industry consultants to identify indirect costs associated with outsourcing. Providing current and archived information regarding degrees of subjects related to outsourcing is proper, and relevant to establishing stronger union social norms derived from informed membership.
We must observe accurate jargon referring to subjects related to Scope to properly frame cognitive bias. The term Scope relaxation should exchanged with negative references such as surrender, loss, demise, or reduction. Regional airlines may best be referred to as outsourced operators, national airlines, or third-party carriers. APA should coin the notion of “Scope recovery.” Legacy airlines once operated 80-seat single class McDonnell Douglas DC-9-10 aircraft with 90,700lb MTOW equivalent to Bombardier CRJ700/900, E175, and MRJ90 aircraft. Any jet aircraft capable of traveling over 1000nm should not be referred to as regional jets. Large regional jets may best be referred to as DC-9 type jets. Small regional aircraft may better be referred to as turbo-prop equivalent jets. APA should redefine Scope psychology with specificity of language that dissociates from failed past policy.
Compromising the Scope of flying done by legacy pilots may cause little if any competitive advantage between legacy carriers once industry Scope reaches equilibrium. Put differently, the entire concept of industry standard Scope may negate the need for further Scope compromise. Management believes that regional aircraft spurs growth, but what is the relative benefit if all legacy airlines do the same? None. APA is unlikely to recover the Scope of mainline flying overnight. How can APA partner with management to implement new industry equilibrium over a series of Collective Bargaining Agreements? Group I orders would be a good starting point. For now, the AAL MTA reflects the most liberal allowance of legacy airline outsourcing creating regional Scope inequity relative to Delta and United. Know that DAL, UAL, and AAL merger synergies demand frequency reductions resultant of airframe up-gauging and hub consolidation. Delta and United mergers triggered CBAs lowering total regional airframes. Similarly, American Eagle ASM should be translated into mainline metal to subsidize coming AAL merger synergy reduction.
Thousands of mainline pilots today were involuntarily furloughed due to outsourcing. Similarly, the majority of legacy new hires were former regional pilots who also carry negative views of third-party airlines. APA leadership should capitalize on the political opportunity presented by large blocks of pilots with negative personal experiences associated with regional airlines. Industries commonly form political action campaigns such as takeflighttomorrow.com. APA may also consider partnering with ALPA, IFALPA, AMFA, CAP, AIBT-AD, IPA, and CAPA to form multimedia driven Scope awareness initiatives. Public perception of such an initiative may be better received without traditional "labor" talking points. More universal methods of discussing regional airlines include flight safety, environmental impact, quality of service rendered, passenger experience perceived, pilot shortage, and traffic congestion. Such initiative expands APA’s sphere of influence within DALPA and UALPA policy.
The Regional Airline Association’s propaganda initiative takeflighttomorrow.com warns of pending pilot shortages but overlooks up-gauging and frequency reduction as solutions. Any regional pilot shortage today reflects overreaching regional airline networks. If legacy staffing remains constant to attrition irrespective of demand then legacy carriers will hire 11,500 pilots during the next eight years. This represents 30% legacy airline attrition; AAL 41%, DAL 31%, UAL 29% respectively. Legacy carriers will hire 19,196 aviators over the next eleven years, which is 49% attrition; AAL 63%, DAL, 61% and UAL 43% respectively. Excluding Southwest, FedEx, UPS, expat, military, and corporate pilots, there are at least 32,730 aviators who may desire legacy airline employment. Individual circumstance may limit Fontrier, JetBlue, and Spirit pilots ability to seek legacy employment. Baby boomers will also exit the nonlegacy pilot workforce during this time, and greatly demonstrate the need for up-gaging regional lift into mainline ASM.
Delta ALPA and United ALPA accomplished regional fleet reductions in their most recent pilot working agreements. American pilots challenge APA leadership to consider how inflation currently threatens the regional airline model. Real inflation remains a constant of indefinite quantitative easing (QE) Federal Reserve policy. World markets dominated by debt and service sectors have little tolerance for absence of currency inflation. Even today financial analysts call for additional QE stimulated GDP growth. We must recognize that continuous inflation puts the very life or death of every regional business model squarely in our hands. Current market forces are an opportunity to reduce a quantity of physically outsourced mainline seats.
In addition to inflation, a convenience of overwhelming small RJ engine overhaul costs impact regional airlines. These charges do not fall solely on third-party airlines and add motivation to shed 50-seat jets. In August, 2012, Michael Boyd said "we think by 2016, virtually every 50-seat jet or smaller will be out of the system . … Those airplanes are getting older and more expensive, and as a result, airlines are culling them out of their fleets.” Boyd's statements reflect AviationWeek’s June, 2012 report that three of every four CRJ100/200 aircraft need CF34-4 engine overhauls within the next three years at projected cost of 1.0 billion dollars.” Similarly, “nearly every [ERJ135/145] Rolls-Royce AE 3007 will need [overhaul] over the same time period, some of them more than once, at a projected cost exceeding $1.4 billion.” “Air Wisconsin Airlines, which operates its CRJ200s for US Airways, is projected to spend $114 million to overhaul 82% of the engines.” “American Eagle Airlines, the second largest ERJ operator, would need to spend $460 million to do the same.” These overhaul costs greatly erode turbo-prop equivalent jet feasibility.
“With more than 13,000 regional airline flights every day, regional airlines operate more than 50 percent of the nation’s commercial schedule,” says raa.org.
Amazingly, industry wide scope trends reflect regional fleet reductions, but no meaningful reduction in net number of physically outsourced seats has occured. Outsourced seats have been consolidated into fewer airframes: “The US regional airline industry is changing ... and now at least 584 small 50 seat RJ’s are on their way out to be replaced by up to 346 larger 76 seat RJ’s coming in (1.7 : 1.0 ratio) and that means the total US regional airline fleet is heading for a 14% [airframe reduction] of around 238 RJ’s.” This means that “55% of [small 50 seat US regional] fleet will be removed leaving only 470 small regional jets in service within the next 3 years... many of them well before their “normal’ commercial retirement age of narrow body commercial jets (21-26 years old), in most cases less than 18 years old. While up to 346 new 76 seat RJ’s will join the US regionals, but aircraft numbers will go from 1,657 today… to around 1,417 with 2.9% less total seating capacity than today.” What added cost(s) can be associated with prematurely retiring aircraft before service date? Legacy airlines ride a knifes edge of CASM operating regional aircraft destined to be made obsolete by inflation and indirectly hidden costs. How does living on the edge of outsourcing lock management into always coming back to the well for more? Will professional pilots one day realize that the well of Scope may one day run dry the moment we outsource our relevancy?