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Old 05-09-2015, 09:24 AM
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Default Pilot Shortage And The Legacy Feed

Highlights...

Summary

  • A pilot shortage has begun to take its toll on legacy airline feed.
  • The shortage will result in economic impact either in the form of increased costs for labor, or decreased route structure.
  • While the Legacy Airlines will be primarily impacted, bargain and low cost carriers should be able to maintain staffing levels at a slightly higher cost.

Economic forces cannot be ignored indefinitely. While the past 15-years have witnessed a surplus of pilot labor due (at first) to capacity restrictions brought on by the business down cycle (following the dot com bubble bursting and later by 9/11), later to be compounded by an increase in the mandatory retirement age for airline pilots, recently this excess has rapidly dwindled to the point of a near crises with regards to hiring at the regional airline level. In short, there is a pilot shortage.

It is an interesting economic study. There really was no question that a pilot shortage was brewing, due to the fact that better paying jobs were beginning to rob the regional airlines of their pilot supply. Still, nearly 20-years of oversupply in the industry has led managers to ignore the warnings of the looming pilot shortage.

The regional feed is an intractable part of the legacy airline model. While low cost carriers will suffer slightly higher acquisition costs for their pilots, legacy carriers will likely be forced to shelve out additional money to pilot groups in order to maintain some degree of regional feed. Offsetting this is the general trend towards larger regional jet aircraft flying the same number of passengers on fewer flights (which means, fewer pilots).

As a whole, low cost and bargain carriers will be more readily able to attract pilots to expand flights, while the legacy airlines will be stymied into a flatline approach: either they will be forced to return flying to the mainline level (which is more expensive and results in fewer flight options to passengers) or they will have to produce incentives to retain pilots at regional feeds.

Pilot Shortage And The Legacy Feed | Seeking Alpha
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Old 05-09-2015, 10:10 AM
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Age 68 retirement
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Old 05-09-2015, 10:27 AM
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Originally Posted by SayAlt View Post
Highlights...
Ok..I'll bite, this is JMHO, but

Mainline will continue to recapture RJ flying, begin flying large RJ's at mainline, cherry-pick profitable routes as RJ operators shrink and leave numerous cities petitioning for EAS designations to at least see service from Great Lakes as an alternative to driving a couple hours to the closest legacy spoke city.

DL already has CRJ900 and E190 rates, age 65 retirements haven't even kicked in yet but are expected to reach 600/yr in the next 3 yrs. and the same thing is happening at the other legacy's. Even if they recinded the 1500 rule, there aren't enough pilot starts to cover the future movement of current RJ pilots to mainline. The course is set..RJ providers will start to shut down, smallest to largest, in the near future. Raising RJ pay won't stem the tide, cause mainline will be flying large RJ's at mainline rates..and only the senior RJ lifers will hang on for QOL.

ULCC's may try to fill the void as cities lose service. Allegiant is a great example of finding city pairs that can be profitable, but we're talking about the very smallest markets that lose RJ lift, and even Spirit will have trouble filling a 320 for $9/seat on a routine basis cause there just aren't enough O&D pax. If there are enough pax to go around, the legacy's will still service that city with mainline RJ's.

As the available pool of approx 11K mainline applicants shrinks, junior ULCC pilots will start to look at their options. We had JBU captains return to DL last year as their last chance to return from furlough after 9/11 expired. I don't pretend to know why, but there was movement from a LCC to DL, so I can only expect that to happen in the future as seat progression and new-hire QOL improves at the legacy's. We just had a 2014 new-hire get the right seat in the 330 in NYC, and others are getting SEA, LAX, SLC right out of training. There's a lot of opportunity out there, and RJ/LCC/ULCC pilots will have lots of options moving forward.

Of course, all of this is subject to change depending on the news ticker of your favorite network. And I'm just a guy who raises the gear for a living, but the future looks very bright for those pilots who take advantage of those options.

JMHO..
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Old 05-09-2015, 10:58 AM
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Originally Posted by CGfalconHerc View Post
The course is set..RJ providers will start to shut down, smallest to largest, in the near future. Raising RJ pay won't stem the tide, cause mainline will be flying large RJ's at mainline rates..and only the senior RJ lifers will hang on for QOL.
I think there might be a flaw in this reasoning. I hypothesize some of the non-wholly owned carriers will be the first to shutdown. Yes, of course we will see the Great Lakes and the likes shut down this year, but think about this for a moment-

American and Delta have the money to throw at their wholly owned carriers in the form of bonuses etc.. Pilots are seeing that at Endeavor now with their $20,000 per year retention bonus. However Skywest and Republic are two of the largest regional airlines. They will not have that luxury and as a result pilots will not work there because they have nothing to offer in the form of bonuses or flows etc.. or even quick upgrade. Republic is cancelling flights today for lack of crews to fly the airplanes and we are just getting started with this tight labor market. I know really nothing about skywest but I have to imagine the situation will be the same if it is not already.

