So Envoy is getting rid of all their 145's to PDT? By when? And what are they going to replace them with?

 

With E175's!

 

As of right now, only some of the 145s are slated to be transferred to PDT. But in a perfect world, I think AAG would like to see PDT operate all of the 145s, Envoy operate an all 175 fleet consisting of the 40 current orders plus the 20 Compass planes and the 90 options, and PSA operate all of their current CRJs plus the rest of the Envoy CRJs. Like I said, that's AAG's ultimate goal in a perfect world. That's many years off. You'll continue to see a handful of 145s going to PDT and a handful of additional 175s coming to Envoy over the years. It'll be a slow process.

 

My understanding is that there was a bankruptcy SEC filing that stated the E145s would be retired in 2020s. (I can't remember the exact year)


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Seems to me there would be a considerable cost savings to merge the three AAG regionals even if they were to keep them as three divisions, with each flying a different plane. Even if they put up a fence between them and just began hiring that way, in a few years it would be done.

Just eliminating two CEOs would save enough to make it worthwhile.

 

They've been down that pathway before. They began American Eagle, the brand, in 1984, contracting with eight different local commuter airlines nationwide. Eventually, AMR decided they wanted more control over their feed, so between 1987 and 1989 they bought out most of those airlines, eventually ending up with four in-house commuter airlines (yes, they were still called commuter airlines back then). Each maintained some anonymity for the first few years (for example, each still maintained their own original company headquarters). By the early 90's, hiring and training for all of the airlines had become integrated and centralized at AMR's headquarters near DFW, yet still AMR maintained each of the four carriers as separate divisions within the American Eagle family. One major reason for this was the thinly veiled ability to play one operator against another during each group's employee contract negotiations - something AMR did very well - transferring aircraft from one certificate to another, furloughing pilots, then re-hiring them (as new hires, mind you) at the division that got the transferred aircraft. Whipsawing was what we called it.

By the mid 90's, however, each of the workgroups from the various airlines ended up becoming represented as single entities, which eventually led to the four airlines having single, all-encompassing contracts covering all of the individual airlines, as opposed to each airline separately. For the pilots, a 16 year, no strike, no lockout, pay-indexed contract was signed in 1997 (as I recall), which led to industry average pay, workrules, etc. No better, no worse. The upside was that it created stability during the turmoil of the early 2000's through about 2012 or so.

Eventually, however, AMR decided that they wanted to be able to negotiate with various independent carriers once again, in order to bring Regional feed costs down. To that end, they began contracting with outside carriers. Eventually, they had contracted out with so many carriers, that they decided American Eagle the airline needed to become American Eagle, the brand - which required a name change for American Eagle Airlines to Envoy.

Since the merge with USAirways, which brought along its own wholly owned Regional Airlines, the newly named AAG now had (has) three separate wholly owned carriers.

So, with that short history lesson, my personal opinion is AAG will likely NOT go back down that long road to consolidation of their feed into one unit. They really never wanted to do that back in the mid 90's, and they spent nearly twenty years trying to back out of that model.

 

Thanks for that. Great post.

 

There are only two things we know for certain. #1, Doug Parker-AA CEO- doesn't want just one regional providing 95%+ of the feed like it was in the old Eagle days.

#2, he doesn't want so many different regionals operating on behalf of AA. He has said those words himself at town hall meetings. The surge in outsourcing between 2013-2015 was the doing of one Scott Kirby. Partly out of his own stupitiidy...partly because he hated Envoy.

But Kirby is out, and in his place we have Robert Isom. The new philosophy is in line with Parker's: less outsourced feed and more in house flying. Putting it all together, we can infer that we will continue to see at least two if not three wholly owned Regionals doing the bulk of AA flying. Then two maybe three outsourced airlines mopping up the left overs. It's a process that has been in motion since Kirby's ejection.

 

But what about with the recent influx of SkyPest? Or is that flying temporary?

 

Spot on. Scott Kirby made things personal when we turned them down on contractual concessions and made it his personal vendetta to shrink Envoy into an oblivion. He hated Envoy. And here we are now with 10 regional airlines doing feed for AA. However, we will see feed slowly consolidated over the next few years. AWAC is obviously the first carrier that will cease to operate for AA. TSA, XJT and Compass will more than likely be the next carriers. I think the endgame will be the WOs doing the majority of feed with a contract carrier or two picking up the remaining slack.