Food For Thought: An Exclusively WO Future?
 

With the recent announcement that American is severing ties with ExpressJet and Trans State, I began to ponder the future of regionals within mainline networks.

What are, in your opinions, the benefits and disadvantages to AA Group operating with exclusively wholly owned regionals? What are some arguments for and against the idea?

On one hand, it makes a greater financial risk for AAG to use only in-house regional carriers, as it increases the likelyhood of an economic downturn directly affecting AAG. However, if third parties aren't able to meet the requirements of their CPA, this could offset the negative effects of delayed, cancelled, and otherwise unfulfillable flights.

I know it's not likely that we'll see this happen, but I thought this might be an interesting thought experiment.

I was thinking along the same lines. Recent news points to expansion of WO flying (new AAG orders for 900s and e175s, PDT and PSA base openings) and reduction of flying by other contracted carriers.

Good news for the AAG WO pilot groups? Hopefully 🙄

I think the future for the American Eagle flying is this:

Envoy
PSA
Piedmont
Republic
SkyWest

Any of the others I would say are no guarantee. Maybe Mesa? But I see them struggling.

I would even go as far as saying Republic going away with Envoy and Skywest picking it up directly. Then PSA helping out with taking some of their eastern flying.

Honestly I see SkyWest going away before Republic does. Envoy can easily take over ORD, and LAX flying. Mesa isn't performing as bad as everyone says based on what I see in AirPortal.

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At least two contractors to keep the WOs in line if need be by using ye ol' whipsaw.

Skywest has the used 700 market cornered and American has a huge advantage with scope considering 700s with 65 seats or less counts the same as a 200/145. Including Expressjet, Skywest operates 50 700s for American. I doubt American wants to give up that competitive advantage and it doesn't make sense to order new 700s.

Compass is next on the chopping block with their 20 American owned E175s likely going to Envoy when their CPA expires. Who knows with Mesa and when their CPA expires.

From what I’ve been reading it’s to control the product. It’s to give a “seamless transition” from mainline to regionals. When you have to many contractors it gets harder to offer a better product with consistency. So this allows American to control its product and better assist customers, with out putting all the eggs in one basket.

I think Mesa has several different CPAs of varying length for the Eagle lift. They have one up for negotiation in 2019 and the remainder are spread out a few years behind that. But Mesa also owns many of their CRJ900s though I believe. American may only own a handful of them.

I doubt Republic will go anywhere as AAG owns a percentage of the company after the bankruptcy..

Pilots at the WOs are awfully good at letting themselves be whipsawed against each other too...

Yeah, all those continual gains for the last three years for all three pilot groups are great examples of that.

A business minded person would not continue to let profits leak to what are effectively competitors. X jet and TSA are losing that flying because they can not maintain it. Why isn’t Mesa going away? Because, they are, SOME WAY, still staffing the planes they are given to fly. I think you got a hint in the last town hall. Dion wants us to take more long haul routes. My guess is that American wants to take all the most lucrative routes for its WO companies, and leave the less popular routes with smaller margins to other reagionals. That would be the schrewd move. So as for who gets the flying the WOs don’t want in the end? Who ever will accept the crappy flying and can afford to operate like that, SkyWest will probably not accept that, Republic is probably a little more in-elastic, but my guess is what ever the bosom feeder airline of the day is.

Two things:

1. "shrewd"

2. Apparently you've never heard management tell us that the reason our schedules are so crappy is that because carriers like RAH, MAF, etc, get first dibs on flying because its less expensive that way to AAG.

Gee, must be nice to have trip and duty rigs like RAH so that its more cost effective to give them better flying.

This is what I came up with. I also think one day that PSA will take over Skywest and Mesa operations, but that will take a while to happen. Finally, I think that Envoy and Piedmont will merge. Anyone agree?

Envoy Air
140/145 15 (Trans State to Envoy)
140/145 75 ??? Maybe
175 20 (Compass to Envoy)
175 44 + 10 + 15 + (61) = 130
240
PSA Airlines
200 35
700 22 (Envoy to PSA)
700 39
900 54 + 15 + (15) = 84
200 -35 (Retirement)
145
Piedmont Airlines
145 13 (Envoy to Piedmont)
145 4 (Envoy to Piedmont)
Assuming they can staff 4 more
145 43
60

Total WO Aircraft 445

SkyWest
700 39
700 12 (ExpressJet to SkyWest)
Mesa
900 64
Republic
175 85

Total Regional Aircraft 645

Contract Expires
Compass (End of 2019)
SkyWest
Mesa
Republic

CRJ 700 112
CRJ 900 148
ERJ 140/145 150
ERJ 175 235

112 + 148 = 260 CRJs
150 (-55) + 235 = 330 ERJs

55 ERJ145s Retire
American only wants 590 regional aircraft

You should write them and tell them all of this.

I deeply respect the work you do for us, my comment was not about the union...