With more airplanes available to fly then crews to fly them, pilots will not pick these carriers with nothing to offer. Current pilots at these airlines may be many of the first chosen in mass at the big 3 legacy airlines as there is not a flow or any kind of agreement that prevents the big 3 from draining them in their entirety, unlike wholly owned carriers whereby the mainline parent won't destroy their own feed and implement flows to slow the regional pilot exit.

Ultimately what you may see is Republic becoming competition running its own ticket selling operation or turning into an airplane and pilot leasing company. If Republic were to become a leasing company, now it is setting its own rates and charging the airline a more realistic fee as opposed to today's scenario under Fee For Departure.

On an unrelated note, one thing seems fairly clear to me though is that mainline pilots and their unions better get a handle on scope. Otherwise major airlines will be nothing more than ticket selling and marketing companies who contract out to other "contract carriers" to do all their flying whipsawing one carrier against the other.

Last edited by tom11011; 05-09-2015 at 11:09 AM.
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Old 05-09-2015, 11:28 AM
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It would be interesting to factor in, over the next generation, projected increase in passenger travel demand. Couple that with fewer pilots and we might be in for a real wild ride!

Eventually, if the most dire pilot shortage forecasts are truly realized, won't companies and regulators be forced to create pilot farms? Won't they change the laws?

And finally, just so I'm getting all this right... Are we pilots accepting the pilot shortage myth now as truth? Or are we still rejecting it? I'm just so confused
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Old 05-09-2015, 12:08 PM
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Well, to repeat what someone once said, there isn't a pilot shortage, just a shortage of pilots willing to work at the current pay scales.

To MAY to, To MAH to. I know.

Thing is, I will believe there is a true shortage when the carriers have to hire off the street and pay for training.
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Old 05-09-2015, 12:14 PM
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Why decrease route structure when you can just decrease frequency, more than likely increase seat availability and first class options potentially increasing revenue. All can be done by putting a mainline aircraft on RJ routes. Pull 2 50 sweaters off the same city pair, fill in with an airbus or 737. You just cut pilot requirements in half, potential increase in revenue to make up the labor costs, helped alleviate the pilot shortage and even the RJ pilots don't lose because they need to get hired at mainline to fill those seats.

And the beautiful thing? It's already happening and will continue to happen. Delta started this a few years ago flying DC9s, MDs and Airbus on short flight such as ATL-TYS or to VPS or CAE.
United is doing the same and just announced between 10-20 used Airbus that will be used to replace 50 sweaters that are going away at an accelerated rate.

All that remains is for us at mainline to hold strong on scope (delta you're next) and it benefits all current and future pilots.

Age 68 gets tossed around but at worst it just pushes this *crisis* back 3 years. Doesn't fix anything.
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Old 05-09-2015, 12:45 PM
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Everyone is so focused on the small end, but how many pilots does it to staff one 777? Maybe 20?

You're 20 pilots short on your staffing plan, do you park 2-3 RJs (having your 20 pilots fly at $200k+ a year) or do you find a way to defer the delivery of one 777 (and those 20 pilots then make $30k/yr) and have that route be flown by a revenue sharing joint venture, where those jobs are now at a foreign carrier?

Unfortunately the answer seems to be: both.

But, the top end is much harder to get a handle of, get an idea of how many jobs have been lost, and to protect against. It sure is scary.
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Old 05-09-2015, 12:51 PM
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Originally Posted by sulkair View Post

Are we pilots accepting the pilot shortage myth now as truth? Or are we still rejecting it? I'm just so confused

FWIW......refute as desired....



"By 2022, mandatory retirements will gut the pilot ranks of the biggest US airlines, creating a need for more new pilots than currently exist in the entire regional airline system."

- Aviation Week & Space Technology, Feb. 4, 2015
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Old 05-09-2015, 01:12 PM
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Originally Posted by sulkair View Post

Eventually, if the most dire pilot shortage forecasts are truly realized, won't companies and regulators be forced to create pilot farms? Won't they change the laws?
If China/Asia gets serious about their pilot shortage, we might be in for H1B visa candidates coming this way, as opposed to today where the flow of pilots goes the other way. Think of all the foreign doctors and IT workers we have in America. I know pilot training overseas is expensive right now, but that can change. China is an expert in doing all things cheaply and profiting.

Originally Posted by sulkair View Post
And finally, just so I'm getting all this right... Are we pilots accepting the pilot shortage myth now as truth? Or are we still rejecting it? I'm just so confused
I think we are. And I say that based on a curious statement from ALPA the other day. I'm paraphrasing here but something along the lines of "while there is no current pilot shortage today, if something isn't done to attract pilots there will be a pilot shortage in the future". For all intents and purposes I believe even ALPA can no longer deny there is a pilot shortage. Today its a shortage of pilots who are not willing to work for what the regional airlines want to pay, but tomorrow it will be a real pilot shortage because what's happening today does nothing to put people in the pipeline for tomorrow. The store is empty, but its hard to see that because your cupboard still has cans in it.

Last edited by tom11011; 05-09-2015 at 01:31 PM.
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