My gripe here is certainly not with the MEC. And it wasn't meant just with regard to PSA...it's more about attitudes among the pilot groups.

At least from what I've heard, too many still seem to think that we are competing with the other regionals and even the other WOs. Not enough realize that all the WOs are basically a massive cost-savings tool for AAL. Too few realize the HUGE margins that AAL makes because of us WO pilots (or in spite of us, depending on how you look at it).

CLT is now (by the CEO's own admission) the most profitable hub of the world's largest airline. It wouldn't be that way without PSA. Pilots at PSA (along with the other WOs) need to understand what they are really worth to the parent company.

[end rant]

AA would gladly take as many regional aircrafts as possible, given lower operating costs vs mainline. Thankfully, scope prevents them from doing that.
Current scope agreement is for 75% of AA narrow body fleet for total number of RJs, and 40% of AA narrow body fleet for large (66 seats+) RJs.

This.

Look at Delta's main line payscale for the CRJ 900 and look at the the pitiful wages we get.

The operating cost of regional aircraft is double what it is of mainline aircraft. AA is a publicly traded company, look it up if you don't believe me. Pilots and FAs obviously get paid less, but the overall CASM is double.

That logic don't wash.

If that were true there wouldn't be scope clauses.

I don't know where you found that information, but the regional expenses are way lower then mainline. While they primarily bundle up salaries together with mainline we all know regional employees get paid way less and the fuel and taxes are much higher for mainline.

https://imgur.com/dMynT33

If that was the case we would all be at the mainline.

If there’s a market that supports 40 seats/flight and revenue/flight exceeds cost/flight it’s a winner. CASM is a useful metric but it’s not particularly helpful for deciding where to stop service at the margins. That last crj flight may be profitable where a 737 wouldn’t be.

It's actually very useful if we're simply looking at the cost, not profit. That's exactly what I was referring to in all the posts. Cost per Available Seat Mile will always be lower at the regional compared to the mainline.
Salaries, Benefits, Fuel Cost and hence Taxes are bound to be lower.

Now, RASM and net profit are a different story. It does get more complicated.

https://seekingalpha.com/filing/3723642

See the AA SEC filing. mainline CASM is about 10 cents, regional is 16.

If you only have 40 customers, it's still cheaper to fly a 60 seat plane at 0.16/ASM than a 120 seat plane at 0.10/ASM.

think you got it backwards son.

Scope clauses protect mainline flying from turning into regional flying.

I was mistaken. Had a completely different metric on my mind. Thanks for educating me.

You got it completely backwards.

Three CRJ200s move the same amount of people as one A320. What costs more to move the same amount of people around? The one A320 or three CRJ200s? The one A320 is obviously cheaper.

I don't think you understand the meaning of CASM - seat for seat and mile for mile.

Food For Thought: An Exclusively WO Future?
 

RJ have a higher CASM in general in comparison to mainline a/c due to amount of seats which costs can be spread across. The kicker is can the airline a achieve RASM that equal to/greater than the CASM for a particular flight. RASM =/> CASM means the flight will break even or make a profit.

There many more variables with running RJ vs mainline on particular routes. But it is IMHO that it would be cheaper for mainline to absorb all regional flying to achieve synergy from top down.


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If I were American I’d just absorb my 3 WO’s. Everyone comes in at1 year seniority however instead of seniority by age in class it’s determjned by your DOH at whichever regional your coming from. Come up with a new pay rate for all the RJ aircraft. Then everyone can bid for any base and aircraft their seniority can hold.

Seems like this would be a way better recruiting tool then a hard to predict flow.

I know this will probably never happen but seems to make sense to me.

Flow and the WO are designed to keep cost lower and profits up... they’ll want to hold off on doing that as long as possible.

I don't think you understand how hub and spoke operations work.

CASM is a useless metric if you only have 50-75 people to move during a given bank. Put alternatively, should AA send A320s from CLT to EWN? A -200 with 40 pax will always cost less than an A320 with 40 pax. It's about net profit, not cost per seat-mile. CASM is one metric, but not the most useful one.

Regionals will ALWAYS have a greater CASM. They have fewer seats. Fact of life. The reason AA makes a killing is because regionals keep up the frequency of feed to/from the hubs and makes CONNECTIONS possible that do not involve 3 to 6 hours of waiting in an airport. Nobody would even book such tickets if they had to wait that long between flights.

Cheaper DOES NOT mean more profitable.

Pointing out higher CASM at the regionals is simply a tool for middle management to try to get everyone at the WOs to be happy with their current wages and not fight for what they deserve.

This guy as a point^

I explained in very basic terms why a CRJ costs more to operate than an Airbus on a CASM basis for a guy they seemed to have it backwards. Nothing was said about hub and spoke, frequency, networks, etc. Think about what you said, you're claiming I do not get something that wasn't even part of the conversation to begin with? We were talking about CASM.